Despite the headwinds facing its economy, the UK remains ‘exceptionally attractive’ to foreign investors, according to the latest EY UK Attractiveness Survey. The survey, that measures the size and number of new projects kicked off with foreign capital, showed that the UK recorded 929 Foreign Direct Investment (FDI) projects in 2022, down 6.4% from 993 in 2021. For context, France continued to lead Europe with Germany ranked third.
However, despite retaining its overall spot as a key European destination for overseas investors, a closer look at the research revealed that UK tech FDI projects were down 23.3% in 2022 – a key factor in the UK’s overall project decline. And while it should be said that the UK still led Europe in the tech sector, tech projects declined by almost a quarter, from 305 in 2021 to 234 in 2022, with the UK’s share of Europe’s digital projects falling from 29.2% in 2021 to 19.8% last year as Europe played catch-up to recent UK growth in this sector. However, despite its fall in market share, the UK still led Europe for tech FDI.
Alison Kay, Managing Partner for Client Service at EY UK & Ireland, said, Europe had a challenging 2022 for inward investment, with overall projects broadly flat. “But, digging into the detail, the UK has a strong investment story to tell.
Investment intentions are at a record high and almost half of the investors surveyed think the UK’s attractiveness will improve in the near-term. Significantly, the UK’s clear focus on project value over volume continues to bear fruit. While the UK is behind France on the total number of projects, it is Europe’s clear leader when it comes to strategically important FDI. Over one-in-four UK projects were linked to Research & Development or new company headquarters – France managed under one-in-five – while UK projects tend to be linked to more jobs than those in France or Germany.
Peter Arnold, EY’s UK Chief Economist, laid out the importance of the UK’s tech sector, which he believes 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.”
The news comes hot on the heels of last week’s call for the UK to go further to develop its tech sector by adopting a more joined up approach.
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