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Foreign investment in the UK: Where are the top hotspots?

The UK is a global investment hotspot and one of the top locations for foreign investment across Europe. And while London has traditionally been the top choice, investors are increasingly looking at other locations.

As a whole, the UK continues to be an attractive location for foreign investment across a number of industries, including the property market. In 2022, the UK recorded 929 Foreign Direct Investment (FDI) projects and remains in second on EY’s annual ranking of European countries by their ability to attract these kinds of projects.

In the EY 2023 UK Attractiveness Survey, the UK ranked highest in Europe for new projects and continued to deliver more total jobs and jobs per project than France and Germany. The UK also led Europe within the tech sector.

Alison Kay, managing partner for client service at EY UK & Ireland, stated: “Europe had a challenging 2022 for inward investment, with overall projects broadly flat. But, digging into the detail, the UK has a strong investment story to tell.

“Investment intentions are at a record high and almost half of the investors surveyed think the UK’s attractiveness will improve in the near-term. Significantly, the UK’s clear focus on project value over volume continues to bear fruit. While the UK is behind France on the total number of projects, it is Europe’s clear leader when it comes to strategically important FDI.”

What locations have seen the strongest growth in foreign investment?

All regions in the north, east, East Midlands and Wales saw FDI project numbers increase by 10% or more year-on-year. The north-west specifically jumped two places in the UK rankings for FDI projects from fifth in 2021 to third in 2022, having attracted 88 projects last year. This is up 19% from a total of 74 the previous year.

The north-west’s share of all UK projects increased to 9.5%. This figure surpassed the peak of 8.7% from 2020. And in 2022, Manchester attracted more projects than any other city in the UK except for London.

Stephen Church, EY’s North market leader, commented: “The North West delivered a strong FDI performance in 2022, cementing its place as one of the most attractive regions for foreign investment in the UK.

“By empowering local areas to make decisions and implement policies that both support and encourage inward investment, the UK can take further advantage of its regional strengths and unique selling points to attract diverse investment opportunities.”

The growing trend of foreign investment in regional areas is happening across the property market as well. More overseas buyers are purchasing properties in thriving regional cities.

While traditional property investors might look to London as a default starting point, it no longer holds the torch as the most profitable investment location. The capital has instead been overtaken by parts of the north and Midlands.

Where is the most foreign investment coming from?

Investors from the US remain Europe and the UK’s leading source of FDI projects, according to research by EY. Interestingly, the US is a more substantial investor in the UK than it is for the rest of the continent. One-in-four UK projects have their origin in the US, while this figure sits at one-in-five for the rest of Europe.

Additionally, US investors are the third most prominent overseas buyers in the UK property market. Recently, there has been a rise in investors from the US buying properties across the nation as many investors have found the property investment landscape in the UK to be especially lucrative.

The allure of UK property investment has even been heightened by the favourable dollar-to-pound exchange rate. This is providing substantial discounts and allowing US investors to maximise their budgets, so we are likely to continue to see high levels of foreign investment from the US in the coming months as well.

BuyAssociation has experience helping US investors access the UK property market for the past 18 years. Get in touch to learn about our investment opportunities and find out how we can help you invest.

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