Executive summary
The UK’s FDI landscape in 2025 faces significant headwinds, with the number of FDI projects falling by 11.6% year-on-year to 1,375, marking the second consecutive annual decline.
Both new and existing investors have reduced activity, with projects from new entrants dropping over 22% since 2022/23 and expansions from established investors down 13% in the past year. This contraction is mirrored in employment figures, as jobs created by FDI have fallen 8% since 2022/23, with new job creation down 14%. The United States remains the UK’s largest source of inward investment, followed by India, Germany, France, and Sweden.
Sectoral analysis reveals resilience in advanced engineering and business services, but notable declines in life sciences, creative industries, and renewable energy. Regionally, London continues to attract the largest share of projects, though it too saw a 15% decline. The West Midlands, Scotland, and Yorkshire showed relative stability or modest growth, while the South East and East of England experienced sharper falls.
These trends are reflected in broader macroeconomic challenges – high borrowing costs, policy uncertainty, and Brexit-related trade frictions – impacting the UK’s competitiveness. While the UK has experienced a sharp decline in attracting inward investment, it’s important to note that these trends have been reflected throughout Europe.
Room for optimism
Despite these challenges, the UK retains strengths in technology, finance, and high-value sectors, but sustained inward investment will require policy stability and effective regional strategies.
Our UK Attractiveness Index showcases how many of its key cities – 46 out of 48 – have improved their scores when it comes to their attractiveness to overseas investors. Compared with a year ago, they’re more productive and better connected, with an economically active and skilled population.
UK Attractiveness Index in summary
London maintains its dominant status, driven by an exceptional performance in Local Skills, supported by its vast economically active population and university cluster.
Edinburgh retains second place, demonstrating consistent strength across all three pillars – particularly Local Infrastructure – though it now faces increasing competition from Oxford and Birmingham in third and fourth place, respectively.
There has been broad-based improvement, with 46 out of 48 cities improving their scores compared to Q4 2024 in part due to an improvement in the economic outlook for the UK compared to this time last year.
The Midlands emerged as the strongest-performing region, with Solihull achieving the biggest rise (up 11 places), Nottingham jumping eight places, and Birmingham breaking into the top four.
Northern cities faced headwinds, with Preston and Sheffield among the biggest fallers. Traditionally strong cities like Manchester and Liverpool also declined in relative rankings.
Beyond the Index itself, the report turns to the broader inward investment landscape, setting UK performance in both a domestic and international context. Recent data point to a continued decline in overall project numbers and jobs created, with the fall in expansions from existing investors being particularly notable. This weakening has taken place against a backdrop of elevated borrowing costs, policy uncertainty, and global trade tensions.
Subsequent sections explore the UK’s position in a fractured global trading environment, the implications of recent trade agreements, and the role of Government policy in shaping competitiveness. The Modern Industrial Strategy and related initiatives illustrate the Government’s intent to foster high-growth sectors and rebalance the regional economy, amidst early evidence pointing to mixed results. Taken together, these priorities point to a clear conclusion: the UK retains substantial competitive advantages, not least in skills, research, and high-value sectors, but converting these into sustained inward investment will require consistent delivery and policy stability.