France stagnates, the UK rebounds and Germany falters

In line with the Europe-wide trend, investment in France fell by 5%. That said, the number of jobs created by FDI increased by 4%, underlining the ongoing benefits of business-friendly reforms and a comparatively healthy economy relative to other European countries. 

The EY 2024 Europe Attractiveness Survey, which is based on insight from 500 business leaders involved in FDI, indicates that the downswing in investment will be only temporary.

When asked about the most attractive countries for investment, respondents ranked France first, ahead of Germany and the UK.

The UK bucked Europe’s negative trend with a 6% increase in FDI projects in 2023. However, this was achieved from a low base, following a 6% drop the previous year. After a 2022 marked by political uncertainty, high inflation and rising energy prices, investors perceived something of a return to stability to UK markets last year, with foreign software and IT providers particularly loyal to London.

FDI in Germany decreased by 12% in 2023, continuing a steady decline in projects since the onset of the COVID-19 pandemic. Industrial investors have been deterred by the recessionary environment, high energy prices and concerns about the security of energy supply. In parallel, low unemployment, complex bureaucracy and high labor costs limit Germany’s ability to attract more foreign businesses.

Most foreign investment in Europe is internal – a business located in one European country establishes or expands a project in another. Outside Europe, the top origin countries for investment are the US (accounting for 19% of projects), China (5%) and Japan (3%).

London is considered the top European city for investment: 32% ranked the UK’s capital as the most attractive city during the next three years, putting it marginally ahead of Paris in second place (31%). Zurich (selected by 22%), Munich (20%) and Barcelona (17%) complete the top five.