Foreign direct investment (FDI) in UK tech projects declined by 23 per cent in 2022 due to the ongoing impact of Brexit and the rising cost of energy, according to research by EY.

A new report by the consultancy firm found that UK tech still attracts the highest level of FDI in Europe despite the fall, with the number of tech projects attracting investment falling from 305 in 2021 to 234 in 2022.

FDI in all sectors in the UK fell from 993 projects in 2021 to 929 projects in 2022, with the UK ranking second in Europe when it comes to ability to attract foreign investment. The report also said that the UK delivered more jobs per project than Germany and France.

France attracted the most FDI, with the total amount of projects increasing three per cent from 1,222 to 1,259. Germany was placed third after the UK, seeing the total number of projects decline by one per cent.

The report also discovered that investor sentiment fell in the UK, with 32 per cent of international investors ranking the UK as an attractive location in 2022, a 12 per cent decline compared to the previous year.

Yet around two thirds of investors said they would make an investment in the UK in the coming year, with a further half saying that the UK’s investment attractiveness will improve over the next three years.

Commenting on the news Peter Arnold, EY’s UK chief economist, said: “The UK’s tech sector typifies the country’s overall performance: project numbers are down but value remains solid with smaller projects not being prioritised. The sector has faced significant global headwinds, while the UK’s loss of market share may also represent other countries playing catch-up in the wake of the UK’s stellar tech performance from 2016 to 2019.”

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