Inbound tech investment into the UK reaches ten year high

26 June 2017

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  • But, the UK’s share of overall tech investment in Europe in 2016, fell to its lowest level since 2008
  • London secured the largest share of tech foreign direct investment (FDI) in Europe, three times more than Paris
  • The gap in the number of projects locating in London vs other UK regions widens

The total number of foreign direct investment (FDI) projects into the UK’s tech sector reached a ten year high in 2016 with 269 investments made, according to the EY European Investment Monitor, UK Tech Report.

However, this was a year of very marginal growth, up only 0.4% compared to 2015. As a result, the UK’s market share fell from 30% of all tech investments across Europe in 2015 to 27% in 2016 - the lowest percentage recorded by the UK for FDI in the sector since 2008. At the same time, the total number of tech investments across Europe increased in 2016 by 9% - from 898 in 2015 to a ten-year high of 980.

London maintained its leading position as the city attracting the largest share of tech FDI projects in Europe by some distance. The capital secured 17% of all tech FDI projects across Europe with 168 investments - three times more than Paris in second place with 56, and nearly four times more than Berlin in third with 44. However, the gap between London and the rest of the UK widened with the capital securing 63% of all inbound tech investments into the UK in 2016, compared to 57% in 2015 and 43% in 2007.

Rahul Gautam, EY’s Head of Technology, Media and Telecommunications for the UK & Ireland, says: “The UK, and London in particular, continue to lead Europe for inbound tech investment, but there is no room for complacency. Last year saw growth slow overall and the success in London was not mirrored in other regions. In fact the volume of tech investment fell in the remainder of England, excluding the ‘Midlands Engine’, with the ‘Northern Powerhouse’ hit particularly hard - experiencing a drop of 34% from 35 projects in 2015 to 23 in 2016.”

US dominates FDI into UK’s tech sector

Looking at the origin of FDI into the UK’s tech sector in 2016, the United States dominates according to the report. FDI from the USA made up 41% of the total, still below its decade long average of 49%. No single country then provides more than 6% of projects, with India coming second and Australia together with France coming third.

UK still leads overall FDI in Europe

Overall, the UK secured its highest ever level of total inward investment into all sectors in 2016 and retained its title as Europe’s most attractive location for international investment, ahead of Germany, France and Spain. The UK attracted 1,144 FDI projects last year, an increase of 7% on 2015, compared to the European market, which saw a 15% rise and enjoyed the best year for international investment since the Eurozone crisis, securing 5,845 projects.

Rahul Gautam adds: “Although the UK’s increase in FDI projects could not match the stellar growth of the European market in 2016, there were no signs of any immediate drop in investment as a result of the outcome of the EU Referendum. In the short-term, the UK has a solid base to build from with globally renowned strengths, which will help it to protect its leading position for inward investment in Europe and capitalise on future opportunities."