London ‘most attractive’ European city for foreign direct investment

London has retained its title as Europe’s most attractive city for foreign direct investment (FDI), according to new research from Ernst and Young.

There were 394 FDI-backed projects in London in 2021, a 2.9 per cent rise from 383 projects in 2020, but a fall from the capital’s peak of 538 in 2019.

London is less dominant within the UK in terms of attracting investment than it was pre-pandemic according to the research.

The proportion of investors describing the city as the UK’s “most attractive destination” fell from 49 per cent in 2019 to 27 per cent this year.

In contrast, the number of investor’s describing Scotland as the UK’s most attractive destination rose from 7 per cent in 2019 to 16 per cent in 2022.

At a city level, Edinburgh and Manchester were the strongest performers among UK cities in terms of attracting FDI, with 31 projects apiece, although both recorded fewer projects than in 2020.

At a wider national level, the UK was bested by France when it came to attracting investment.

France held the top spot for project numbers for the third year running, although the UK came first in Europe for new projects and beat France and Germany on jobs per project according to the research.

The UK was home to 993 FDI-backed projects in 2021, up 1.8 per cent from 2020 (975) and a return to growth after a pandemic-driven fall of 12 per cent the year before (from 1,109 in 2019). This secured the UK a second-place finish for the third year in a row.

The UK share of all European FDI-backed projects peaked at 21 per cent in 2015 according to the research.

“Levelling-up as a policy idea has cut through, with almost two-thirds of investors we surveyed having heard of it last year,” said Peter Arnold, EY’s UK chief economist.
“Awareness has turned into engagement this year, with a similar proportion saying levelling-up influences their location decisions and that they’ll look to invest where government support is available - although project numbers are yet to reflect this.”

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