London: #1 destination for foreign investment

London’s ‘international business culture’ hits the mark

Despite a drop in the number of high value Tier 1 applications over the past year, London has retained its position as the single most important European location for foreign direct investment (FDI) for 2014.

The recent 2015 UK Attractiveness Survey, which measured the UK’s attractiveness as an investment destination, has provided valuable insight into how the world’s global executives view the UK and London.

When asked to name the three most attractive European cities for FDI, over half cited London, whilst Paris (29%) and Berlin (28%) came in second and third. Along with this impressive achievement, the survey threw up the following promising results:

• London was ranked as the fifth most likely city to produce the next tech giant;
• The UK created a market-leading 31,198 jobs in 2014; and
• The UK secured 164 manufacturing projects in 2014, beating the 131 won by Germany. This was based on a strong growth in the automotive, food, and machinery and equipment sectors.

Just under half of the survey respondents quoted the city’s ‘international business culture’ as a stand out feature when comparing it to other European cities.

The capital’s rising reputation has attracted much investment for the purposes of research and development. According to Caroline Artis, EY’s London Senior Partner, this has resulted in a fast-growing East London Tech City, commonly known as ‘Silicon Roundabout’ and has seen London labelled as the fifth likeliest city to produce the next tech giant.

The country’s hold over such titles, however, hangs in the balance. The survey also revealed how the UK’s prospects for foreign direct investment are much affected by its political choices and that many overseas investors await the EU referendum with baited breath, planning to reduce, or even freeze their investments in the run up to 2017.

The risk to further growth through foreign investment is obvious and EY identifies many challenges which the UK must overcome in order to encourage competitive growth of FDI, such as reducing the costs of operating in the UK, improving real estate availability and lowering labour costs.

Mark Gregory, Chief Economist at EY, commented that current ‘positive perceptions of the UK as an attractive FDI location are largely held by those that already have established operations. Convincing new investors to enter the UK market has to be a high priority in the UK’s future strategy.’

View full details of the EY 2015 UK Attractiveness Survey