The United Kingdom was the only one of Europe’s three major economies to record an increase in foreign direct investment last year, in an apparent vote of confidence in Britain’s Brexit.
Figures compiled by EY showed the number of overseas-backed projects rose six per cent to 985, while struggling France and Germany saw drops of five per cent and 12 per cent.
Hywell Ball, chairman of EY in the UK, said the “strong performance” of foreign direct investment (FDI) last year was “driven by a resurgence in technology investment and impressive annual growth in sectors such as services business”.
It is the latest evidence of Britain’s economic strength despite fears about the consequences of leaving the European Union.
And it comes after recent business survey data showed UK growth outpacing that of the US and eurozone.
The United Kingdom was the only one of Europe’s three major economies to record an increase in foreign direct investment last year, in an apparent vote of confidence in Brexit.
Foreign direct investment (FDI) projects across Europe – including the UK – fell by 4 per cent and most major nations, including Italy and Spain, also saw falls, although there was an increase in the Netherlands.
It comes as the eurozone economy stagnates, dragged down by weakness in Germany, which has been hit by high energy costs and a crumbling industrial base.
The EY survey showed the tech sector led the way in the UK with 255 projects in 2023, up 8.9 per cent on the previous year, even as Europe as a whole saw a 19 per cent drop.
Britain’s leading position in this industry meant it attracted more than a quarter of all technology FDI in Europe in 2023.
Peter Arnold, chief economist at EY in the UK, said: “The UK owes much of its FDI growth this year to a resurgence in digital investment, making the UK an outlier compared to the European trend. of decrease in technological projects”.
‘After a period of relative European dominance between 2016 and 2019, the UK’s tech pipeline disappointed in 2022 as high interest rates cut off access to easy capital and the sector cut costs and contracted globally.
“While this pressure eased slightly in 2023, companies investing in technology were still facing tighter borrowing conditions and may therefore have prioritized more established and resilient technology markets, such as the UK, over emerging ones” .
Financial services were the second-largest sector for foreign investment in the UK, a boost for the City as it shrugs off attempts by countries such as Paris, Frankfurt and Amsterdam to steal its crown as a financial centre.
And Greater London regained its top spot as a European investment destination, overtaking the Ile de France region, which includes Paris.
Of the UK’s total 985 FDI projects in 2023, 736 were new, an increase of 13.9 per cent on new projects in 2022. The UK has secured the highest number of new investments in the last five years .
The United States was the main source of foreign investment for both the United Kingdom and Europe.
However, there was a decline in the UK in some “high value” areas such as research and development, as well as manufacturing.
France remains the largest recipient of inbound investment in Europe overall, with 1,194 projects underway in 2023, with the United Kingdom in second place and Germany in third with 733.
Mr Ball said: “The UK remains a leading investment destination in Europe, but there is no room for complacency.”
“The total number of projects has not yet returned to pre-pandemic levels and global competition for investment remains fierce.”
The United States was the main source of foreign investment for both the United Kingdom and Europe. It represents one in five of all such projects in Britain. India was the second largest foreign direct investor in Britain, followed by Germany in third place.
Britain’s economic growth will be the slowest among the G7 group of advanced economies next year due to high taxes and interest rates, the Organization for Economic Co-operation and Development (OECD) warned yesterday.
The Paris-based group downgraded its outlook for the UK, predicting GDP will rise a “sluggish” 0.4 percent this year and 1 percent in 2025. That’s down from 0.7 percent and the 1.2 percent from previous forecasts.
UK taxes “continue to rise” to reach record highs of around 37 percent of GDP, the OECD said, which is only partly offset by cuts to national insurance and corporation tax breaks for investment, the OECD said. OECD.
