Portugal’s nearshoring appeal grows as firms favor closer production hubs
Portugal’s North Regional Coordination and Development Commission, though part of the Ministry of Territorial Cohesion, operates with financial and administrative autonomy. Each quarter it releases a report tracking labor market trends, external trade, and productivity. The latest study, Relatório Norte Conjuntura, analyzes the first quarter, noting that half of all new jobs in Portugal from January to March were driven by northern companies. Growth came from attracting new industries, better infrastructure, and tourism. Wages, however, did not see a corresponding rise: a factory worker earns an average net 937 euros, compared with 980 euros in construction and 1,227 euros in logistics. This keeps Portugal’s status as a low-cost location on the Iberian Peninsula, not only in tax terms or business land prices. A bundle of advantages has helped the country become not only the most attractive in southern Europe for investment but also the global leader for production relocalization in some contexts.
Insights come from the Nearshoring Index 2024 by Savills, a consultancy focused on investment and real estate. The report identifies which countries offer favorable conditions for keeping production processes nearby, avoiding overreliance on factories in places like Singapore, China, or the United States. The COVID-19 pandemic accelerated this relocalization trend, with economies such as Spain, Germany, and France relying more on stressed logistics chains for essential supplies like semiconductors, surgical masks, and pain relievers. The European Commission has encouraged this shift, though large public funding or capital programs are still developing. In private sector terms, Portugal emerges as the preferred territory. Spain ranks ninth, moving up five places in the process.
“Unprecedented interest”
There is a surge of interest in installing new production lines that span consumer goods, molds and packaging, automobiles, and energy sectors. The country has achieved notable progress, including greater energy independence, a renewable-heavy mix, and a political environment of relative stability, with a skilled workforce and strong ESG policies. This combination also allows rapid access to both European and American markets. Until now the top position was held by the Czech Republic, another strong destination for industrial investments, especially automakers. Savills’ top ten list includes Portugal, the Czech Republic, Poland, Sweden, Japan, Singapore, Canada, South Korea, Spain, and the United Kingdom. The trio of Portugal, the Czech Republic, and Poland is described as a rare mix of low costs, resilience, and access to the European single market.
Portugal has long displayed this favored status in recent years, a trend reflected in outward investment balances. From January 2020 to March 2024, Galicia saw only 18 million euros in investment from Portugal, while Portuguese investment in Galicia exceeded 2.877 billion euros. The preferred sectors include finance, real estate, telecommunications, retail, metal product manufacturing, and the food industry. The Portuguese municipality of Águeda even secured a major objective for the Galician region: the installation of a large automotive component plant, a tire facility operated by a Chinese firm Citic Dicastal, with around 180 million euros in direct investment.
Industrial employment in Galicia is returning to levels not seen in more than a decade. Galicia’s economy grew 2.5 percent in the second quarter of 2024 compared with the same period a year earlier, according to the Galician Institute of Statistics. The quarterly national accounts also show a positive first quarter for 2024, with growth of 0.5 percent.
Demand-side drivers show public spending rising by 3 percent versus the April to June 2023 period, while external demand added 2.4 percentage points to GDP growth, with exports up 6 percent. On the supply side, industry grew by 4.1 percent, construction by 3 percent, and services by 2.4 percent, with information and communications leading the service gains at 7.9 percent. Employment in industry rose 1.4 percent, services 1.2 percent, and construction 0.4 percent, while agriculture saw a 1.1 percent drop. In absolute terms, industry employment reached about 154,875 jobs, its highest level since mid-2011.
Key takeaways point to a relocation-focused trend and a Savills index that assesses which nations are best positioned to host strategic factories with proximity criteria, reducing reliance on parts from distant suppliers. Energy costs, policy stability, and access to the European single market remain decisive factors.
Notes about the data underscore the broader regional dynamic, with Portugal increasingly fetching attention from neighboring regions and multinational investors seeking resilient, cost-efficient production bases. This overview reflects a broader movement toward regional supply chain diversification and nearshoring that many analysts expect to persist in the years ahead. Source attribution: Savills Nearshoring Index 2024.