Foreign Direct Investment: UK remains second in Europe

• The UK recorded 853 Foreign Direct Investment (FDI) projects in 2024, a 13% decline from 2023
• First-place France and third-place Germany saw FDI projects fall by 14% and 17% respectively
• Greater London remained Europe’s leading region for investment for the second year in a row, attracting 265 projects in 2024

The UK attracted the second highest number of Foreign Direct Investment (FDI) projects in Europe last year but, like other large European countries, saw overall project numbers decline year-on-year. 

The UK secured 853 FDI projects in 2024 according to the EY 2025 UK Attractiveness Survey, which represented a 13% decrease from 2023. France (1,025 projects) ranked first in Europe for the sixth consecutive year but recorded a decline of 14% year-on-year, while Germany (608 projects) followed in third place and saw its total fall by 17%. 

Greater London recorded 265 FDI projects in 2024, making it Europe’s leading region for investment for the second year in a row. However, Greater London’s total did represent a 31% decline on the 359 projects it recorded in 2023.

Economic challenges drive Europe-wide FDI decline

Europe as a whole recorded a 5% year-on-year decrease in FDI projects, securing a total of 5,383 projects in 2024 which was a nine-year low. Europe’s project numbers in 2024 were 16% below pre-COVID-19 pandemic levels and 19% below the record high in 2017 (6,653).

According to EY’s analysis, this is the second consecutive year that Europe’s overall FDI project total has fallen and means the continent has seen FDI numbers decline for four of the last seven years. 

France, the UK and Germany, which have historically attracted around 50% of Europe’s annual FDI project total, saw a more pronounced decline in project numbers last year as low economic growth, high energy prices and competition from other markets, such as Asia and the United States, impacted investment. France experienced a period of political uncertainty in 2024 as well as elevated labour costs and impending higher taxes for large businesses, while Germany faced growing energy prices and a contraction in its manufacturing sector. 

In contrast, FDI project totals increased across Central, Eastern and Southern Europe, with Spain (15%), Poland (13%) and Italy (5%) all recording rises, albeit with significantly lower totals than the top three ranked countries. 

Anna Anthony, EY UK & Ireland Regional Managing Partner, said: “While it’s encouraging to see that the UK remains one of Europe’s top investment destinations, it wasn’t immune to the decline in FDI volume that affected other large European countries last year. Looking ahead, international trade disruption has weakened the global economy and the extent to which this will affect investor appetite this year remains unclear.

“Nonetheless, the UK still has a compelling investment story to tell. It has outperformed Europe in securing investment into future-facing industries such as technology and life sciences, generates the most FDI-related jobs and tends to attract capital from a broad global pool of sources. The Government is taking positive steps to show the UK is open for business, progressing trade relationships with India and the US while also pinpointing those sectors it hopes will yield most growth and investment in its Industrial Strategy. The UK has an opportunity to present an appealing, stable regulatory and business environment and, at a time of worldwide economic turbulence, this could help attract strategically important FDI projects that will drive the greatest level of value, employment and prosperity.”

UK continues to lead Europe in tech FDI

The UK’s share of all European FDI projects fell to 15.8% in 2024, which was a decline from the 17.3% seen in 2023. UK project numbers have remained below 1,000 since 2019 and the country secured 352 fewer projects in 2024 than at its high point of the decade in 2017, when 1,205 projects were recorded.

The UK remained the European leader for tech FDI last year, attracting 161 projects related to software and IT services. However, this represents a decline of more than a third (37%) on the total secured in 2023 (255 projects). One in five (20%) tech FDI projects in Europe last year were secured by the UK, although this share had fallen from the 27% recorded in 2023. 

Europe also recorded a fall in tech FDI projects last year, although at 17% this decrease was less pronounced than the UK.  

Based on EY analysis, transportation manufacturers and suppliers (75 projects), which includes automative and aerospace businesses, was the UK’s second largest sector for FDI projects in 2024. Business and professional services (74 projects) was the UK’s third leading sector for FDI last year.

The UK was also Europe’s leading destination for investment for a range of sectors including health and social work (33 projects), pharmaceuticals (33 projects), wholesale, retail & distribution (16 projects) and leisure, culture and tourism (15 projects). 

Quality rather than quantity of projects remains a positive for the UK

Despite a decline in overall project volume, the UK continues to perform well in securing strategically valuable projects. 

