Political instability in the UK has emerged as one of the top concerns for foreign investors, according to EY's latest UK Attractiveness Survey, which also revealed a 14% decline in overseas investment projects in Britain last year. The report highlights that Greater London was the only English region to see growth, widening the regional investment gap.
Investor Sentiment and Key Concerns
The survey, which polled 360 international investment decision-makers in March and April, showed that overseas investors flagged political instability as the second biggest disadvantage for the UK as an investment destination, behind energy costs. Labour market costs and tax competitiveness were also cited as concerns. The UK is heading for its seventh prime minister in 10 years after Sir Keir Starmer announced his resignation on Monday, with a new leader expected to be in place when Parliament returns from summer recess on September 1.
Impact on Government Bonds
UK government bonds, through which overseas investors buy into Britain, have been under pressure since the start of the year, with prices falling and yields rising amid downgrades for the UK economic growth outlook and political uncertainty. This reflects investor unease about the stability of the political environment.
UK Still Second in Europe for FDI
Despite the overall decline, the UK recorded 730 foreign direct investment (FDI) projects in 2025, the second highest in Europe, beaten only by France with 852 projects. More than half of global investors surveyed expect the UK to become more attractive to invest in over the next three years. Anna Anthony, EY UK & Ireland regional managing partner, said: “Despite an overall decline in FDI project numbers amid a challenging economic and geopolitical backdrop, investor sentiment suggests the UK – particularly London – remains a strong contender in a highly competitive global market. While the UK is well positioned to attract long-term capital and compete with leading destinations such as the US and France, the priority now is to convert this into sustained investment that drives growth, supports innovation and strengthens economic momentum across all regions.”
