Portugal and Spain have emerged as two of the most attractive destinations for industrial investment on the continent, according to a significant new report.
Portugal, in particular, has been highlighted as one of Europe's economic success stories.
The two Iberian nations owe their strong position to a mix of competitive energy costs and productive investment levels well above those recorded in Europe's largest economies.
These conclusions come from the McKinsey Global Institute (MGI) report, "Catalysing Competitiveness: Where Investment Happens and Why," which offers a sobering assessment of the wider European economy.
According to the report, Europe faces an annual investment shortfall of around €800 billion — a gap that risks dampening growth and weakening competitiveness in the years ahead.
A key theme of the report is that productive investment has now overtaken traditional indicators as the clearest marker of economic competitiveness.
Businesses choosing where to base their operations are increasingly focused on cost, productivity and speed of implementation, rather than relying on historic ties or geographical convenience.
This shift works firmly in Portugal and Spain's favour.
Both nations have access to plentiful renewable energy at comparatively low cost, making them especially appealing for industries with high electricity demands.
The findings arrive shortly after Portugal and Spain agreed to deepen cooperation to cut administrative red tape and strengthen the business climate across their shared border.
Portugal is singled out in the report as one of the standout examples of investment recovery in Europe since the eurozone debt crisis.
Net productive investment in Portugal reached 4.6% of GDP in 2024, compared with just over 2% in Spain.
Germany, meanwhile, recorded only around 0.2% of GDP over the same period — a telling sign of how significantly the industrial map has shifted.
Consequently, several energy-intensive industrial projects are now being directed towards the Iberian Peninsula and the Nordic region, sidestepping Europe's traditional manufacturing heartlands entirely.
Paul Stannard, chairman and founder of Portugal Pathways and the Portugal Investment Owners Club, said: "This report only goes to show how far Portugal has come.
"The economy is growing, being boosted in part by its Golden Visa programme which supports many of Portugal's top sectors.
"This economic boost is creating new jobs and opportunities for people across the country."
Beyond Europe, MGI highlights a growing divergence between the world's leading economic powers.
While Europe continues to underinvest, the United States is working to reinforce its own industrial capacity and reduce dependence on overseas suppliers, and China is scaling up its manufacturing output at roughly three times the combined pace of the US and Europe.
The report further warns that manufacturing costs in Europe and the US are typically at least 50% higher than in the economies currently attracting the most investment, with the disparity in research and development costs even more pronounced — reaching as much as 300% — largely as a result of slower processes and longer product development timelines.
MGI attributes much of Europe's competitiveness challenge to elevated energy and raw material costs, together with uneven public investment support, which can vary by as much as eightfold between different regions.
To reverse this trend, the institute recommends embracing automation and artificial intelligence to boost productivity, reducing bureaucracy, ensuring access to affordable clean energy, accelerating product development timelines, and prioritising strategic sectors including semiconductors, biotechnology and AI infrastructure.
About Portugal Investment Owners Club
The Portugal Investment Owners Club, or P Club for short, is a unique investor membership community designed for discerning individuals, families, and organisations committed to exploring and capitalising on life in Portugal and enjoying money-can't-buy experiences and exclusive events.
About Portugal Pathways
Portugal Pathways has supported hundreds of Golden Visa residency-by-investment applications and provides expert guidance through its professional supply chain network on estate planning, wealth management, Golden Visa and tax optimisation, including post-NHR / IFICI tax regime planning, as well as private healthcare, money transfers and bespoke relocation and luxury real estate solutions to enhance life and investment in Portugal
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