1st September 2026
Britain Is Still a European Investment Favourite – But the Warning Signs Are Growing
Britain may not feel like an obvious destination for international investment at the moment. Economic growth has been weak, energy costs remain high, businesses continue to complain about regulation and taxation, and political uncertainty has hardly disappeared.
Yet international investors are still voting with their money.
The latest EY UK Attractiveness Survey places the United Kingdom second in Europe for foreign direct investment, behind France and ahead of Germany. In 2025, the UK attracted 730 foreign direct investment projects. France remained first with 852 and Germany was third with 548.
At first sight that looks like a strong performance. But there is an important qualification. Britain's 730 projects represented a 14% fall from the 853 recorded in 2024. Europe itself suffered a difficult year, with investment projects falling by 7% to 5,026, the third consecutive annual decline.
So Britain is not attracting more investment because Europe is booming. It is retaining its position near the top while the whole European investment market is under pressure.
That makes the figures rather more significant.
Britain still has something investors want
The EY figures show that the UK retains several substantial advantages.
It remained Europe's leading destination for technology investment in 2025, attracting 155 software and IT services projects. That represented 18% of all European technology FDI projects.
Business and professional services produced another 153 projects, more than twice the 74 recorded in 2024. Financial services accounted for a further 85 projects.
Technology and professional services together represented 42% of all UK FDI projects.
This is important because these are not simply investments in warehouses or low-cost manufacturing. They are areas where skills, research, universities, finance, legal services and access to international markets matter.
The UK also remained Europe's leading destination for new FDI projects for the fourth consecutive year. Of the 730 projects recorded in 2025, 474, or 65%, were new projects rather than expansions or reinvestments.
And when it comes to employment, Britain actually came first.
The projects for which employment figures were disclosed generated 28,867 jobs, compared with 27,921 in France and 24,130 in Turkey.
That is an important reminder that counting projects alone does not necessarily tell us which country is gaining the greatest economic benefit.
Investors are still optimistic about Britain
Perhaps the most interesting part of the research is what investors say about the future.
EY surveyed 360 international investment decision-makers in March and April 2026.
More than half, 57%, expect Britain's investment attractiveness to increase over the next three years. Only the United States, at 60%, and France, at 58%, scored higher on this measure.
That is quite a vote of confidence.
It also suggests that international investors do not necessarily see Britain's current difficulties as permanent.
The UK continues to benefit from a skilled workforce, a strong research and innovation base and access to finance. Those advantages are particularly important as companies invest in artificial intelligence, advanced technology and knowledge-intensive services.
The latest EY research on technology investment found that 57% of investors believe the UK performs better than competitor countries in the availability of technology talent. Almost half, 48%, regard Britain as more attractive than rival markets for AI investment, development and deployment.
That is a potentially important advantage as the global race to develop AI accelerates.
But Britain is making life expensive
This is where the EY report becomes less comfortable reading for policymakers.
Investors may like Britain's skills and innovation, but they are much less enthusiastic about the cost of operating here.
High energy prices, high labour costs and concerns about tax competitiveness were identified as major disadvantages.
Energy costs were particularly prominent. More than a third of investors, 38%, identified energy costs as the single biggest factor reducing the UK's investment appeal.
That should concern a country attempting to attract manufacturing, data centres, advanced engineering and other energy-intensive industries.
It is difficult to tell an international company that Britain is an excellent place to invest while simultaneously presenting it with significantly higher operating costs than some competing locations.
And the problem is not simply today's electricity bill.
Investors are also worried about the wider economic environment. Macroeconomic conditions, including weak growth, high interest rates and public debt, were identified as the biggest risk to Britain's attractiveness over the next three years. Forty-one per cent of investors included these factors among their three biggest concerns.
The rising cost of doing business was another major concern, followed by tariffs and other barriers to trade and geopolitical tensions.
The London problem
There is another warning hidden inside the figures.
Britain's success is still heavily concentrated in London.
Greater London attracted 279 FDI projects in 2025, up 5% on the previous year. It accounted for 38% of all UK FDI projects.
Outside London the picture was much less encouraging. No English region outside the capital recorded growth in FDI during 2025. Several experienced substantial falls.
The North East, for example, saw projects fall by 48%, Yorkshire and the Humber by 46% and the North West by 41%.
This raises a question that matters enormously to Scotland and to rural areas such as Caithness.
If Britain remains attractive to investors, where will that investment actually go?
It is not enough for the UK to be second in Europe if much of the benefit ends up concentrated in London and a handful of major cities.
Scotland provides an interesting counter-example
Scotland actually performed rather better than much of the UK outside London.
EY's separate Scotland Attractiveness Survey found that Scotland attracted 108 FDI projects in 2025, making it the UK's leading destination outside London. It accounted for 14.8% of all UK FDI projects, well above its ten-year average share of 11.6%.
But even Scotland experienced a 20% fall in project numbers.
The more encouraging finding was investor sentiment. One-third of investors planning to invest in Britain said they expected to choose Scotland. That was up from 27% the previous year.
Edinburgh attracted 30 projects, up 25%, while Glasgow recorded 23.
Scotland was also identified as the most attractive UK destination outside London by investors, with its skilled workforce, infrastructure and sector strengths among the factors supporting its position.
For a country with only a fraction of England's population, that is a significant result.
The real test is turning interest into investment
There is perhaps a bigger lesson in the EY report.
Britain does not appear to have lost its ability to attract international investors. What it risks losing is its ability to convert that attractiveness into sustained economic growth across the whole country.
Investors are telling policymakers something quite straightforward.
They like the people. They like the universities. They like Britain's research base. They like access to capital. They like technology and professional services. They still regard the country as a place where important businesses can be established.
But they don't like expensive energy, expensive labour, complicated regulation or uncertainty about taxation.
That ought to make the policy response rather less complicated than much of the political debate suggests.
If Britain wants more investment, it needs to make investment easier and more competitive.
And that means looking beyond the number of projects announced in London.
The real test will be whether the next wave of investment reaches manufacturing, energy, technology, life sciences and infrastructure across the regions, creating productive jobs rather than simply adding another headquarters or financial operation to the capital.
The EY survey therefore provides a reassuring message, but not a complacent one.
Britain is still one of Europe's most attractive investment destinations.
The danger is that we may be slowly making ourselves less attractive while relying on the strengths built up over previous decades to keep investors coming.
Those strengths should not be taken for granted.