For projects where expected job totals were reported, the UK continued to lead Europe on overall jobs created (38,196), ahead of Spain (34,603) and France (29,000).

Examining FDI projects by activity also reveals that, despite a fall in overall volume, the UK attracted a greater level of investment into research and development (R&D) and manufacturing last year than in 2023. These are two areas traditionally deemed high-value and strategically important by policymakers. The UK attracted nearly a third (32%) more R&D projects and 22% more manufacturing projects in 2024 than it did in 2023, representing the UK’s highest total for manufacturing since 2016. Europe as a whole recorded a 3% rise in R&D projects and 8.5% fall in manufacturing projects last year. 

The largest number of projects in the UK in 2024 (301) were involved in business services activity, such as establishing a call centre or a testing and training facility, although there has been a 23% fall in projects of this type since 2023. Projects to establish corporate headquarters in the UK saw a marginal decline of 2% to 86 in 2024. 

The UK secured one in three (34%) of all headquarters-related FDI projects in Europe last year, nearly one in five (19%) of all R&D-related projects and a similar proportion (18%) of all business services-related projects. 

‘New’ projects – as opposed to re-investments or extensions – are one way of assessing a country’s ability to attract fresh investment, and the UK has retained its position as Europe’s leading country for new projects for a fourth year in a row.

Of the UK’s 853 total projects in 2024, 535 (63%) were new. Despite this, the overall level of new projects into the UK fell by 27% when compared with 2023. New projects into Germany fell by 19% and fell in France by 12%.

The UK has secured the largest number of new projects for the last five years and, in 2023, secured 173 more projects than Germany (up from a gap of 135 projects in 2022).

UK should capitalise on strong fundamentals as uncertainty weighs on investment

Peter Arnold, EY UK Chief Economist, said: “Economic growth across Europe has been relatively modest in recent years, which appears to be driving investors towards more competitive global destinations such as Asia and the US. There was also clearly an element of investor hesitancy last year in particular, which can be partially attributed to higher energy and labour costs in many European countries, as well as a degree of political uncertainty from the UK, France and Germany all holding major elections in 2024. 

“Global uncertainty makes it difficult to predict how investment numbers will change this year, but the UK does have some strong fundamentals that could set it apart. It now has a government with a large majority in place for the foreseeable future and can project a sense of regulatory and legislative stability. An emphasis on project quality over quantity expressed by policymakers in recent years also appears to be working, with the UK securing a higher number of projects that typically generate greater long-term value such as R&D and manufacturing.

“The UK tends to attract FDI from a more diverse range of countries outside Europe, supported heavily by Commonwealth nations, which may offer a buffer if European FDI volumes continue to decline. Rapidly expanding economies like India are also becoming increasingly important sources of investment for the UK in key sectors like technology. Strengthening economic ties with high-growth partners worldwide may enable the Government to maintain a resilient investment pipeline for the UK while simultaneously driving capital into the high-value sectors identified in its Industrial Strategy.”

Fall in US projects drives overall decline but India remains key source of UK FDI

The United States remained Europe and the UK’s leading source of FDI projects in 2024. Nearly a quarter (24%) of all UK FDI projects originated in the US, compared to 18% of European projects. However, project numbers originating from the US decreased by 11% for Europe and 7% for the UK last year and was a key factor in the overall fall recorded in 2024. 

India remained the UK’s second largest origin country for FDI for a third consecutive year, contributing 8% of all UK projects, with France in third place with 6%. A quarter (25%) of all UK software and IT FDI projects in 2024 originated from India. 

Germany was Europe’s second largest origin of investment projects as a whole in 2024, contributing 12% of the overall project total. The UK was Europe’s third largest source of FDI, contributing 7% of all European projects. 

While the majority of Europe’s overall investment (60%) originates from European countries, this is not the case for the UK specifically, which saw just over half (52%) of FDI projects originate from nations outside of Europe in 2024. 

For example, India was the 12th largest contributor to European FDI projects as a whole in 2024, with the UK securing half (50%) of all Indian projects into Europe.

Meanwhile, Australia was the 22nd largest origin of investment projects into Europe in 2023 but was the fifth largest origin of projects into the UK. Around three in five (59%) of all Australian FDI projects in Europe last year were secured by the UK. 

Nearly one in five (18%) Canadian FDI projects and a third (32%) of Singapore FDI projects in Europe last year were also recorded in the UK.