Governments are screening more foreign deals than ever, but the money isn't disappearing, it's just going somewhere else.
A new CEPR analysis released in 2025 finds that foreign investment screening across advanced economies has not caused a broad collapse in cross-border capital. Instead, screening appears to redirect investment toward friendlier countries, safer sectors, and different ownership structures, even as European Union screening cases jumped from 1,444 in 2022 to 3,136 in 2024.
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What the CEPR research actually found
CEPR studied the rapid spread of foreign investment screening rules across the OECD and European Union. These rules let governments review, delay, or block foreign purchases of companies tied to defense, energy, data, semiconductors, and other sensitive areas. The researchers wanted to know a simple question: does this screening actually scare away foreign money?
The answer is more complicated than a flat yes or no. CEPR found no systematic link between how strict a country's screening rules are and how attractive that country remains to foreign investors. In plain terms, a country can have tough screening laws and still pull in strong foreign investment. The report states plainly that restrictive investment screening mechanisms can coexist alongside an otherwise liberal investment environment.
That doesn't mean screening has zero effect. CEPR points out that some deals likely get abandoned quietly before they ever reach a formal review. Official numbers only count blocked deals, not deals that died early because investors sensed trouble ahead. As the researchers put it, the limited number of blocked transactions could also reflect the deterrent effect of investment screening mechanisms working behind the scenes.
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European screening cases have tripled in two years
The numbers tell a clear story about scale. In 2022, EU countries with national screening systems handled 1,444 authorization requests and self-initiated cases. That number climbed to 1,808 in 2023, then surged to 3,136 in 2024. Screening has gone from a narrow tool to a routine part of doing business across Europe.
Despite that growth, the biggest allied economies kept investing heavily. Of the 477 cases notified through the EU's cooperation mechanism in 2024, the United States, United Kingdom, China including Hong Kong, Japan, Canada, and the United Arab Emirates were the top sources of investment. The United States and United Kingdom together made up 51% of all notified investments that year. The American share alone grew from 33% in 2023 to 40% in 2024, proving that stricter rules haven't pushed out major allied investors.
Earlier data from the EU's first reporting period, running from October 2020 through June 2021, showed 265 notifications from 11 member states. Back then, 91% of formally screened deals were approved, and most of those approvals came with no conditions attached. The system was built to filter out genuine risks, not to block investment broadly.
Why governments started screening deals in the first place
This shift didn't happen overnight. Governments grew worried after a string of foreign purchases touched sensitive industries like semiconductors, telecommunications, robotics, artificial intelligence, ports, and energy infrastructure. Officials decided that normal merger rules weren't built to catch national security risks hiding inside ordinary business deals.
The European Union responded with its Foreign Direct Investment Screening Regulation. This framework lets member states share information and flag concerns about deals that might affect security or public order. Importantly, the EU didn't create one central authority to block deals. Each national government still makes the final call on its own territory.
Separate academic research adds more texture to this picture. A study covering 43 OECD and EU countries between 2007 and 2022 estimated that screening rules reduced cross-border mergers and acquisitions by 12% to 16% on average. That drop was concentrated heavily in minority stake deals, where investors buy less than 50% of a company. Full takeovers were far less affected, suggesting screening mostly worries about quiet influence rather than total ownership changes.
Germany's experience shows capital doesn't vanish, it shifts
Perhaps the clearest evidence of this reshaping effect comes from Germany. After Germany expanded its screening rules in 2020, researchers tracked what happened to deal activity in newly regulated sectors. Using firm-level data from 2016 to 2024, they found something unexpected: investment from other EU countries in those sectors actually increased, and majority-control deals became more common.
This matches CEPR's broader conclusion. When one type of investor faces more hurdles, investors from trusted or politically aligned countries often step in to fill the gap. Capital doesn't necessarily leave the table, it just changes seats. Related research also found that the sharpest negative effects landed on minority stakes, non-OECD investors, financial buyers, and late-stage venture capital deals, while strategically aligned investors faced far less friction.
What this means for the next wave of deals
Screening looks set to stay a permanent fixture of investment policy rather than a short-term reaction to any single geopolitical flashpoint. The real debate ahead is about scope: should governments only review truly strategic assets, or keep widening the net across technology, finance, data, and infrastructure broadly?
Future reporting will need to separate deals that get formally blocked from deals approved with conditions, deals abandoned quietly before notification, and deals simply redirected to friendlier investors or other countries. The most important change happening right now may not show up as a dramatic rejection headline at all. It's a slow, steady reshuffling of who owns what, moving ownership toward domestic, regional, and politically trusted capital rather than blocking foreign money outright.
