France has once again emerged as Europe's leading destination for foreign direct investment (FDI) projects, attracting 852 new initiatives in 2025, according to the latest EY Europe Attractiveness Survey. This marks the country's continued dominance despite a 17% year-on-year decline in project numbers and a broader downturn across the continent.
The United Kingdom placed second with 730 projects, down 14% from 2024, while Germany ranked third with 548 projects—a 10% drop and its lowest tally since 2009. Europe as a whole recorded 5,026 new FDI projects in 2025, a 7% decrease from the prior year and the weakest performance in 11 years, reflecting headwinds from geopolitical tensions, slower global growth, and economic uncertainty.
France's Strategic Edge
President Emmanuel Macron's "Choose France" initiative, launched in 2018, continues to underpin the country's appeal. At the 2025 summit, foreign companies pledged a record €93 billion in investments, signaling strong confidence in France's business environment. Analysts attribute this resilience to proactive government policies, streamlined regulatory reforms, and France's central position within the European Union, which offers access to a large single market.
France's ability to attract projects spanning manufacturing, research centers, and infrastructure expansions has bolstered its standing. For investors, this translates into potential opportunities in sectors such as transport infrastructure and industrial electrification, with companies like VINCI and Schneider Electric positioned to benefit from related capital expenditure.
Germany and UK Face Structural Hurdles
Germany's FDI performance is particularly concerning. Compared to 2019, the number of foreign investment projects has plunged 44%, a steeper decline than France's 28% or the UK's 34%. High energy costs, regulatory complexity, and weaker domestic demand are deterring new plant openings and expansions, creating headwinds for industrial automation and electrification demand. This environment poses challenges for firms like Siemens, which rely on robust customer capex cycles.
The UK, while benefiting from post-Brexit flexibility in certain sectors, continues to grapple with labor shortages and trade frictions, limiting its ability to close the gap with France. Both nations will need to address these structural issues to regain momentum in the competitive FDI landscape.
Broader Implications for European Competitiveness
The EY survey tracks announced investment projects rather than capital flows, offering a granular view of real economic activity. These projects typically involve new factories, research centers, and expansions that create direct jobs and strengthen supply chains. The overall decline across Europe signals growing challenges in attracting foreign capital at a time when many economies are seeking to boost growth and innovation. Competition from the United States, Asia, and emerging markets remains intense, pressuring European governments to refine their incentives and policy frameworks.
Related developments in European markets underscore the shifting landscape. For instance, European sovereign yields have hit multi-year highs, raising debt refinancing concerns that could influence investment decisions. Meanwhile, European Q1 earnings have shown resilience, though geopolitical risks cloud the full-year outlook.
Outlook for 2026
With global economic conditions still uncertain, European nations are expected to intensify efforts to attract foreign investment. France appears well-positioned to defend its lead, while the UK and Germany will need to tackle structural impediments to regain ground. As governments prepare new incentives and policy measures, the battle for FDI projects is likely to intensify in 2026. Success in this arena could prove decisive for Europe's economic recovery and long-term competitiveness.
In related news, CSG has secured a €300 million artillery ammunition deal amid rising European defense spending, highlighting another avenue of investment activity on the continent.
This article is for informational purposes only and does not constitute financial advice.
