U.K. Leads in FDI Growth Amid Europe’s Decline

In 2023, Europe witnessed a decline in foreign direct investment (FDI), with a 4% drop compared to the previous year and an 11% decrease from pre-pandemic levels, according to the 2024 EY Europe Attractiveness Survey. However, amidst this downturn, the U.K. defied the trend by experiencing a remarkable 6% growth in FDI, showcasing its resilience in attracting investment despite lingering uncertainties post-Brexit.

France, Germany, and the U.K. continue to dominate as the top destinations for European FDI, with France leveraging its research and development capabilities to maintain its leading position. However, France saw a 5% decline in FDI in 2023, despite a 4% increase in job creation, indicating ongoing challenges amid business-friendly reforms.

In contrast, Germany faced a 12% decrease in FDI, attributed to a recessionary environment, high energy prices, and bureaucratic hurdles. Complex regulations and labour costs continue to deter foreign businesses from investing in Germany’s industrial sector.

The U.K., on the other hand, experienced a resurgence in FDI growth, albeit remaining below pre-Brexit levels. Despite political uncertainties and economic challenges, the U.K. market regained stability in 2023, attracting foreign investment, particularly in the software, IT, and financial services sectors. London emerged as Europe’s top investment region, surpassing Paris, with a notable increase in financial services projects.

Looking ahead, European business leaders express optimism about future expansion plans in the region, with 72% intending to establish or expand operations in Europe within the next year. Innovation and client-facing services are identified as key growth areas, with organisations prioritising increased investment in research and development, sales, and marketing.

However, concerns linger regarding regulatory burdens, volatile energy prices, and political instability, which could hinder business growth and innovation. European policymakers are urged to address these challenges and prioritise long-term industrial policies to enhance the continent’s business attractiveness and competitiveness.

To secure Europe’s position in the global market, concerted efforts are needed to harmonise regulations, restore confidence in energy supplies, and facilitate access to capital. By leveraging its strengths and addressing key concerns, Europe can navigate the evolving economic landscape and maintain its appeal to foreign investors in the years to come.