All conversations at FDI in 2025: Insights and Trends Shaping the Future of Investment in London last week seemed to return to the question of uncertainty.
The event was hosted by the World Association of Investment Promotion Agencies (WAIPA) and the Kuwait Direct Investment Promotion Authority (KDIPA).
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Whether that uncertainty stems from geopolitical changes or paradigm-shifting technology, the message to investment promotion agencies (IPAs) was that they need to evolve with the times in order to continue being useful to their governments and investors.
FDI in 2025: bottoming out and key industries
The first talk of the day was given by James Zhan, WAIPA World Investment Conference executive board chairman. He outlined his predictions on foreign direct investment (FDI) prospects for 2025, focusing on the growth of services, the global downward FDI trend, key sectors and the rise of technology.
A long-term trend is the expansion of the service sector, which accounts for 70% of global FDI. He cautioned the audience that, despite heightened fears about rising trade barriers and protectionism, “bear in mind it is more impacting on manufacturing sectors of investment. The service sector is much less.”
For 2025, Zhan sees a possible bottoming-out of global FDI after three very slow years. The recovery, however, “is likely to be weak, fragile and modest” and will be driven more by “restructure of international production systems or supply chains, instead of expansion”. The increase in volatility, uncertainty, complexity and ambiguity will also dampen recovery efforts.
He predicts that there will continue to be FDI interest in key sectors such as renewable energy, communication, semiconductors and electric vehicles. This will undoubtedly vary by region. In the US, Zhan expects an increase in reshoring and market-seeking FDI driven by increased tariffs and corporate tax reductions. Europe could see a moderate recovery and ASEAN countries may continue enjoying increases in investment flows from the past few years from manufacturing revitalisation and regional integration.
He also highlighted that the growth of automation will continue to shape global FDI flows. “On average, there will be half a million [industrial robots] to be deployed yearly leading up to 2030,” he noted.
Working through volatility
The panel that followed gathered UK Department for Business and Trade (DBT) director for investment John Edwards; WAIPA regional director for EU and head of Invest in Finland Antti Aumo; Mélisande Roche, director of inward investment at Business France in the UK and Ireland; and FT Locations managing director Chris Knight. Courtney Fingar, FDI specialist and WAIPA Europe and Communications senior advisor, moderated the conversation.
The implications of the new US administration and AI were two major talking points.
“I think we are in the foothills of a massive geopolitical shift. So, whilst I take those trends, I think [they] may have been correct two weeks ago. I don’t know if they are correct today,” Edwards said referring to how US President Donald Trump’s mandate will affect the set of FDI trends identified by Zhan. For example, if there is a massive rollback on green transition initiatives from the US and more investment is poured into fossil fuels, it could affect the renewables industry.
Edwards suggested the uncertainty of the US’ future will make it harder for companies to make FDI decisions involving the US. “Long term, people are making decisions on FDI for 20 years, not for one-two years. What does the US look like? Are you going to make a big decision on the US at the moment?” he questioned.
For Europe, the new administration has many implications. The US scaling back its support for Ukraine and getting closer to Russia will affect the European economy as well as its security. Edwards anticipates that, in the face of these geopolitical shifts, governments will increasingly become more protectionist and interventionist as they launch major industrial policies.
All the speakers highlighted that, where there are challenges, there are also opportunities. If clean energy companies, for example, can’t find a home in the US, then Europe has an opportunity to attract the industry. In Finland for example, Aumo highlighted that projects within “clean energy, the green transition and sustainability, it just moves forward because it has to”.
Roche also noted that one of the biggest areas for investment opportunities in France is in green investments. She added that Business France is working to create a “fast track” for investments by identifying potential manufacturing sites for prospective investors. Knight also acknowledged that, with the new administration threatening to pull back from the Inflation Reduction Act, “there is a big opportunity for Europe in green energy […] because companies are going to shy away from the US”.
The importance of AI, both in workflows and as part of investment strategies, was also central. Knight highlighted how mega investments in the AI sector in 2024, such as with data centres, do not create a lot of jobs. For IPAS, “the question is […] are data centres what you want to target or are they not depending on your KPIs?” he questioned.
The nuances of AI also took centre stage. IPAs were advised to explore how AI can optimise their workflows and help design value propositions. Using AI to write emails to create leads, for example, could save you a “fortune of time”, Knight explained. Edwards echoed this sentiment, saying that when organisations need to cut costs, AI could help them do that. He explained how at the UK Department for Business and Trade, there are a lot of people who “do a level of basic research that we can get done in about two seconds on AI”.
IPAs need to specialise
Specialisation was also a top priority.
“A lot of IPAs want to be generalists, but companies want to talk in niches. So I know DBT [has] got a lot of sector experts which are going to, I think, become more and more necessary in these meetings to talk about what is happening down the line,” Knight said.
Prioritising specificity may also be a way for IPAs to increase their value proposition. “The generalist stuff, unfortunately, you can get through AI increasingly,” Edwards noted.
Aumo agreed, saying that “generalists do not provide a great customer experience because […] customers want to talk about their business and the technology that they are developing, and the generalist is like a glorified secretary”.
Knight said the focus should now be on sector-specific investment attraction strategies. “Get rid of generic messaging,” he advised IPAs. It is not enough to say you are looking for investments within renewable energy or tourism. “We need to hone in on exactly what we are targeting within these industries,” he said.
