London retains its crown as Europe’s top city for foreign investment

Tuesday, May 31, 2022 6:00 a.m.

(Photo by Dan Mullan/Getty Images)

London has retained its crown as Europe’s most attractive city for foreign investment despite recovering slower than expected from a pandemic crisis, new data has revealed.

The capital recorded foreign direct investment (FDI) in 394 projects last year, compared to 383 in 2020, according to data from the four major firms EY.

EY analysts said overall funding levels in the capital remained subdued from pre-pandemic levels as a shift in investor sentiment towards manufacturing projects triggered a slowdown in London’s digital sector.

Only 194 digital projects in London attracted investment last year, down from 289 in 2019.

EY’s chief economist said investment in the rest of the country had also grown at a faster rate than capital as investors pumped cash into the so-called leveling program.

“Leveling as a policy idea has caught on, with nearly two-thirds of the investors we surveyed having heard of it in the past year,” he said.

“Awareness has turned into engagement this year, with a similar proportion saying upgrading influences their location decisions and that they will seek to invest where government support is available – although the number of projects does not yet reflect this.

FDI-backed projects in the UK rose by 18 to 993 in 2021, marking a return to growth after falling 12% the previous year amid a broader pandemic-induced slowdown in investment.

Technology continued to form the backbone of FDI in the country, but EY warned that the lure of manufacturing left the UK with “some catching up to do” to retain its appeal to overseas financiers.

“A trend towards ‘green’ manufacturing could help the UK attract investment while accelerating progress towards sustainability and improving targets,” said EY Client Services Partner Alison Kay.

France topped the list of foreign direct investment in European countries last year, retaining its crown from the previous year.

Mary I. Bruner