Foreign Direct Investment: UK retains second place in Europe

• The UK recorded 730 Foreign Direct Investment (FDI) projects in 2025, a 14% decline from 2024 when 853 projects were recorded. 
• First-place France and third-place Germany saw FDI projects fall by 17% and 10% respectively. 
• UK led Europe in attracting investment into technology and business and professional services last year.

The UK attracted the second-highest number of Foreign Direct Investment (FDI) projects in Europe last year, despite a fall in overall project numbers across the continent. 

The UK secured 730 FDI projects in 2025 according to the EY 2026 UK Attractiveness Survey, which represented a 14% decrease from 2024, when 853 projects were recorded. France (852 projects) ranked first in Europe for the seventh consecutive year but recorded a decline of 17% year-on-year, while Germany (548 projects) followed in third place and saw its total fall by 10%.

Europe as a whole recorded a 7% year-on-year decrease in FDI projects as global economic uncertainty related to tariff disruption weighed on investment figures worldwide. Subdued economic growth, high energy prices and competition from other markets, such as Asia and the United States, are also thought to have impacted investment levels into Europe.  

Greater London outperformed the UK and Europe-wide trend by recording a 5% year-on-year increase in FDI projects in 2025, making it Europe’s leading region for investment for the third successive year.  

European project totals decline for third consecutive year 

The 5,026 projects secured across Europe in 2025 marks the third consecutive year that project numbers have declined, with FDI totals decreasing for five of the last eight years.  

There were increases in FDI project numbers across parts of Eastern and Southern Europe, with Spain (7%), Poland (10%) and Turkey (20%) all recording rises, albeit with significantly lower totals than the top three ranked countries. 

The UK accounted for 15% of all FDI projects secured in Europe last year.

Anna Anthony, EY UK & Ireland Regional Managing Partner, said: “Global trade disruption significantly dampened investor confidence last year, reducing FDI levels across Europe and beyond. Against this backdrop, it is encouraging that the UK has retained its position as one of Europe’s leading destinations for investment, particularly in key sectors such as technology and professional services which the Government has identified as being central to future national growth.  

“The UK remains a highly competitive investment destination, leading Europe in FDI-related job creation and attracting capital from a diverse global investor base. London has been a notable outperformer amid broader European decline, and the Capital’s access to talent, financing opportunities and role as an engine room for the UK’s services economy underlines its importance as a national investment asset. As the Government continues to take steps to prioritise growth, reinforcing regulatory stability and competitiveness will be critical to channelling investment into the strategically important sectors set out in the Modern Industrial Strategy and delivering lasting economic value.” 

The UK retained its position as Europe’s leading destination for technology FDI last year, securing 155 software and IT services projects. While this represents a modest 3.7% year‑on‑year decline, the UK continued to attract the largest share of technology investment across the region, accounting for 18% of all European tech FDI projects in 2025. 

Business and professional services was the UK’s second‑largest sector for FDI, with 153 projects secured in 2025 - more than double the 74 projects recorded in 2024. The UK led Europe in this sector, securing over one‑fifth (21.4%) of all business and professional services FDI projects across the continent. 

Overall, the UK continues to attract a high concentration of service‑led investment, with technology and professional services accounting for 42% of all UK FDI projects last year. 

Peter Arnold, EY UK Chief Economist, said: “Global inward investment softened last year amid trade disruption and geopolitical uncertainty, with Europe experiencing a particularly pronounced and consecutive decline. Persistently low economic growth, alongside structural challenges such as high energy and labour costs and regulatory complexity, continues to weigh on investor confidence across the region. 

“While the UK also saw project numbers fall, there are encouraging signs of a more diversified and resilient investment mix emerging, most notably with India now firmly established as a consistently strong source of FDI. Addressing high energy and labour costs would enhance UK attractiveness. Ultimately, demonstrating stronger, more durable economic momentum will be the key driver to unlocking greater levels of capital, and while global conditions remain challenging, investors will be watching closely for signs of recovery. 

“Technology has remained the UK’s leading sector for inward investment for more than a decade, but as companies embrace AI, the distinction between software‑led and people‑led services is becoming increasingly blurred. The sharp rise in professional services projects reflects this shift, with many of these projects representing investment in technology‑enabled capabilities. The result is a growing concentration of service‑led inward FDI, underscoring the UK’s structural advantage in attracting high‑value, knowledge‑intensive capital.” 

UK continues to lead Europe for FDI-related jobs

‘New’ projects – as opposed to re-investments or extensions – are one way of assessing a country’s ability to attract fresh investment. For the fourth consecutive year, the UK remained Europe’s leading destination for new FDI projects, ahead of Germany. 

Of the UK’s 730 total FDI projects in 2025, 474 (65%) were new. While the number of new projects declined by 11% compared with 2024, this fall was broadly in line with the wider European trend, where new projects across the region declined by 12% year on year. 

The UK continued to lead Europe for FDI‑related job creation in 2025, generating 28,867 jobs across projects where employment totals were disclosed and outperforming France (27,921) and Turkey (24,130). 

Despite an overall fall in project volumes, the UK attracted a greater proportion of investment in business services activity than the year before. Business services accounted for the largest number of UK FDI projects in 2025, with 326 projects secured, which marked a 27% increase on the previous year. Europe as a whole recorded a 10% increase in business services projects, with the UK accounting for 21% of all such activity across the region. 

By contrast, manufacturing (-28%), sales and marketing (-37%), and research and development (-59%) all recorded significant year‑on‑year declines in UK project numbers. Projects to establish corporate headquarters also fell by 23% to 66 in 2025. 

Nevertheless, the UK secured more than a quarter (27%) of all headquarters‑related FDI projects in Europe last year. The UK’s share of Europe’s research and development projects declined from 19% to 11% over the same period. 

US and India remain key sources of UK FDI

The United States remained the largest single source of FDI projects into Europe in 2025. A total of 943 US‑originated projects were recorded across Europe, virtually unchanged from 942 in 2024. However, US‑originated investment has now declined or stagnated in three of the past four years, and the 2025 total represents a 24% fall from the recent peak of 1,240 projects in 2022, highlighting a longer‑term easing in US investment volumes. 

The US also remained the UK’s largest source of FDI projects. The UK continued to be the leading European destination for US investment, securing 19% of all US‑originated projects in 2025. One quarter (25%) of all UK FDI projects originated from the United States, compared with 19% across Europe as a whole, despite an 11% year‑on‑year decline in US‑sourced projects into the UK. 

India was the UK’s second‑largest source of FDI for the third consecutive year, contributing 10% of all UK projects. The UK secured nearly half (46%) of all Indian FDI projects into Europe in 2025, while 16% of all UK software and IT FDI projects originated from India. 

The UK was also the leading European destination for outgoing investment from France, securing 19% of all French projects into the rest of Europe, and from Australia, attracting 46% of all Australian FDI projects. 

The UK continues to attract a global mix of investment. In 2025, 58% of FDI projects into the UK originated from outside Europe, compared with 43% across Europe as a whole. 

Peter Arnold, EY UK Chief Economist, said: “The UK tends to attract FDI from a more diverse range of countries outside Europe, with a significant share originating from Commonwealth nations, and this may offer a buffer if outgoing 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 Modern Industrial Strategy.”