Ernst & Young: Germany to be leading destination for inward investment soon

By Rob Starr, Content Manager, Big4.com

According to Ernst & Young’s annual UK Attractiveness Survey out today, the UK remains Europe’s top destination for foreign direct investment (FDI) but will lose its crown to Germany within two years unless action is taken. The report demonstrates how dependent the UK is on a small number of countries, especially the US, and sectors, such as financial services, for the majority of its projects. Germany’s growth illustrates the importance of two way trade and strong domestic demand, in driving investor choice and shows how linked success in attracting inward investment is to wider economic performance.

The main foreign investment into the UK comes from the US, followed by Germany and India. India is the bright spot among the BRICS – with the UK receiving by far the most investment from the country. The leading sectors for the UK were business services, software and machinery and equipment.

Despite overall positivity about the UK as an investment destination, barriers to investment remained. Less than half of major investors cited labour costs as appealing. One in six said the cost and availability of real estate was unattractive, while only 53% found the UK’s corporate taxation appealing.

London is the jewel in the UK’s crown, attracting more projects than any other city and more than all, but four countries. Despite the overall fall in UK projects, London actually increased its share of FDI by 13%, securing half of all UK investment. The report found that 60% of all investment was to London and the South.