Britain was the only one of Europe’s three largest economies to record a rise in foreign direct investment last year – a show of confidence in Brexit Britain.
Figures from EY show the number of foreign-backed projects rose by six percent to 985, while struggling France and Germany saw declines of five percent and 12 percent.
Hywell Ball, chairman of EY in Britain, said last year’s “strong performance” in foreign direct investment (FDI) “was driven by a revival in technology investment and impressive annual growth in sectors such as business services’.
It is the latest evidence of Britain’s economic robustness despite fears about the consequences of leaving the European Union.
And this comes after recent business survey data shows UK growth is outpacing the US and the Eurozone.
Britain was the only one of Europe’s three largest economies to record a rise in foreign direct investment last year – in a show of confidence in Brexit
Foreign direct investment (FDI) projects across Europe as a whole – including Britain – fell by 4 percent, with most major countries including Italy and Spain also seeing declines, although there was an increase for the Netherlands.
It comes at a time when the eurozone economy is stagnating, dragged down by weakness in Germany, which is plagued by high energy costs and a crumbling industrial base.
The EY research found that Britain’s technology sector led the way with 255 projects in 2023, an increase of 8.9 percent on the previous year – even as Europe saw a 19 percent decline overall.
Britain’s leading position in this sector saw the country attract more than a quarter of all foreign direct investment in the technology sector in Europe by 2023.
Peter Arnold, EY’s chief economist in the UK, said: ‘The UK owes much of this year’s FDI growth to a resurgence in digital investment, making the UK an outlier compared to the European trend of declining technology projects.
‘After a period of relative European dominance between 2016 and 2019, the UK tech project completely disappointed in 2022 as high interest rates cut off access to easy capital and the sector cut costs and shrank globally.
“While these pressures eased somewhat in 2023, companies investing in technology still faced tighter lending conditions and may therefore have prioritized more established and resilient technology markets, such as the UK, over emerging markets.”
Financial services was the second largest sector for foreign investment in Britain, a boost for the city as it rebuffs attempts by the likes of Paris, Frankfurt and Amsterdam to steal its crown as a financial center.
And Greater London regained its top position as a European investment destination, overtaking the Ile de France region, which also includes Paris.
Of the total 985 FDI projects in Britain in 2023, 736 were new – an increase of 13.9 percent on new projects in 2022. Britain has attracted the largest number of new investments over the past five years.
The US was the main source of foreign investment for both Britain and Europe
However, there was a decline for Britain in a number of ‘high value’ areas such as research and development, as well as manufacturing.
Overall, France remains the largest recipient of foreign investment in Europe, with 1,194 projects underway in 2023, Britain in second place and Germany in third place with 733 projects.
Mr Ball said: ‘The UK remains a leading European investment destination, but there is no room for complacency.
“Overall, project numbers have not yet returned to pre-pandemic levels and global competition for investment remains fierce.”
The US was the main source of foreign investment for both Britain and Europe. It represented one in five of all such projects in Britain. India was the second largest direct foreign investor in Britain, followed by Germany in third place.
British economic growth will be the slowest in 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 cut its outlook for Britain, forecasting GDP to rise by a ‘slow’ 0.4% this year and 1% in 2025. That is less than the 0.7% and 1.2% in previous forecasts.
UK taxes “continue to rise” towards historic highs of around 37 percent of GDP, the OECD said, only partially offset by national insurance cuts and corporate tax cuts for investment, the OECD said.