London has retained its crown as Europe’s most attractive city for foreign investment despite a slower-than-expected recovery from a pandemic slump, fresh data has revealed.
The capital recorded foreign direct investment (FDI) into 394 projects last year, up from 383 in 2020, according to data from big four firm EY.
Analysts at EY said that overall funding levels into the capital remained subdued on pre-pandemic levels, as a shift in investor sentiment towards manufacturing projects had sparked a slowdown in London’s digital sector.
Just 194 digital projects in London attracted investment last year, down from 289 in 2019.
EY’s chief economist said that investment into the rest of the country had also risen at a sharper rate than the capital as investors pumped cash into the so-called levelling up agenda.
“Levelling-up as a policy idea has cut through, with almost two-thirds of investors we surveyed having heard of it last year,” he said.
“Awareness has turned into engagement this year, with a similar proportion saying levelling-up influences their location decisions and that they’ll look to invest where government support is available – although project numbers are yet to reflect this.
UK FDI-backed projects rose by 18 to 993 in 2021, marking a return to growth after slumping 12 per cent the previous year amid a wider pandemic-induced slowdown in investment.
Technology continued to form the backbone of FDI into the country, but EY warned the attraction to manufacturing was leaving the UK with “ground to make up” to retain its appeal to overseas backers.
“A drive towards ‘green’ manufacturing could help the UK attract investment while accelerating progress towards sustainability and levelling up goals,” EY’s managing partner of client services Alison Kay said.
France topped the list of foreign direct investment into European nations last year, retaining its crown from the previous year.