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The UK remains Europe’s top destination for Foreign Direct Investment (FDI) in digital technology, according to EY’s 2024 UK Attractiveness Survey. Despite a 19% decline in project numbers across Europe, the UK attracted more foreign investment projects than any other European country last year.

EY reports that digital technology remains the leading sector for UK FDI. This sector played a significant role in the country’s year-on-year FDI growth. Last year, in 2023, the UK ranked second for overall FDI projects, after France.

Recently, UK FDI has grown due to a resurgence in digital investment. The UK secured more than a quarter (27%) of all European digital tech projects last year. This is an 8.9% increase from 2022. EY highlights London as the leading European city for digital technology investment.

This news comes amid significant investments from big technology organizations in Europe. These include AWS’ European Sovereign Cloud investment and Microsoft’s billion-dollar investments in several countries, including Sweden.

After the UK, EY cites France as the second leading country for digital technology FDI projects in 2023, securing 135 projects. Germany follows with 119 projects.

London has continued to attract significant interest over the last decade and continues to draw key digital projects. Notable investments include a new Google data center near the city to support AI growth.

Peter Arnold, EY’s UK Chief Economist, comments on this trend. He says, “The UK owes much of its FDI growth this year to a resurgence in digital investment, making the UK an outlier compared to the Europe-wide trend of declining tech projects.” Besides, he notes that after a European dominance between 2016 and 2019, the UK’s tech projects faced challenges in 2022. This was due to high interest rates and global sector contractions.

He adds, “While pressure eased slightly in 2023, companies investing in tech still faced tighter borrowing conditions. They may have prioritized more established markets like the UK over emerging ones.”

The UK holds a strong position as a global technology hub. It continues to lead in fields such as AI, fintech, and cybersecurity. This leadership is supported by startups, world-leading universities, and a highly skilled talent pool. Rob Atkinson, EY UK&I Managing Partner, explains that the country continues to attract inward and overseas investment.

“This creates employment opportunities and contributes to economic growth,” Rob says. “The UK provides fertile ground for tech companies to thrive, partly due to strong collaboration between the public and private sectors. Maintaining this environment is essential for the UK to remain competitive and attractive for business.”

The United States was the leading source of digital technology investment in the UK in 2023, contributing 50 projects. India followed with 36 projects, and Australia contributed 13 projects.

Overall, EY finds that projects across Europe are starting to decline. The continent recorded a 4% year-on-year decline, the lowest FDI total since 2020, and 11% lower than pre-pandemic levels. While France was Europe’s largest recipient of inward investment with 1,194 total FDI projects in 2023, this represented a 5% decrease from 2022. Germany, in third place, recorded 733 projects in 2023, a 12% decline from the previous year.

EY also found that, while the share of all European FDI projects grew to 17.3% in the UK, the country’s broader FDI trend mirrors Europe. The UK recorded fewer projects in the last four years compared to pre-pandemic levels, with 220 fewer projects in 2023 than at its high point in 2017.

“While our latest data is promising, it’s important the tech sector does not become complacent,” Rob adds. “Many tech companies continue to face challenges in accessing capital as high interest rates and geopolitical headwinds create a difficult fundraising environment.”

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