London has prevailed as fDi’s European City of the Future 2016/17, a position it has held since 2006. The metropolis is a beacon to investors, and has performed particularly well in this ranking, also being named Northern City of the Future and Major European City of the Future for 2016/17. London’s ability to attract the highest number of FDI projects of any European city helped to shape this year’s results, with it bringing in more than 1600 projects between 2010 and 2014 (see Figure 1).

Software and IT services was the largest sector for inward FDI, commanding 40% of all investment in the city, up from 35% in the previous ranking. The share of inward investment in the business services and financial services sectors fell from a respective 21% and 19% in the 2014/15 ranking, to 19% and 15% in the 2016/17 ranking.

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Paris pipped

London saw off stiff competition from Paris, which was ranked second, and Dublin in third. Paris was also named Western City of the Future and ranked second in the Major European Cities of the Future category. An innovative city, Paris has a higher number of patents granted than any other location analysed, with nine of the city’s universities ranking in the Shanghai Ranking Consultancy Global Top 500 Universities ranking, the highest of any European city. Internet download speeds are among the best in Europe, meaning business can be done efficiently online, while investors locating in France are afforded relatively low costs to establish their business, just over $340.

But it is not only France’s capital city that boasted an impressive set of data points related to innovation in the fDi rankings: Grenoble had the highest number of patents granted of any city in France after Paris, and also boasted the highest number of inward FDI projects per 100,000 in R&D and design, development and testing of all French cities analysed. Grenoble is home to eight national research centres, and Forbes named it the fifth most innovative city in the world in 2013. In June 2014, US-based Mirantis opened a research facility in the city, citing Grenoble’s reputation as a centre of engineering and knowledge-driven industries as a reason for investment.

Germany’s growth

Further east, four German cities featured in the top 10 list of cities for patent registration between 2003 and 2014 (Figure 3). In July 2014, US-based AppDirect opened an office in Munich in recognition of the city’s reputation for being a centre of innovation, while Finland-based Vaadin credited its decision to open an office in Berlin to the city’s start-up community. Berlin is able to compete on cost as well as quality: the city often offers more favourable property and labour costs than other German cities such as Frankfurt and Munich. Japan-based software development company Gree International, which opened an office in Berlin in July 2015, said: “The low prices on real estate are a great way to attract talent.” 

Cologne, a large city in Germany’s North Rhine-Westphalia state, had the highest upload speeds of any German cities analysed, helping the city to rank second of all large European cities in the Connectivity category. German cities took five of the 10 places in this category, while the country performed well in several indices, including the Logistics Performance Index from the World Bank (best in Europe), and in the Quality of Roads, Rail and Overall Infrastructure indices from the Global Competitiveness Report.

The Danish capital of Copenhagen also has strong tech credentials. According to greenfield investment monitor fDi Markets, more than one-quarter of all of the city’s inward investment between 2003 and 2015 was in the software and IT sector (Figure 2). Copenhagen, which ranked fifth of all major cities for Connectivity, had the highest upload speeds of all major cities analysed in the ranking. Denmark was the best-performing country in the ICT Development Index, from UN agency International Telecommunication Union, with Sweden second.

Top five Destination cities inward FDI between 2010 and 2014

Dublin’s tech strength

Dublin’s standing improved in the 2016/17 ranking, increasing from fifth position in 2014/15, to third this time. The city is becoming a hotbed for investment in software and IT (Figure 5), with the sector attracting more than 45% of all Dublin’s inward FDI between 2010 and 2014. Projects, jobs created and capital expenditure in the sector have all risen from 2010 to 2014, with 2014 being a peak year for job creation. Major US technology companies such as Amazon, Google and IBM have a presence in the city, which has seen a rise in the number of tech professionals and companies operating at ‘Silicon Docks’ – the epicentre of the city’s software boom. IBM most recently invested in the city in March 2015, when it opened a new design studio close to its existing European digital sales centre.

Belfast in Northern Ireland was the leading city for job creation from inward investment in the UK, excluding London, and had the highest figures by this measure among all small European cities. It is also ranked first for Business Friendliness among small cities. Belfast also experienced the UK’s highest rate of growth in FDI job creation between 2005 and 2009, and 2010 and 2014. Galway, which is on the west coast of Ireland and ranked first of all micro cities in Business Friendliness, had the highest level of growth in FDI job creation of any Irish or micro city, and the second highest level of all cities analysed for the ranking. Shannon, also on Ireland’s west coast, attracted the highest number of FDI jobs per 100,000 people of all European cities analysed. 

Outward bound

While the purpose of the fDi ranking is to identify the best locations for inward investment, among the dozens of data points used to determine scores is outward investment, as having strong clusters of successful local companies which are expanding abroad is a positive indicator. Among all German cities, Munich ranked top for outward FDI (Figure 4), with more companies from the city investing abroad than from Berlin and Frankfurt. Munich is home to electronics giant Siemens, gas and engineering company Linde, insurance specialist Allianz and motoring brand BMW. In December 2015 alone, Siemens announced two investments planned for China, an innovation centre for digital solutions, and a new rail equipment manufacturing base in Jiangmen.

The rankings have shown that it not always capital cities that offer the highest number of companies investing abroad. While Munich was the highest in Germany for outward FDI (above capital Berlin), Milan has topped all Italian cities (above Rome) and in Ukraine, Dnipropetrovsk had the highest number of outward FDI projects, more than Kiev. All of these cities are huge sources of financial services projects. 

Click on the link below for a PDF version of the complete results: