London returned to its top spot as Europe’s most important destination for foreign direct investment (FDI) thanks to booming investment in emerging technologies, new figures show.
EY’s latest Attractiveness Survey showed that overseas investment projects in London climbed by 20 per cent in 2023 to hit 359. This meant it overtook the Île-de-France, which recorded 300 projects.
The figures mean London has been Europe’s most attractive destination for international capital in four out of the past five years.
“It’s a welcome sign to see Greater London regain pole position, and while the region has certainly benefitted from a resurgence in tech investment, this is just one factor in its overall attractiveness to global investors,” Julie Carlyle, managing partner for EY in London, said.
“Greater London enjoys a variety of distinct advantages, from its status as an international financial centre to its relatively young working-age population and its appeal as a headquarters location,” she added.
London’s success helped the UK as a whole notch a six per cent increase in FDI in 2023.
France remained ahead of the UK, but recorded a five per cent fall in projects in 2023. Germany meanwhile came in third place despite reporting a 13 per cent dip in FDI projects.
Tech investment lay behind the UK’s success, with foreign investment in new technologies climbing 8.9 per cent in 2023. UK tech investment made up 27 per cent of all tech FDI in Europe last year.
This followed a disappointing performance in 2022, when tech FDI project numbers fell sharply and the country’s share of Europe’s digital projects declined to under 20 per cent.
“The UK owes much of its FDI growth this year to a resurgence in digital investment, making the UK something of an outlier in comparison to the Europe-wide trend for declining tech projects,” Peter Arnold, EY’s UK chief economist, commented.
The survey showed that foreign investment created over 50,000 jobs in the UK, more than in any other country in Europe.
US investment made up over 20 per cent of UK FDI projects, but US investment still fell for the fourth consecutive year and was 42 per cent lower than its high point in 2019.
Hywel Ball, EY UK chair, said the figures showed the UK was still a “leading” investment destination, but stressed there’s “no room for complacency”.
“Overall project numbers have not yet returned to pre-pandemic levels and global competition for investment remains fierce,” Ball continued.
EY’s report follows a similar survey from the City of London Corporation, which also found the City was top of the pile for foreign investment in Europe.
Some 222 projects in the financial and professional services sector received backing from overseas investors last year with nearly 7,000 jobs created, the research found.
However, City chiefs warned that London could not “rest on its laurels” or it would risk losing out to international rivals.