Portugal and Spain considered ‘top destinations for industry’

Portugal and Spain are among the most attractive industrial destinations in Europe due to their competitive energy costs and levels of productive investment that exceed those of the major European economies.

This is the view of the McKinsey Global Institute (MGI) which has just released its report, “Catalyzing competitiveness: Where investment happens and why”.

According to the report, Europe faces a structural investment shortfall of around €800 billion per year, which undermines long-term growth and competitiveness.

The study argues that productive investment has become the key indicator of an economy’s competitiveness, noting that location decisions are increasingly driven by factors such as costs, productivity and speed of implementation, rather than historical or geographical factors.

In this context, the Iberian Peninsula stands out for its availability of renewable energy at lower costs, offering more favourable conditions for electricity-intensive industries.

According to MGI, Portugal is one of the most significant examples of investment recovery in Europe following the eurozone sovereign debt crisis.

In 2024, the net productive investment rate reached 4.6% of Gross Domestic Product (GDP), whilst in Spain it exceeded 2% of GDP.

By comparison, Germany recorded a rate of around 0.2% of GDP over the same period.

As such, several energy-intensive industrial projects are already being directed towards the Iberian Peninsula (and Nordic countries, where conditions are also favourable), rather than the traditional European industrial centres – reflecting a shift in the continent’s industrial geography.

Globally, MGI points to a growing divergence between major economies

While Europe is underinvesting, the United States is seeking to strengthen its industrial capacity to reduce external dependencies – and China continues to expand its production capacity at a rate roughly three times that of the United States and Europe combined.

The report also indicates that manufacturing in Europe or the United States can cost, on average, at least 50% more than in the economies currently attracting the most investment.

In the case of research and development, this difference could reach around 300%, due to more time-consuming processes and a longer time-to-market for new products.

Among the factors undermining European competitiveness, MGI highlighted energy and raw material costs, as well as differences in public support for investment, which can vary by up to a factor of eight between regions.

To boost the bloc’s competitiveness, the institute advocates measures such as increasing productivity through automation and Artificial Intelligence (AI), simplifying administrative processes, ensuring access to clean and competitively priced energy, accelerating the development of new products, strengthening innovation, and specialising in strategic sectors such as semiconductors, biotechnology and AI infrastructure.

Source material: LUSA