The UK attracted more foreign investment projects than any other European country last year, despite a 19% fall in the number of projects across Europe.
According to EY, digital technology remains a key sector for UK FDI and played a major role in the UK’s year-on-year FDI growth. Last year, the UK was second only to France for overall FDI projects in 2023.
FDI into the UK has increased in recent months due to a resurgence in digital investment, with the UK winning more than a quarter (27%) of all digital tech projects across Europe last year. This is an 8.9% increase from 2022, with London in particular being hailed by EY as Europe’s leading city for digital tech investment.
Strengthening Europe’s digital presence
The news from EY comes amid a number of major tech companies investing in European countries, including AWS’ European sovereign cloud investment and Microsoft’s multi-billion dollar investment in several countries on the continent, including Sweden.
EY cited France as the second-highest country for digital technology FDI projects in 2023 after the UK, winning 135 projects, followed by Germany with 119 projects.
As the current leading city, London has continued to attract a lot of interest and major digital projects over the past decade, with notable investments including a new Google data centre being built on the outskirts of London to support the growth of artificial intelligence (AI) across the region.
“A resurgence in digital investment has driven much of the UK’s FDI growth this year, making it an outlier compared to the overall decline in tech projects in Europe,” commented Peter Arnold, EY’s chief UK economist. “After a period of relative European dominance between 2016 and 2019, UK tech projects have thoroughly disappointing in 2022 as high interest rates make capital less readily available and industry cuts costs and scales back globally.”
He added: “While this pressure eased somewhat in 2023, companies investing in technology still faced tough borrowing conditions and may have prioritised more established and resilient tech markets such as the UK over emerging markets.”
The UK is firmly established as a world-leading technology hub, continuing to contribute cutting-edge areas such as AI, fintech and cybersecurity. With a diverse range of start-ups, world-leading universities and a highly skilled talent pool, the UK continues to attract domestic and international investment, as Rob Atkinson, Managing Partner at EY UK&I, explains.
“This creates job opportunities and contributes to economic growth,” Rob said. “The UK provides fertile ground for technology companies to thrive, thanks to 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 provide a supportive and attractive place to do business.”
Other: Creating global technology opportunities
The largest source of digital technology investment in the UK in 2023 will be the United States, with 50 projects, followed by India (36) and Australia (13).
Overall, EY noted that other projects across Europe have also begun to decline, with the continent recording a 4% year-on-year decline. This is 11% below pre-pandemic levels and the lowest total FDI since 2020.
