EUROPE FACES CHALLENGES WHILE TECH AND FINANCE BOOST THE U.K.
In 2023, Europe experienced slow economic growth, soaring inflation, rising energy costs, and a precarious geopolitical landscape. Foreign investment is essential for job creation, innovation, export growth, and a strong economy—but investors are cautious.
France, the U.K., and Germany continue to attract around half of European FDI (foreign direct investment), maintaining their positions as the top three destinations. Although France emerged as the leading market by leveraging its research and development (R&D) capabilities and attracting major banks post-Brexit, it still experienced a 5% decline in 2023. However, 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.
FDI in Germany decreased by 12% in 2023, continuing a steady decline since the onset of the pandemic. Industrial investors have been deterred by the recessionary environment, high energy prices and concerns about the security of energy supply. Complex bureaucracy and high labour costs also continue to limit Germany’s ability to attract more foreign businesses.
In contrast, the U.K. bucked the trend, with a 6% FDI growth in 2023—although it remained significantly below pre-Brexit levels. After a 2022 marked by political uncertainty, high inflation, and rising energy prices, investors perceived something of a return to stability in U.K. markets. Foreign software and IT providers were particularly loyal to London, which moved above Paris into the top spot as Europe’s No. 1 investment region. London’s attractiveness to the finance sector also proved significant, with London seeing a 20% increase in financial services projects.
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