UK FDI Slips Despite Investment Growth

UK investment rose 5 per cent to £4.1 trillion in 2025, yet the country lost ground with international investors as foreign direct investment and sovereign capital declined. The contrast highlights a growing competitiveness challenge, with domestic market depth failing to translate fully into a stronger share of global capital.

The UK economy attracted £200 billion of new investment during the year. Public equities posted the largest increase, rising £222 billion to nearly £1.2 trillion, while business investment climbed 16 per cent to £331 billion and infrastructure investment increased 24 per cent to £68 billion. Government bonds remained the largest investment destination at almost £1.3 trillion.

The weaker signal came from foreign capital. FDI fell 21 per cent, or £14 billion, to £54 billion, driven by 51 fewer projects and a reduction in projects worth more than £1 billion. Scotland and the North East recorded the steepest declines, while renewable energy remained the strongest FDI draw, rising 11 per cent to £21 billion.

Sovereign investors also reduced their UK exposure. Although sovereign wealth funds and global public pension funds increased worldwide investment to £215 billion from £169 billion, the UK’s share fell from 13 per cent to 9 per cent. UK investment from these institutions declined by £3 billion to £19 billion.

The figures suggest Britain retains substantial financial capacity but faces tougher competition for internationally mobile capital. Initiatives such as InvestConnect and the Office for Investment: Financial Services may improve access, but the wider challenge is structural. Planning reform, tax competitiveness and proportionate regulation will be central to whether the UK can convert its deep capital markets into a stronger FDI proposition.