Why the UK’s inward investment story is stronger than the headlines suggests

Although it is easy to focus on the headline decline in foreign direct investment project numbers, doing so risks missing the more important underlying story.

Both EY’s latest UK Attractiveness Survey and Irwin Mitchell’s own report show that while the market for inward investment has become more challenging, the UK continues to demonstrate many of the qualities international investors value most.

The first and most obvious similarity between the two reports is that neither presents the recent slowdown as a uniquely British problem. EY found that the UK remained Europe’s second most attractive destination for FDI in 2025, even though project numbers fell to 730. At the same time, France and Germany also recorded declines, and Europe as a whole suffered its third consecutive annual fall in projects. Irwin Mitchell’s report reached a similar conclusion, describing a tougher environment shaped by borrowing costs, policy uncertainty and wider international pressures, while also noting that the UK’s experience has broadly mirrored the wider European trend.

That matters, because it changes how the numbers should be interpreted. A softer market does not automatically mean a weaker proposition. What both reports really suggest is that the competition for global capital is becoming more intense and more selective. In that environment, countries that can offer stability, access to talent, legal certainty, strong professional ecosystems and globally connected cities are still well placed to compete. The UK continues to offer all of those things. EY says the UK accounted for 15% of all FDI projects in Europe last year and remained Europe’s leader for FDI-related job creation. Our own findings also underline the enduring attractiveness of the UK’s major cities and regional economies, with 46 out of 48 cities improving their attractiveness scores year on year.

A second clear point of alignment is sector strength. EY found that the UK led Europe in technology-related inward investment and continued to perform strongly in business and professional services, with the latter more than doubling year on year. Those are not marginal areas of economic activity. They are precisely the sorts of sectors that reflect a modern, knowledge-led economy: high-value, internationally mobile and deeply reliant on skills, expertise and trusted institutions. Irwin Mitchell’s own report pointed in a similar direction, highlighting the UK’s continuing strengths in technology, finance and other high-value sectors even as some parts of the market became more subdued.

This is where the positive story becomes clearer. Investors are not simply looking for the cheapest place to do business. They are looking for the right ecosystem. The UK’s attraction lies in its ability to bring together world-class legal and financial services, deep capital markets, respected universities, a highly skilled workforce and a longstanding reputation for innovation. That combination remains powerful, particularly in sectors where ideas, talent and trusted regulatory frameworks are just as important as physical infrastructure. It is no coincidence that these are the areas where the UK continues to hold its ground most effectively.

Both reports also point to the enduring importance of London, while showing that the UK story is broader than the capital alone. EY highlights that Greater London recorded a 5% increase in FDI projects in 2025 and retained its position as Europe’s leading region for investment for the third year in a row. Our own index likewise shows London maintaining its dominant status, but also captures wider regional momentum, particularly in places such as the Midlands, Edinburgh, Oxford and Birmingham. That matters because the next chapter of the UK’s inward investment story is unlikely to be written by one city alone. It will depend on the extent to which the UK can combine London’s global pull with a stronger pipeline of investable opportunities across the rest of the country.

There is another important similarity in the reports, and that is the profile of the international investors still backing the UK. EY found that the United States remained the largest source of investment into the UK, while India held its position as the second most important source for the third consecutive year. The UK also secured nearly half of all Indian investment projects entering Europe. Irwin Mitchell’s analysis also identified the US and India among the UK’s most important inward investment partners. This is an encouraging signal, because it suggests the UK continues to resonate not only with long-established investors, but also with faster-growing international markets that will shape the next generation of cross-border investment flows.

India in particular deserves attention in the years ahead. The UK’s ability to attract investment from Indian businesses points to an outward-facing economy with strong international relationships, cultural links and service-sector depth. More broadly, EY found that 58% of UK inward investment projects originated from outside Europe, compared with 43% across the continent. That supports the view that the UK’s investor base is becoming more globally diversified, not less. In a world where trade routes, supply chains and geopolitical priorities are shifting, that kind of diversity is a strategic strength.

If there is a lesson for policymakers and businesses alike, it is that the UK should not undersell its position. Yes, inward investment has become harder to win. Yes, investors are more cautious. And yes, there are areas where the UK must remain competitive, especially on policy certainty, the cost of doing business and the speed at which major projects can be delivered. But the underlying proposition remains strong. The UK is still attracting new projects, still generating jobs, still performing in high-value sectors and still drawing capital from a diverse range of global markets. Both EY’s findings and our own suggest that this is not a market in retreat. It is a market at an inflection point.

That is why the coming months and years matter. The opportunity now is not simply to defend the UK’s position, but to build on it. That means creating the conditions in which international investors can move with confidence: clearer policy signals, stronger support for priority sectors, continued investment in skills and infrastructure, and a regional growth strategy that helps more places convert their strengths into real investment wins. If that happens, the next wave of FDI into the UK could be defined less by volume alone and more by quality, resilience and long-term value.

The message from both reports is ultimately the same. The UK is operating in a harder global investment climate, but it remains one of the few European markets with the scale, talent base, legal infrastructure, sector expertise and international reach to compete at the highest level. Inward investment may be under pressure, but the foundations of the UK’s attractiveness remain firmly in place. That is a story worth telling, and more importantly, one worth building on.