The UK attracted more digital technology Foreign Direct Investment (FDI) projects than any other country in Europe last year, according to EY’s 2024 UK Attractiveness Survey.
Despite a 19% decline in project numbers across Europe, digital technology remains the leading sector for UK FDI and played a significant role in the country’s year-on-year FDI growth. The UK ranked second, after France, for overall FDI projects in 2023.
In total, the UK recorded 255 digital technology projects in 2023, an annual increase of 8.9%, and received more than a quarter (26.7%) of all digital tech FDI projects in Europe last year. It follows a disappointing performance in 2022, when UK digital technology FDI project numbers fell to 234 and the country’s share of Europe’s digital projects declined to 19.8%.
France was the second leading country for digital technology FDI projects in 2023, securing 135 projects, followed by Germany which received 119 projects.
Peter Arnold, EY’s UK Chief Economist, comments: “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. After a period of relative European dominance between 2016 and 2019, the UK’s tech project total 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 tech still faced tighter borrowing conditions and so may have prioritised more established and resilient tech markets, such as the UK, over emerging ones.”
Greater London has been the leading city destination of digital technology projects for the last 10 years and in 2023 attracted 132 projects, an increase of 24.3% from 2022. It was followed by Paris and Berlin which attracted 47 and 34 FDI digital technology projects, respectively.
The United States was the leading source of digital technology investment into the UK in 2023, contributing 50 projects, followed by India (36 projects) and Australia (13 projects).
Rob Atkinson, EY UK & Ireland Managing Partner for Technology, Media and Telecoms (TMT), comments: “The UK, and specifically Greater London, continues to solidify its position as a leading global technology hub in cutting-edge fields such as artificial intelligence, fintech, and cybersecurity. The UK’s vibrant tech ecosystem – a combination of innovative startups, world-class universities and a highly skilled talent pool – has attracted inward and overseas investment, creating employment opportunities and contributing to economic growth.
“Whilst our latest data is promising, it’s important the tech sector does not become complacent. Although macroeconomic pressures are easing, many tech companies are continuing to face challenges in accessing capital as high interest rates and geopolitical headwinds create a difficult fundraising environment.
“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.”
The UK recorded Europe’s second highest overall total (985) of FDI projects in 2023, but was the only country in the top three to see project numbers increase year-on-year.
While France was Europe’s largest recipient of inward investment with 1,194 total FDI projects in 2023, this represented a 5% decrease on its 2022 project total. Germany followed in third place, recording 733 projects in 2023, which was a decline of 12% on the year before.
Europe as a whole recorded a 4% year-on-year decline with a total of 5,694 projects recorded in 2023. This was the continent’s lowest FDI total since 2020 and was 11% lower than its pre-pandemic level (6,412) and 14% lower than 2017 (6,653).
The UK’s share of all European FDI projects grew to 17.3% in 2023, an increase on the 15.6% seen in 2022. However, the UK’s broader FDI trend mirrors Europe’s by recording a lower level of projects in the last four years in comparison to pre-pandemic levels. UK project numbers have remained below 1,000 since 2019 and there were 220 fewer projects recorded in 2023 than at the UK’s high point of the decade in 2017, when 1,205 projects were recorded.
