Amidst the jubilant celebrations and fraught reflection in the immediate aftermath of last year’s Brexit vote, an unnerving and somewhat paralysing new reality settled into view for everyone – politicians, analysts and investors alike. That reality was uncertainty. Brexit could be an act of economic ‘self-harm’ for Britain and the EU, as then Prime Minister David Cameron had warned during the campaign. Or it could be a catalyst for economic revitalisation. No-one really knows for sure, and that is about the only thing we do know. Today, more than a year after the Brexit vote, with Brexit negotiations about to formally begin and the political landscapes shifting in London, Paris, and Berlin, uncertainty reigns.

The headline figures on foreign investment into the EU, including the U.K., since the vote, indicate a certain cautious optimism among investors. In 2016, there was a 15% increase in the number of FDI projects in Europeand a 22% increase in the value of FDI flows into the EU, from $478bn to $528bn. The U.K. has traditionally been the leading destination for FDI flows into the EU and it was feared that a downturn in U.K. investment would negatively affect the continent as a whole. That has not transpired. However, countries like Germany, France, Denmark and the Netherlands, which all have similar sectoral patterns to the U.K. in terms of inward FDI investment, are actively trying to attract businesses which might have otherwise set-up in the U.K. For instance, French officials estimate that they can lure 10,000 employees to Paris if and when London loses its privileged access to the European financial services market, while a number of investor confidence surveys have found increasingly favourable attitudes toward Germany, Sweden, Italy, Ireland and France. Nevertheless, the extent to which firms and investors choose to relocate their operations around Europe will depend, in part, on the post-Brexit tax and regulatory incentives British policymakers are able to offer.

Beyond Western Europe, there is also increased positive investor sentiment toward economies in Central and Eastern Europe [CEE]. A survey of more than 500 international decision makers, carried out by the multinational financial services firm, EY, found that the CEE region ranked just behind the U.S. and alongside China in terms of investment attractiveness. This is not a new trend but it may be pronounced in this pre-Brexit era, and perhaps for the foreseeable future. In Poland, for instance, 2016 saw a 74% y-o-y growth in FDI, to $9.9bn – proof that Poland can become ‘Brexit’s beneficiary’, in the words of the Polish minster for economic development. FDI Intelligence calculates that the composition of overall FDI into Romania and Poland is 65% similar to the U.K.’s, suggesting a high competitive threat for investment. These countries are using innovative pro-investment policies, such as designating Special Economic Zones, to maximise their attractiveness. In Poland, the total area occupied by SEZs more than tripled to nearly 20,000 hectares between 2004 and 2015, attracting more than PLN 100 billion in investment. 25% of that investment was directed toward the manufacturing of motor vehicles – an industry which is of significant importance to the U.K. economy and which recently experienced a 33% fall in investment in 2016, to £1.66bn. However, CEE countries like Lithuania, Hungary and Poland also have much to lose from Brexit. The uncertain future of their large migrant populations and remittances from the U.K. to the region; the potential loss of EU development finance from a slimmed-down commission once Britain’s financial contributions stop; and the risk of trade frictions. The U.K. regards the CEE countries as natural political allies as they try to lobby for the least punitive Brexit settlement possible.

The cautious optimism of investors has confounded the expectations of analysts. Uncertainty is usually the one thing investors are unable to tolerate. But these are strange times. Establishment consensus has been challenged in the U.S., the U.K., France and Brussels and it is possible investors are adjusting to this new normal. The United States remains Europe’s leading investment partner in the world – 41% of FDI flowing into the continent came from the U.S. and 37% of FDI flowing outward went to the U.S. in 2015. That is a robust economic relationship underpinned by fundamentally favourable structural factors: a growing global consumer population ensures long-term demand for goods and services predominantly developed by western firms. Furthermore, big investment projects often take months, if not years, of planning and negotiation driven by fundamental economic factors – such as labour costs, market growth and access. That makes final investment decisions less susceptible to shifting political dynamics. Notwithstanding these assurances, however, Brexit does present a potentially serious upheaval of the European political order. Investors have been able to ‘Keep Calm and Carry On’ thus far.  Let’s see how long they can last.

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