The Nordics' high-quality attractiveness may be eroding, E&Y; warns, as the number of foreign direct investments plunged last year.

• Sweden the most competitive EU nation
• Swedish economy grows faster than expected

London maintained its position as the most attractive European city for inward investment in 2009 for the eighth year in a row, a new Ernst & Young report said.

The big European economies held up relatively well in terms of their ability to attract inward investment, the consultants firm said in its annual European Attractiveness Survey. The number of foreign direct investments dropped 11 percent.

The Nordics, on the other hand, suffered a steep decline, attracting only 124 projects in total, down 40 percent from 2008.

“Investors continue to perceive the Nordic countries as high-quality destinations that are attractive both for their internal markets and their export-oriented services, though this attractiveness may be eroding”, the report said.

Sweden, making up 2 percent of the total number of foreign direct investments (FDI) in Europe, recorded 32 percent fewer deals. The country did not make it to the top-20 in the ranking of jobs created by foreign investments into Europe.

Almost three-quarters of FDI projects in the Nordic states were in services. Strikingly, 70 percent of Nordic FDI projects were in sales and marketing, headquarters and research and development.

Ernst & Young also said that more and more Asian companies are attracted to enlarge market share through mergers, pointing out Geely Automobile’s acquisition of Volvo Cars in Sweden.

“Volvo’s market share and outstanding reputation give many advantages, and will quickly improve Geely’s brand in car markets around the world and provide a platform for further development”, Lilian Li, Chief Financial Officer at Huawei Technologies Investment Netherlands, said in the report.