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The number of foreign direct investments boomed last year in Stockholm as risk appetite recovered and U.S. investors returned to Europe, according to Ernst & Young’s European Attractiveness Surve.

"Following a significant decline in investment during the worst of the global recession, investors are now coming back in force to Europe, led by the the US," said Mark Otty at Ernst & Young.

UK and France remain foreign direct investments (FDI) leaders in Europe, but they are losing market share to countries such as Germany and a host of smaller more cost-competitive countries, for example, Poland, Hungary and the Baltics.

London is still the most attractive city in Europe to establish  operations, standing nine percentage points ahead of its closest continental rival.

Stockholm was among the fastest climbers on the top 15 list. The Swedish capital rose 55 percent, to place 13 in 2011 from 48 the year before.

In Sweden foreign direct investments created 1,125 new jobs, the report said. The number of investments rose by 33 percent compared to 2009. Sweden makes up 2 percent of the total European share.

European foreign-direct investment rebounded in 2010 as U.S. investors returned to the region. Last year, the number of European FDI projects rose 14 percent year on year and 137,337 new jobs were created by FDI in Europe, up 10 percent from 2009.

This marks a clear recovery of international investment in Europe’s 43 countries, the report said.

The greatest number of projects in Europe come from business services, software, machinery and automotive. Most jobs are created by business services and automotive.