Slow economic growth, high inflation, rising global geopolitical tensions and soaring energy prices have made it challenging for European countries to attract foreign direct investment (FDI) in recent years.

In 2023, 11 EU countries received €3,263 billion in FDI – an increase since 2022, rising from €3,241 billion.

According to the latest Eurostat figures, Germany overtook the United States as the top ultimate investing economy, essentially accumulating the most foreign direct investment, receiving €410 billion. This represents 12.6% of the over €3 billion total for 2023.

An ultimate investing country is a nation that has final control over the investment – rather than an intermediary nation.

The United States dropped to second place as an ultimate investing economy with €406 billion, followed by France with €356 billion, and the United Kingdom with €290 billion.

In terms of projects, IT services, business services, transportation and logistics were the hottest areas for FDI in 2023, according to the EY European Investment Monitor 2024. 

“The flow of FDI into Europe has more undercurrents than ever before,” stated Marc Lhermitte from EY Global Lead FDI & Attractiveness. “In addition to traditional drivers of investment, foreign businesses are expanding operations in Europe to reshore supply chains, create efficiencies and accelerate innovation.”

Investors claim that the main risks affecting Europe’s attractiveness over the next three years will be finding a regulatory balance between protection and innovation and maintaining manufacturing competitiveness. 

If this is not found, the US, China and other Asian countries will continue to outflank Europe in terms of FDI.