The UK attracted more foreign investment projects than any other country in Europe last year, despite a 19% decline in project numbers across Europe.
According to EY, digital technology remains the leading sector for UK FDI and played a significant role in the country’s year-on-year FDI growth. Last year, in 2023, the UK had ranked second for overall FDI projects in 2023, after France.
UK FDI has grown in recent months on account of a resurgence in digital investment, with the country securing more than a quarter (27%) of all European digital tech projects last year. This is a that has gone up 8.9% from 2022, with London in particular having been touted by EY as the leading European city for digital technology investment.
Bolstering Europe’s digital presence
This news from EY comes in the midst of plenty of big technology organisations investing in countries across Europe, including AWS’ European Sovereign Cloud investment and Microsoft’s billion-dollar investments into several countries across the continent, including Sweden.
Behind the UK, EY cited France as the second leading country for digital technology FDI projects in 2023, securing 135 projects, followed by Germany which received 119 projects.
As the current leading city, London has continued to garner much interest over the last ten years and continues to attract key digital projects. Notable investments include a new Google data centre just outside of the city to support artificial intelligence (AI) growth across the region.
“The UK owes much of its FDI growth this year to a resurgence in digital investment, making the UK something of an outlier in comparison to the Europe-wide trend for declining tech projects,” comments Peter Arnold, EY’s UK Chief Economist. “After a period of relative European dominance between 2016 and 2019, the UK’s tech project was totally disappointed in 2022 as high interest rates cut off access to easy capital and the sector cut costs and contracted globally.”
He adds: “While this pressure eased slightly in 2023, companies investing in tech still faced tighter borrowing conditions and so may have prioritised more established and resilient tech markets, such as the UK, over emerging ones.”
The UK holds a strong position as a leading global technology hub and continues to contribute to cutting-edge fields, including AI, fintech and cybersecurity operations. Amongst this resides a range of startups, world-leading universities and a highly skilled talent pool and, as EY UK&I Managing Partner Rob Atkinson explains, the country is only continuing to attract inward and overseas investment.
“This creates employment opportunities and contributes to economic growth,” Rob says. “The UK provides fertile ground for tech companies to thrive, thanks in part to the strong collaboration between the public and private sectors. Maintaining this collaborative environment is essential if the UK is to remain competitive with other leading global destinations and offer a supportive, attractive place to do business.”
Elsewhere: Creating global technology opportunities
The United States (US) was the leading source of digital technology investment into the UK in 2023, contributing 50 projects. This was followed by India (36 projects) and Australia (13 projects).
Overall, EY finds that other projects across Europe are starting to decline, with the continent recording a 4% year-on-year decline – the lowest FDI total since 2020, which was 11% lower than its pre-pandemic level.