UK foreign direct investment hits decade low as strategic sectors bear the impact
New figures from the Department of Business and Trade show a 26% year-on-year decline in the number of Foreign Direct Investment (FDI) projects landing in the UK, falling to just 1,020 in 2025 to 2026. This represents the lowest in over a decade and a 54% contraction compared with ten years ago, raising questions about the UK’s international competitiveness and capacity to deliver the Industrial Strategy.
The year-on-year decline cuts across sectors vital to the economy:
- Advanced engineering and supply chain: down 41%
- Financial services: down 36%
- Renewable energy: down 25%
- Software and computer services: down 23%
- Environment, infrastructure and transportation: down 22%
- Life sciences: down 16%
- Creative and media: down 15%
Despite the decline in the number of projects, FDI-related employment showed some resilience. New jobs created fell just 0.3% to 69,166, while safeguarded jobs surged 61% to 16,407, driven in part by large individual commitments in infrastructure and energy.
Commenting on the figures, Dr Joe Marshall, chief executive, National Centre for Universities and Business (NCUB) said:
“The scale of this decline is deeply concerning. A 26% drop in just one year, alongside a 54% fall over the past decade, suggests not a temporary slowdown but a sustained weakening in the UK’s investment appeal.
“While headline job numbers have remained broadly stable, this should not offer false reassurance. Fewer projects mean a smaller and more vulnerable pipeline of investors, and the sharpest declines are happening in sectors critical to future growth.
“A 41% fall in advanced engineering, 16% in life sciences, and 13% in R&D investment cannot be offset by a handful of big-ticket deals. These industries underpin long-term competitiveness, innovation and economic resilience. The next prime minister must move quickly to deliver an Industrial Strategy that gives globally mobile investors the certainty and confidence they need to choose the UK.”