FDI in Europe slows, but confidence remains for long-term rebound

• Foreign direct investment (FDI) in Europe declines to nine-year low with projects down 5% and jobs down 16% in 2024 
• France again tops foreign investment league table but number of FDI projects down 14%; UK next with 13% decrease; Germany in third after 17% decline
• 37% of companies say they have scaled back investment plans; US import tariffs make immediate rebound unlikely but confidence remains — 61% of respondents expect Europe’s attractiveness to improve long term with potential to drive growth through key emerging sectors like AI and renewable energy

FDI into Europe declined for the second consecutive year in 2024, falling by 5% compared with 2023 and reaching its lowest level in nine years, according to the EY organization’s 2025 European Attractiveness Survey – the most in-depth and long-running annual analysis of FDI into the continent.

The survey finds that France, the UK and Germany remain the top three destinations, together accounting for roughly half of all FDI projects. However, all three countries experienced double-digit declines: France saw a 14% drop (1,025 projects in 2024), the UK 13% (853) and Germany 17% (608).

Slow economic growth, persistently high energy prices and a febrile geopolitical environment were the key reasons behind the second consecutive downturn in European FDI since 2020.

Throughout 2024, businesses around the world announced 5,383 greenfield and expansion projects in 45 European countries, compared with 5,694 in 2023 – a year-on-year decrease of 5%, compared with a 4% decline between 2022 and 2023, and 1% growth between 2021 and 2022.

Investment is now 19% lower than its peak in 2017 and 16% below pre-pandemic levels. The total number of jobs created in Europe as a result of FDI fell 16% year on year to 269,740.

Geopolitical tensions, economic instability and rising trade barriers – particularly involving the US – were cited as the top three factors deterring investment. As a result, 37% of companies reported postponing, cancelling or scaling back their European investment plans. Only 59% of businesses intend to invest in Europe within the next 12 months, down from 72% last year. Meanwhile, 42% believe US policies are reducing Europe’s attractiveness, with just 27% expecting them to have a positive impact.

Despite the general downward trend, 500 executives interviewed by the EY organization between January and March 2025 say that Europe can attract investment in the sectors that will dominate FDI in years to come. These include renewable energy, semiconductors, pharmaceuticals, artificial intelligence (AI) and electric vehicles (EVs). There is still confidence among investors, with 61% of surveyed businesses expecting investment to improve during the next three years.

Julie Linn Teigland, EY Global Vice Chair – Alliances & Ecosystems and EY EMEIA Area Managing Partner, says:

“Foreign investment is a vital pillar of the European economy, and our findings should sound the alarm for governments and policymakers. Urgent and collective action is needed to focus on future-facing sectors that can drive growth.

“While overall investment has declined, there is a significant opportunity for Europe to double down on investments in emerging sectors like renewable energy, AI and electric vehicles, which show real promise. By prioritizing these areas, European businesses and governments can not only tackle current challenges but also unlock new avenues for growth and innovation.

“It is essential that we adapt and innovate swiftly to secure a prosperous future for Europe."

Double-digit decline in France, the UK and Germany

In line with the Europe-wide trend, investment in France fell by 14%. Though France remains the leading destination for FDI investment and is emerging as a key hub for AI investment while also remaining a prime location for international energy and agri-food companies.

The UK saw a 13% decline in FDI, following a 6% increase the previous year. The UK has shifted its focus toward capital and infrastructure investments, driven by the Office for Investment’s strategy of prioritizing fewer but higher quality projects. There has been a strong rise in research and development (R&D) investments (+32%) and a sustained high level of headquarters projects, both considered strategic activities. London remains the most attractive European city for investment.

FDI in Germany decreased by 17% in 2024, continuing a steady decline since the pandemic. Investment in Germany in 2024 was fueled mainly by expansion projects, with Asian investors remaining key.

Central, Eastern and Southern Europe surges

In contrast, investment increased across Central, Eastern and Southern Europe. Spain is the standout performer, with the number of announced projects surging 15%, making the country the fourth-largest destination for FDI in Europe. A combination of strong economic performance, relatively low energy and labor costs and an abundant supply of land helped attract investors. The country also benefited from €163b ($184b) of funds through the NextGenerationEU scheme, the second-largest amount secured in the EU. 

