U.S. firms pare European expansion. (Business Briefs).

Another sign of recessionary U.S. corporate investment Europe shrank significantly in 2001 as American firms pared back expansion plans for the first time in more than four years.

Only 733 new investments by U.S. firms in European markets were logged by Ernst & Young's European Investment Monitor (EIM), a 26 percent decline from the 985 projects tracked in 2000. The Ernst & Young report also shows that the market share of European investment held by U.S. corporations shrank to 37 percent last year from 44 percent the year before. This is the lowest U.S. share of European investment since 1997, when the U.S. accounted for 35 percent of inward investment in Europe.

Some of this decline was offset by increased investments by Austria, France and Japan, but this was not enough to offset an overall decline in inward investment of 12 percent in 2001.

In absolute numbers, the United Kingdom was the hardest-hit regional market, E&Y found. New U.S. investments in the country in 2001 dropped to 377 from 575 the year prior, a 34 percent decline. Also hit hard: Switzerland, down from 45 projects in 2000 to 24, a 47 percent decline; Ireland, where investment projects fell from 113 to 61 in 2001, down 46 percent; the Netherlands, down from 105 to 66, or 37 percent; and France, where new investments were down 25 percent.

Among other key statistics from the ElM:

* London retained the top spot in the regional tables with 94 new projects in 2001. Catalonia was second, with 86, and Paris third, with 61. Regions entering the top ranks for the first time included Madrid, Helsinki, Moscow and Stockholm.

* By sectors, the stars of 2000 -- telecommunications, computers, electronics and business services -- all fell last year, by 48 percent, 49 percent, 22 percent and 18 percent, respectively.

* The top-performing sector of 2001 was pharmaceuticals, with an 18 percent rise in the number of projects.

According to Mark Hughes, Lead Advisor for International Location Advisory Services, Ernst & Young, and the author of the European Investment Monitor, the main beneficiaries of the failback in U.S. investment last year were some of the newer European nations that were able to expand their market share within the region through new investments.

"We are beginning to see countries like Romania, Russia, Bulgaria, the Ukraine and Turkey seriously gatecrashing the party for the first time in the post-Communist era. Risk is becoming more manageable, with recognition of their longer-term potential for EU affiliation and market opportunities," Hughes said.

The Ernst & Young European Investment Monitor was begun in 1997. Copies of the current issue can be downloaded at www.ey.com/eim.