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UK still best European country for foreign investment, survey says

Germany, Frankfurt, Hesse, Skyline
Frankfurt skyline. Credit: Getty Images

The UK’s ongoing Brexit turmoil has not dented its appeal for foreign investors. According to EY’s European Investment Ranking survey, Britain held its place as the most attractive country in Europe for foreign investment projects, while Germany slid behind France to third place.

However, the survey found that both the UK and Germany suffered a 13% decline in the number of foreign projects they attracted compared to the year before. For Germany, that was the first drop since the consultancy began its survey in 2005.

The UK attracted a total of 1,054 investment projects by foreign companies, EY said the UK was able to maintain its number one place on the table despite Brexit thanks largely to US investors, who increased their investment in the UK from 2017.

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While US companies increased their investment in Germany by 3%, other key countries, like China and the UK each carried out 12 percent fewer projects in Europe’s largest economy. Foreign direct investment in Europe dropped for the first time in six years, showing a 4% decrease to 6,356 FDI projects in 2018.

"The fact that foreign investment in Germany is falling is a warning sign — Germany is no longer the growth engine of the European economy," said Hubert Barth, management board chairman of EY in Germany. "With economic growth of 1.4%, Germany finished just 24th out of the 28 EU member states last year. And for 2019, the prospects are anything but rosy.”

EY discovered a surge in the number of foreign companies with negative opinions about Germany. Their main criticisms were about the country’s rigid labour laws, high labour costs, and corporate taxation. On the other hand, they appreciated aspects like a highly-skilled workforce, transport infrastructure, and general stability.

"Political stability and predictability are a great asset for a location," said Bernhard Lorentz, Head of Government & Public Sector for Germany, Switzerland and Austria. "But a competitive tax system, economic and political optimism, and openness to new technologies are also important factors. Germany has some catching up to do here."

READ MORE: Manufacturers slam no-deal Brexit as 'economic lunacy'