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London leads Europe in new FDI while much of the UK sees a decline, research shows

London leads Europe in new FDI while much of the UK sees a decline, research shows
London leads Europe in new FDI while much of the UK sees a decline, research shows

LONDON (Reuters) – London overtook Paris last year as the top region in Europe for new foreign direct investment, but foreign direct investment fell in many other areas of the United Kingdom, data showed, underscoring the challenge facing the new government in spreading development across the country.

Accounting firm EY reported that regional figures from its annual FDI survey showed London attracted 359 projects, a 20% increase from 2022 and the highest annual total since 2019, with technology and financial services leading the way.

This makes the British capital the most important region in Europe for new FDI projects in 2023, surpassing Paris and the surrounding areas, where 300 FDI projects were realised.

Scotland – helped by the growth of the wind energy industry – and the West Midlands saw a 14% and 72% increase in the number of FDI projects.

In contrast, Wales, Northern Ireland and the East Midlands saw large declines, and regions in the north of England also attracted less new investment from abroad than in 2022.

Peter Arnold, EY’s chief economist for the UK, said a 6% rise in foreign direct investment into the UK as a whole – a figure released earlier – could signal an easing of political unrest in 2023, after Britain had three different prime ministers in 2022.

Britain’s new leader Keir Starmer has said his government will boost the investment needed to boost sluggish economic growth, combining stability with reforms to the often restrictive planning system and targeted state aid.

According to Arnold, the new government must consider the impact of incentives, subsidies and skills development on attracting FDI to different parts of the UK.

“Increasing the attractiveness of the diverse regions will be key to raising the UK’s national investment profile,” he said. “The progress of Scotland and the West Midlands shows there is a clear appetite for investment outside London.”

(Written by William Schomberg, edited by Andy Bruce)