Today, our European President Stuart MacFarlane spoke at the High-Level Conference on “Europe as an Investment Destination”. The event was convened by the European Commission in the context of the implementation of the European Fund for Strategic Investments, a 315 billion Euros initiative launched by the President of the European Commission Jean-Claude Juncker, to stir growth and competitiveness in the EU.
Stuart’s panel discussed how Europe in general and companies in particular can use investment to increase the continent’s future competitiveness. As the only representative of a consumer goods company, we shared our thoughts on what the EU needs to do to catalyse investments by businesses like AB InBev.
This is a very important issue for us. AB InBev was born in Europe, a few kilometres away from Brussels in the city of Leuven. Today, our global headquarters are still located close to where Stella Artois was first brewed, and our European brands such as Stella Artois, Jupiler and Beck’s remain at the core of our international business.
Last year, we invested more than 350 Million Euros, and we are planning to invest another 370 Million Euros this year. Europe clearly remains an important investment destination for AB InBev.
This is partly due to some strong competitive advantages. For example:
- High productivity rates: Europe is our second most productive region behind the US.
- A robust external trade policy which is crucial for us as 20% of the beer we brew inside Europe is sold outside Europe. And this matters because it means you don’t have to sell in the EU to secure investments in the EU. The world is your consumer.
- An innovation culture which is an undeniable asset for us to remain on top of a very competitive market. Our Global Innovation and Technology Center, which leads all innovation projects for our entire global business, is based in Leuven, Belgium.
Notwithstanding these and other competitive advantages, Europe’s continued ability to attract investment depends to a significant extent on the investment conditions created by policy and regulation. We are concerned about some recent trends we are witnessing.
Two developments are particularly concerning in our view. Firstly, a great part of the strength of the EU as an economic zone comes from the size, unity and coherence of its Single Market. The prospect of a Brexit could create a climate of economic uncertainty and damage capital inflows into Europe.
Secondly, the right tax environment needs to be in place to obtain the full benefit of the EU’s investment plan. Worryingly, some of the proposed changes to EU tax rules may have the opposite effect. For example, consider the proposed cap on tax deductibility of the interest that companies pay on their debts, including on external debt to banks. While we finance some of our investments via equity, we – like many others – also rely on borrowing money. A catch-all cap on interest deductibility would seriously raise the cost of capital, discouraging economic operators from investing and creating knock on effects for the real economy.
To be clear: we understand and support the fight against tax avoidance. A clear-headed approach by the EU in this space is welcome. But third-party loans from banks are not instruments of tax avoidance. Provisions like catch-all limits on interest deductions will seriously hinder companies’ capacity to invest in the EU, while doing little to discourage tax avoidance.
With the right investment conditions in place, the EU has the potential to catalyse company investments in the real economy – and with these investments to generate growth and jobs. Citizens and businesses alike will gain much if the EU gets this right.
Let us tap into this potential. And let us have a more honest conversation about the policy choices which, however well intended, can do serious damage to investment and growth in the EU.