In a significant shift in the landscape of foreign direct investment (FDI) in Europe, London has surpassed Paris as the leading region for new FDI projects, according to the latest data from EY’s annual FDI survey. The UK capital saw an increase of 20% from the previous year, attracting 359 projects in 2023—its highest annual total since 2019. This growth was predominantly driven by the technology and financial services sectors.
While London’s ascendancy highlights its strategic importance, the overall UK picture is mixed. Regions like Scotland and the West Midlands experienced substantial growth in FDI, attributed to the burgeoning wind power industry and a 72% increase in projects, respectively. However, other areas such as Wales, Northern Ireland, and the East Midlands faced significant declines, and Northern England saw a decrease in new foreign investments compared to 2022.
The overall 6% increase in the UK’s FDI for 2023 reflects a stabilization following the political turmoil of the previous year, which saw three different prime ministers. The easing of these political disruptions has provided a more stable environment for foreign investors.
The new government under Keir Starmer aims to bolster economic growth by promoting stability, reforming the restrictive planning systems, and providing targeted state support. These measures are expected to invigorate investment across various UK regions.
EY’s UK chief economist, Peter Arnold, emphasized the importance of understanding the impact of incentives, grants, and skills development in attracting FDI to different parts of the UK. The success stories of regions like Scotland and the West Midlands demonstrate a robust interest in investing beyond London, suggesting a potential for broader geographic distribution of FDI with the right governmental strategies.
This data underscores the ongoing challenge for the UK government to foster equitable development across the country and enhance the investment appeal of its diverse regions to maintain and grow the nation’s overall investment profile.