Other strong performers include Denmark (+86%), Austria (+31%), Switzerland (+25%), Poland (+13%), Finland (+13%) and Italy (+5%). The significant surge in Denmark was caused by a tripling of the number of business services and sales and marketing projects. Poland has consolidated its position as an industrial and logistics hub, capitalizing on its central location, cost competitiveness and sizable pool of skilled talent.​

Manufacturing contracts, but future sectors show promise

Manufacturing FDI declined by 9%, reaching its lowest level of new projects since 2020. New greenfield projects dropped 20%, and manufacturing job creation fell by 25%. This is a concern, as greenfield sites typically generate twice as many jobs as expansions.

Office-based investment also declined, with business support services projects falling by 9%. The shift to remote work has reduced demand for new office space. Software and IT services – historically the largest sector for FDI – saw a 17% decline, partly due to tighter outsourcing budgets.

Despite a general decline, early signs suggest Europe can attract future investment in key sectors like renewable energy, semiconductors, pharmaceuticals, AI and electric vehicles (EVs). 

While most categories of FDI declined in 2024, R&D-related investment increased, albeit from a relatively low level. This indicates that investors still consider Europe an attractive location for cutting-edge research across all sectors.

Rising uncertainty disrupts immediate plans

According to the report, an immediate recovery in FDI is unlikely. Thirty-seven percent of companies postponed, cancelled or scaled back their European investment plans last year. In parallel, the proportion signaling intent to invest in Europe in the next 12 months fell to 59% from 72% in 2024.

The prospect of tariffs on imports into the US and record levels of economic uncertainty added to businesses’ long-term worries about Europe’s competitiveness, feeding investor hesitancy. Forty-two percent of surveyed businesses say they think the policies of the US administration will decrease Europe’s attractiveness, with just 27% optimistic that they will lead to improvements.

Rising uncertainty has also damaged investors’ longer-term view of Europe’s attractiveness. The proportion that believes Europe’s attractiveness will increase during the next three years fell 14 percentage points, to 61%. More are confident that the attractiveness of the US (74%) and China (67%) will improve. In addition, investors for the first time ranked the US higher than Western Europe when asked which regions are most attractive for investment. This is likely driven by rapid growth in the US, favorable energy costs and the Inflation Reduction Act, as well as frustration with European stagnation and relative complexity.

Businesses expect FDI to improve in the next three years

Despite the challenges, 61% of respondents expect FDI into Europe to improve over the next three years. Positive economic indicators – including wage growth outpacing inflation and falling interest rates – support a cautious sense of optimism.

The 2024 data shows that investment in defense is increasing through investments by European businesses, while the size of the market and quality of infrastructure remain Europe’s greatest relative strengths and could be the basis for the development of a highly competitive economy and a recovery in investment. 

In addition, as important as the US is as a source of investment in Europe, 60% of European FDI originates in Europe, often in the form of small and medium-size businesses investing in neighbouring countries. These businesses are less swayed by overseas developments. 

The full report can be accessed on ey.com here, in addition to further detail on investment attractiveness of a range of other countries.

-ends-

Notes to editors

About EY

EY exists to build a better working world, helping to create long-term value for clients, people and society and build trust in the capital markets.

Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate.

Working across assurance, consulting, law, strategy, tax and transactions, EY teams ask better questions to find new answers for the complex issues facing our world today.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation is available via ey.com/privacy. For more information about our organization, please visit ey.com.

This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.

About the EY Europe Attractiveness Survey 2025

For this 24th edition of the Europe Attractiveness Survey, we again draw on two sources.

• Our evaluation of FDI in Europe is based on the EY European Investment Monitor (EIM). This EY proprietary database enables us to track projects announced in 2024 across 45 countries.
• We explore Europe’s perceived attractiveness via an online survey of international decision-makers. Field research was conducted between 31 January and 3 March 2025 based on a representative panel of 500 respondents.