The UK has overtaken Germany as the most attractive place to invest in Europe, despite concerns about higher taxes under Rachel Reeves's Government remain.
According to PwC’s annual survey of global CEOs, Britain is now the second most appealing country for investment worldwide, behind the United States.
The UK’s rise from fourth position last year comes as Germany continues to struggle with an energy crisis triggered by Vladimir Putin’s invasion of Ukraine in 2022 and investors remain wary of investing in China as the threat of huge tariffs looms.
However, the survey also warns that this positive shift could be at risk if the UK does not adopt pro-growth policies and urged the Chancellor not to squander its position of “relative stability”.
Many leaders felt confident about the UK’s prospects, particularly in areas like artificial intelligence (AI), despite the announcement of higher taxes
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PwC’s global survey, conducted between October and early November 2024, shows that UK business leaders are increasingly optimistic.
A majority, 61 per cent, expect growth in the next year, up from 39 per cent in 2024. Many leaders felt confident about the UK’s prospects, particularly in areas like artificial intelligence (AI), despite the announcement of higher taxes.
However, there has been a shift in sentiment since the Budget, with surveys revealing that the £25billion increase in employers' National Insurance has dampened business confidence.
Business leaders have expressed concern about the impact of Reeves’s record tax increases, with some fearing that these changes could hurt investment.
Marco Amitrano, of PWC, said business leaders had been “rocked” by Reeves’s Budget as he warned that corporate Britain was reaching its limit on tax rises.
He said: "Business clearly feels a little bit rocked, but personally I don’t believe that the relationship between business and Government is fractured, more a fault line.
“Is there going to be a welcome response to even higher taxes? No.”
Germany, by contrast, has seen its economy stagnate for two years, exacerbated by the energy crisis caused by Russia’s invasion of Ukraine.
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These challenges have led to a decline in business confidence. In addition, the looming threat of tariffs on China is causing concern, as investment interest in China has “fallen dramatically,” according to PwC.
Despite the challenges, Reeves has expressed optimism, stating that the Government’s primary goal is to grow the economy.
She pointed out that global CEOs are backing Britain as an attractive destination for investment, which will ultimately help drive economic growth and improve living standards across the country.
The PwC survey of nearly 5,000 CEOs from over 100 countries also highlighted the UK’s strong position in key sectors, including technology.
However, Amitrano warned that complacency would be a mistake. The UK must continue to offer a clear path to growth and maintain a stable approach to business and investment.
Reeves will use meetings at the World Economic Forum (WEF) in Davos to seek support for the UK’s economic policies, while Labour leader Sir Keir Starmer aims to negotiate a trade deal with US President Donald Trump.
