Foreign direct investment (FDI) into Europe fell 4% last year, with Germany seeing a sharp 12% drop in projects amid concern over its economic slowdown and energy security, a survey by professional services group EY found.
It was the first annual fall in the number of European FDI projects registered since the COVID-19 pandemic, after gains seen in both 2021 and 2022. Foreign investment into the region is now 14% lower than at its peak in 2017.
Companies surveyed cited volatile energy prices, turbulent domestic politics and the steady stream of new European regulation in areas ranging from artificial intelligence, sustainability and data protection among their concerns.
EY EMEIA Area Managing Partner Julie Teigland said the sheer pace of regulation coming on-stream was creating daunting compliance challenges in particular for smaller companies.
In the EY survey, France topped the foreign investment list even though its tally of investment projects fell by 5% - albeit still creating 4% more jobs compared to the year before.
Britain overtook Germany for second place, seeing a 6% gain in FDI projects in 2023. That came after a comparable fall the year before amid concerns about trade snags and labour shortages linked in part to Brexit.
