France, Spain and Germany are catching up rapidly with Britain as a favoured location for internationally mobile inward investment projects, according to a study to be published this week.

The report, compiled by Ernst & Young, will provide the first independent evidence that Britain's self-imposed exclusion from the euro has reduced its attractiveness as a base for international business.

It will show Britain retained its position as the biggest single recipient of projects in 1999. But its market share slipped to 24 per cent of new projects, from 28 per cent, while the share won by France was 18 per cent, up 6 per cent.

The report will show that investment increased by 11 per cent in the euro-zone as a whole, and fell by 18 per cent in countries outside the zone. The biggest increases were recorded in Spain (to 7 per cent from 3 per cent) and Germany (to 9 per cent from 8 per cent). The Netherlands, the Republic and Italy showed modest gains.

Outside the euro-zone, Switzerland and Sweden increased their share of projects. But there was a big fall in investment in central and eastern Europe, mainly due to declining flows from Germany and South-East Asia. The Ernst & Young data appear in line with warnings from Japan and UK business leaders that many firms are postponing or moving planned investments in the country.