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UK continues to attract high levels of Foreign Direct Investment

11/07/2023

According to the results of the EY 2023 UK Attractiveness Survey, published in May, the UK has retained its second spot in terms of the ability of European countries to attract Foreign Direct Investment (FDI). France continues to top the table for the fourth consecutive year – and while activity actually fell for the UK in 2022, they ranked above all their European counterparts in terms of new projects. 

 

Here’s why the UK is performing so strongly. 

Value over volume

When attracting FDI, the UK has changed its strategy to focus on value, rather than volume. As a result, the UK’s total number of FDI-backed projects fell from 993 in 2021 to 929 in 2022, while its share of all European FDI projects fell from 16.9% to 15.6% in the same period. 

However, the focus on value is evident in the fact that the UK delivered both more total jobs and more jobs per project than its European counterparts in 2022. What’s more, over 1-in-4 UK projects (compared to under 1-in-5 in France) last year were linked to either R&D or new company headquarters.

 

Digital technology dominates

The biggest driver of FDI projects in the UK is still digital technology (234 projects in 2022), followed by financial services (76) and business and professional services (70). The number of digital tech projects actually fell by 23.3% compared with 2021, however – despite digital tech FDI projects increasing by 8% across Europe in 2022. 

With 25.2% of all UK FDI projects accounted for by digital tech, this could mean that other European countries are capitalising on projects that may normally have gone to the UK. 

The UK did, however, see gains in certain sectors, namely financial services, pharmaceuticals and utility supply, among others. 

 

Where is foreign direct investment coming from? 

24% of UK projects originate from the US – above the 20.8% figure for Europe as a whole. Also of great importance is India, with the UK accounting for 58.2% of all European projects backed by India in 2022 – a rise of 7% compared with the previous year. 

Australia and Canada have also risen up the ranks in terms of where the UK’s FDI backing comes from: unsurprising as a result of Brexit. 

In the other direction, more and more UK businesses are investing in European markets – especially in France and Germany. Could we see more entrepreneurs and investors focusing on the single market, rather than the UK, in the future?

 

Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.

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