Splash and grab

From the airport at Nice to the city centre there are two routes. Along the seafront, leading to the Promenade des Anglais and the luxury hotels, or inland, taking the road through the commercial districts. On the seafront there is a solid line of traffic, so you opt for the inland route. And come face to face with the other Nice - the gleaming offices and the bustling retail developments, both with their car parks full to overflowing. Business, a visitor might say, must be booming.

The same thought occurs when you take the Eurostar train from London to Paris. Emerging from the Chunnel's southern portal, you soon hit the top speed of 300km/h. The journey slows for a brief halt at Lille, gateway to north-east France and Belgium.

Not many years ago a worn-out industrial city, the heart of the rust- belt region, Lille is now a key interchange on Europe's high-speed rail network, a magnet for international business. As you change here, just a 15-minute wait, for direct connections to the Mediterranean and Atlantic resorts, you start to think: if I had some money shouldn't I be investing here?

Apparently booming business and hi-tech treats do not automatically translate into good investments. In fact much of Europe is still mired in economic difficulties. Moreover, with Wall Street stumbling, European markets may also prove fragile.

But, says Rory Powe, who runs Invesco's European Growth unit trust (which has increased investors' money by 260 per cent over the past seven years), there are still many good opportunities: "Investment has its fashions but Western Europe has somehow never been fashionable for UK investors. That's unfortunate because there are many successful companies in Europe, but it also means European shares are priced at realistic levels."

Continental Europe can be just as easy to invest in as to visit. As a small saver you do not need to worry about individual shares since there are countless funds - unit and investment trusts - which invest in a spread of companies and can be bought in Britain. These funds are also available in tax-free personal equity plans.

Carrefour group, which defines the French hypermarket experience for thousands of British holidaymakers, is also a good example of a business that is a good investment opportunity, says Mr Powe. The key, he says, is to find companies that do not depend on local economic cycles and have a global approach. Carrefour, for example, has spread its wings much further afield than Brit-infested ferry ports to Eastern Europe, the Far East and Spain, where it is a big shareholder in Pryca superstores.

Over the border, the electoral success of the Olive Tree coalition in Italy has played an important role in stabilising the country, says Mr Powe: "I've been following the Italian stock market since 1988 and this is the first time we've had an understandable political background."

Again, fund managers say many of the best companies are internationally oriented. Gerhardt Schoning, a manager of Baring's Europe Select unit trust, another fund that has performed strongly, says: "One of the most successful companies in Italy is Fila, which makes sports shoes. Its sales and profits are growing at almost 50 per cent a year - and that's nothing to do with the local Italian economy. They studied the market and realised that to succeed internationally they had to succeed in the US. That's not just because of the size of the American market but because the other markets follow America in terms of products, brands and styles. So that's what they did, and in their market sectors they are now number three in the American market after Nike and Reebok."

But there are still concerns about investing in Italy. Privatisation issues will take money out of shares and worries remain about the influence of the former communists.

In France, notes Percival Stanion, a director of Pictet Asset Management, the Swiss bank's London arm, "While individual companies may be doing well, the economy is still weak and unemployment remains high. Efforts to cut public spending have not been successful so far, and if this leads to further tax increases, consumer spending will inevitably take a knock."

In Spain fund managers point to a shortage of good-quality growth companies. The stock market is dominated by banks, utilities and construction firms, a reflection of an economy that has still not entirely cast off the shadows of the Franco years.

But one issue on the Madrid Bolsa is a name as familiar to holidaymakers as to fund managers: Sol Melia, market leader in both tourist and city hotels. Many of those heading for the costas regard the Sol brand as a sign of quality and value in a business that has a reputation for unpleasant surprises. And the secret of Sol Melia's success? It does not own hotels. It simply operates them on profit-sharing management contracts, leaving the capital costs with the owners.

Spain is the most popular holiday destination for British tourists, with 7.2 million visitors last year. France is second most popular with 6.7 million, while Italy attracted one million Britons.

The total amount of money invested in European unit trusts by Brits is pounds 12.4bn, making them the fourth most popular type of unit trust.

All are big stock markets by international standards. France is worth pounds 330bn, Italy pounds 110bn and Spain pounds 97bn, compared with pounds 880bn for the UK, the world's third biggest stock market after Wall Street and Tokyo.

British investors would have made more money from the UK stock market than this European trio over the past five years. Italy is up just 3 per cent in sterling terms, France up 51 per cent and Spain up 25 per cent, compared with 60 per cent from the UK stock market. But more recently these countries have performed better.