Foreign direct investment (FDI) across Europe experienced a modest decline during this past year primarily due to ongoing economic pressures and geopolitical uncertainties. Yet the European continent has now demonstrated notable resilience, drawing more than 5,000 new investment projects and maintaining strong investor faith in its future prospects. These insights come from EY’s European Attractiveness Survey 2026, which is a review of foreign direct investment trends on the continent.
The EY update indicated that 7% year-on-year drop in FDI projects reflects broader global caution. Investors pointed to geopolitical conflicts and tensions as the primary concern for Europe’s appeal over the next three years, with 41% of respondents highlighting this risk—an increase from 35% the previous year and 27% in 2024.
Additionally, around 35% identified sluggish economic expansion, mounting government debt, and inflation linked to elevated energy prices as significant obstacles.
Despite these immediate hurdles, Europe continues to position itself as a robust choice for international capital.
A majority—60%—of business leaders anticipate that the region’s attractiveness will strengthen in the coming three years.
This outlook stems from confidence in core strengths such as advanced infrastructure, a vast consumer base, and supportive policy frameworks.
Bridget Walsh, EY’s EMEIA Area Managing Partner, noted, the narrative centers on adaptation rather than withdrawal, with notable advances in forward-looking industries.
Traditional powerhouses encountered reductions in FDI inflows. France saw a 17% decrease, the United Kingdom a 14% drop, and Germany a 10% decline. In contrast, several other nations and regions recorded gains.
Poland achieved a 10% rise, Spain 7%, and Turkey a substantial 20% increase. Sub-national areas also showed promise, such as Greater Lisbon with an 11% uptick and Catalonia with a 2% gain.
These developments highlight how competitive wages, available industrial sites, infrastructure upgrades, and growing tech networks are fostering fresh opportunities in Southern, Central, and Eastern Europe.
Investor origins revealed mixed dynamics. Flows from the United States, Europe’s longstanding top source country, held steady.
However, intra-European investment from Germany fell sharply by 28%.
Overall, while plans for new or expanded operations eased from highs of 72% in 2024 and 59% in 2025, 54% of executives still intend to pursue opportunities in Europe within the next year.
This figure exceeds pre-pandemic levels, underscoring enduring commitment.
High-potential fields displayed impressive vitality. AI-related FDI projects jumped 96%, generating over 14,000 new positions—a 41% increase. Defense investments rose 84%, adding nearly 7,000 jobs, particularly in the UK, France, and Ukraine.
Low-carbon energy projects grew 25%, bolstering Europe’s standing in sustainable development.
Conversely, established manufacturing segments faced headwinds. Healthcare production projects decreased 28%, chemicals 19%, and automotive 11%.
These reductions tie to structural challenges, elevated operational expenses, energy costs, and fiercer worldwide rivalry.
Europe’s ability to channel resources into strategic, future-oriented sectors while addressing competitiveness gaps will prove decisive.
Priorities include regulatory streamlining, affordable energy, and improved financing access to help innovations reach scale.
The EY survey, based on the European Investment Monitor tracking announcements across 47 countries and a perception poll of 500 senior executives conducted in early 2026, affirms that while short-term global forces test resolve, Europe’s fundamental advantages support sustained appeal for most experienced and discerning global investors.
