The UK attracted more digital technology Foreign Direct Investment (FDI) projects than any other country in Europe last year, according to EY’s 2024 UK Attractiveness Survey. 

Despite a 19% decline in project numbers across Europe, digital technology remains the leading sector for UK FDI and played a significant role in the country’s year-on-year FDI growth. The UK ranked second, after France, for overall FDI projects in 2023. 

In total, the UK recorded 255 digital technology projects in 2023, an annual increase of 8.9%, and received more than a quarter (26.7%) of all digital tech FDI projects in Europe last year. It follows a disappointing performance in 2022, when UK digital technology FDI project numbers fell to 234 and the country’s share of Europe’s digital projects declined to 19.8%. 

France was the second leading country for digital technology FDI projects in 2023, securing 135 projects, followed by Germany which received 119 projects.  

Commenting on this, EY UK chief economist, Peter Arnold, said: “The UK owes much of its FDI growth this year to a resurgence in digital investment, making the UK something of an outlier in comparison to the Europe-wide trend for declining tech projects. After a period of relative European dominance between 2016 and 2019, the UK’s tech project total disappointed in 2022 as high interest rates cut off access to easy capital and the sector cut costs and contracted globally. While this pressure eased slightly in 2023, companies investing in tech still faced tighter borrowing conditions and so may have prioritised more established and resilient tech markets, such as the UK, over emerging ones.”

London remains the leading European city for Digital Tech investment

Greater London has been the leading city destination of digital technology projects for the last 10 years and in 2023 attracted 132 projects, an increase of 24.3% from 2022. It was followed by Paris and Berlin which attracted 47 and 34 FDI digital technology projects, respectively. 

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

EY UK & Ireland managing partner for technology, media, and telecoms, Rob Atkinson, further said: “The UK, and specifically Greater London, continues to solidify its position as a leading global technology hub in cutting-edge fields such as artificial intelligence, fintech, and cybersecurity. The UK’s vibrant tech ecosystem – a combination of innovative startups, world-class universities and a highly skilled talent pool – has attracted inward and overseas investment, creating employment opportunities and contributing to economic growth.

“Whilst our latest data is promising, it’s important the tech sector does not become complacent. Although macroeconomic pressures are easing, many tech companies are continuing to face challenges in accessing capital as high interest rates and geopolitical headwinds create a difficult fundraising environment.

“The UK provides fertile ground for tech companies to thrive, thanks in part to the strong collaboration between the public and private sectors. Maintaining this collaborative environment is essential if the UK is to remain competitive with other leading global destinations and offer a supportive, attractive place to do business.”