Foreign direct investment (FDI) into Europe declined 7% in 2025, although the region still drew more than 5,000 projects and created over 200,000 jobs, according to the EY European Attractiveness Survey 2026.
The survey said the reduction was smaller than the 16% decline in global industrial greenfield FDI reported by UN Trade and Development.
Europe's three leading destinations – France, the UK and Germany – each recorded declining inflows, down 17%, 14% and 10%, respectively.
Political uncertainty, trade frictions stemming from Brexit and a slowdown in manufacturing weighed on all three markets.
Job creation from FDI projects fell more steeply, declining 25%, as investors scaled back project sizes and accelerated the adoption of productivity-enhancing technologies, including AI.
Several markets bucked the wider trend. Turkey, Poland and Spain posted gains of 20%, 10% and 7%, respectively, benefiting from competitive labour costs, the availability of land suited to industrial development and access to EU infrastructure funding.
Sectoral shifts were pronounced.
AI-related investment nearly doubled, rising 96% and accounting for more than 14,000 jobs, while defence FDI grew 84%, creating close to 7,000 jobs as European governments ramped up military expenditure.
Low-carbon energy investment expanded 25%, supported by data centre demand and the strategic push for domestic energy supply.
Conventional industries fared less well.
Automotive FDI fell 11%, chemicals dropped 19%, and healthcare manufacturing declined 28%.
Sentiment among investors showed signs of cooling.
Of the 500 foreign investment leaders surveyed, 54% said they intended to establish or expand a European presence in the coming year, down from 59% the previous year.
Geopolitical tension and conflict were flagged as the principal risk to Europe's appeal by 41% of respondents, up from 35% in 2025, with macroeconomic conditions and trade barriers ranking second and third.
Longer-term confidence remained more resilient, however, with 60% of those surveyed expecting Europe's attractiveness to improve over the next three years, pointing to the continent's market scale, infrastructure quality and innovation ecosystem.
Some 52% said they believed Europe would take the strategic steps necessary to close competitiveness and productivity gaps.
The survey identified lower energy costs and stronger support for small and medium-sized enterprises as the most pressing priorities for maintaining Europe's position as an investment destination.
