Foreign direct investment into the North East drops to 10-year low, research shows

Despite the fall EY directors say there remain reasons for optimism in the North East

The North East has seen its biggest drop in foreign direct investment (FDI) projects in a decade, new research has shown. New research from accountancy firm EY shows the region chalked up 22 inward investment projects last year – a 48% year-on-year fall and the region’s lowest total across the last decade.

The figures come in the latest EY UK Attractiveness Survey, with ranked 259 regions across Europe according to the number of FDI projects each attracted in 2025. The region’s year-on-year fall in foreign direct investment meant that its overall share of UK projects fell from 4.9% in 2024 to a decade-low of 3% in 2025.

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.

Meanwhile, 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. The majority of UK regions saw FDI projects fall year-on-year in 2025, with just Greater London (5%), Wales (56%) and Northern Ireland (65%) seeing increases. The South West saw projects stagnate year-on-year, while all other regions saw a decline.

Investment in the region was led by business services and manufacturing activities, but the number of jobs created by FDI projects 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, with the North East securing 3.5% of total UK FDI-related employment, down from 4.9% in 2024.

A breakdown of activity revealed that there were six business services projects, followed by five within manufacturing and three in logistics. A key indicator of a region’s ability to draw in fresh investment is in the number of ‘new’ projects chalked up, as opposed to re-investments or extensions.

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. Despite the fall, EY directors remained cautiously optimistic – but warned over the widening gap between London and the regions.

Michael Scoular, EY Newcastle office managing partner, said: “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.”