The North East secured 22 Foreign Direct Investment (FDI) projects in 2025, a 48% year-on-year fall and the region’s lowest total across the last decade, according to the latest EY UK Attractiveness Survey.

The EY 2026 UK Attractiveness Survey ranked 259 regions across Europe according to the number of FDI projects each attracted in 2025. The majority of UK regions saw FDI projects fall year-on-year in 2025, with only Greater London (5%), Wales (56%) and Northern Ireland (65%) seeing increases. The South West saw projects stagnate year-on-year, with all other regions seeing a decline. Greater London (279 projects), Scotland (108 projects) and the West Midlands (68 projects) were the UK’s top-performing regions for attracting FDI projects last year. Across the UK, 730 projects were secured in 2025, representing a 14% fall from 853 the previous year.

Business and professional services was the sector that drove the North East region’s highest volume of FDI projects in 2025, with a total of five. The Finance, Software and IT Services, and Transportation Manufacturers and Suppliers sectors were joint-second with a total of three projects each.

The region’s year-on-year fall in FDI meant that its overall share of UK projects fell from 4.9% in 2024 to a decade-low of 3% in 2025.

Newcastle was ranked the UK’s sixth best-performing city outside London for securing FDI projects with a total of 11, in line with last year’s ranking despite projects falling marginally from 13 in 2024.

France ranked first in Europe in 2024 with 852 projects, a decline of 17% year-on-year. Meanwhile, Europe as a whole recorded a 7% year-on-year decrease in FDI projects as global economic uncertainty related to tariff disruption weighed on investment figures worldwide. Subdued economic growth, high energy prices and competition from other markets, such as Asia and the United States, are also thought to have impacted investment levels into Europe.

Michael Scoular

There remain reasons for optimism in the North East, including the fact that Newcastle has retained its position among the top 10 UK cities for attracting inward investment, and that the region was still able to secure several high-value projects creating more than 100 jobs each in 2025. However, the decline in FDI projects in the North East last year was more pronounced than in any other UK region, which emphasises the need for improvement.

There is undoubtedly a need for resilience and innovation in boosting the North East’s attractiveness as a destination for foreign investment. EY’s investor sentiment survey highlighted access to skilled workforces, robust local transport and infrastructure and access to regional grants and incentives as top priorities for global investors when considering locations outside of London – which should all be key considerations for the region going forward. The regional gap between London and the rest of the UK has widened, so it’s crucial that the North East builds on its industrial strengths and heritage as well as capitalising on emerging opportunities around technology, Artificial Intelligence (AI) and future talent to increase its competitiveness both nationally and globally.

Business services and manufacturing were leading FDI activities for the North East in 2025

The number of jobs created by FDI projects in the region fell to 998, down by a significant 47% from the 1,864 recorded in 2024. The region was ranked 11th in the UK for FDI-related employment last year, and as a result, the North East secured 3.5% of total UK FDI-related employment, down from 4.9% in 2024.

Examining FDI by activity reveals that the majority of the North East’s FDI was driven by projects involving business services (6 projects), followed by manufacturing (5 projects) and logistics (3 projects) activities. However, FDI in the region driven by business services (-54%), manufacturing (-58%) and logistics (-40%) activities was down significantly year-on-year.

New projects in the region also fell year-on-year

‘New’ projects – as opposed to re-investments or extensions – are one way of assessing a country/region’s ability to attract fresh investment. For the fourth consecutive year, the UK remained Europe’s leading destination for new FDI projects, ahead of Germany.

In 2025, the North East recorded 10 new projects, down 55% from 2024, when 22 projects were recorded. As a result, the UK market share for new projects secured by the North East decreased to 2.1% in 2025, down from 4.1% the previous year.

Of the UK’s 730 total FDI projects in 2025, 474 (65%) were new. While the number of new projects declined by 11% compared with 2024, this fall was broadly in line with the wider European trend, where new projects across the region declined by 12% year on year.

US remains the leading origin of North East FDI

The United States (US) has been the leading origin of Foreign Direct Investment projects into the North East over the last decade by a significant margin, accounting for 29.1% of projects.

While the US remained the region’s leading origin of investment in 2025, its proportionate share of projects in the region (22.7%) was a decrease from the 31% recorded in 2024.

The US was a proportionately lower origin of investment in the North East than the UK as a whole in 2025 by a narrow margin, with the US accounting for 24.5% of investment projects into the UK (based on 179 US projects out of a UK total of 730).

Over the last 10 years, 10.5% of projects into the North East have originated from Japan. This performance has established Japanese-origin projects as the second most prevalent investments in the region over the last decade. However, in 2025, Japan accounted for just one project, ranking it joint-sixth alongside Germany, India, and Italy.

In 2025, the other countries making up the five largest origins for foreign investment into the North East were France, the Netherlands, Sweden, and Canada.

While London outperformed the broader European trend in 2025 and remains a highly attractive global investment hub, FDI activity across much of the UK was more subdued. No English region outside the capital recorded growth, and while Wales and Northern Ireland saw year-on-year increases, their overall totals remain significantly below the UK’s traditional investment hubs. This widening gap between London and the rest of the country risks reinforcing long-standing regional disparities.

Against a backdrop of more cautious global investment flows, the UK must sharpen its focus on where it can compete most effectively and deliver long-term value. Addressing structural barriers - including high energy and labour costs - will be critical to better insulating the economy from ongoing uncertainty. Strengths in sectors such as technology, professional services and financial services remain a clear advantage, but this needs to be complemented by stronger performance in high-value, productivity-enhancing areas such as advanced manufacturing and life sciences. Strengthening regional investment propositions through improved connectivity, workforce capability and a stronger pipeline of investable projects will be essential to translating investor interest into sustained, nationwide growth.

Skills, grants and infrastructure key for investors when considering locations outside London

EY asked investors to outline the most important factors they considered when deciding whether to invest in locations outside London. The highest number of responses included the availability and skills of the local workforce (30%), followed by access to regional grants and incentives (27%), strength of transport infrastructure (27%) and the cost and availability of local real estate (26%).

Other important investment criteria included the availability of business partners and suppliers, and access to specialised industry clusters (both 21%).