The number of foreign companies investing in the region has taken a nose-dive compared to the same period last year, a study has found.

Ernst & Young's latest European Investment Monitor report has revealed inward investment projects into the West Midlands for the first six months this year dropped 62 per cent - falling from 21 in 2005 to eight in 2006.

That figure came in contrast to the national picture, where the UK has consolidated its position as the most attractive destination for inward investment in Europe.

Ronnie Bowker, the accountancy firm's senior partner in Birmingham, said: "While the overall picture is positive, with the UK being the most attractive destination in Europe for inward investment, it is concerning that the West Midlands has seen significant decline when compared to last year.

"The business community and the inward investment agencies need to work together in proactively marketing the region as the ideal base for doing business with Europe and the US, with the added advantage of a highly skilled and adaptable workforce."

Mr Bowker warned the study overall suggested the region's manufacturing sector may face increased competition for investment from Romania and Bulgaria.

There were also concerns over the strength of local links to attract Indian investment. No Indian financed projects in the study were launched in the region during the first six months, a spokesman said.

Across the UK, the number of projects announced in the first six months of 2006 showed an increase of over 30 per cent, growing from 236 in 2005 to 315 in 2006.

However, although the number of projects in the region declined when compared to this time last year, the area was still an attractive destination for manufacturing, with five of the eight projects secured coming from this sector. Other projects originated from finance, business services, and transport and communications.

The report showed that overall, Europe continued to increase inward investment, with the number of projects up by 25 per cent from 1,144 in the first six months of 2005 to 1,432 over the same period in 2006.

The rise has been driven by a 40 per cent increase in investment projects from the US as well as a threefold increase in the number of projects from India.

India was now the second most important source for inward investment into the UK, behind the US, capturing over half of all projects announced by Indian companies into Europe in the period.

Mr Bowker said: "Indian companies need to gain clients from Western Europe and are therefore putting sales offices and also customer support activities closer to their customers as a conduit to helping growth in India.

"It's unfortunate, however, that with such a strong Indian community and close ties with the country the West Midlands cannot build stronger links to be able to attract more investment from this emerging economy."

The apparent losers in Eastern Europe were Poland, Hungary, Russia and the Czech Republic with a combined market share of 12.8 per cent, down from 19.3 per cent in the first half of 2005.

The anticipated admission of Romania and Bulgaria to the EU in 2007 had already driven up projects into their respective capital cities.

Part of the reason for the drop in the market share of the Eastern and Central European locations was a relative decline in the number of manufacturing projects announced in Europe.

Mr Bowker said: "Manufacturing has not benefited as much as other sectors in terms of new investment projects.

"Whether or not this is the beginning of a long-term slow down in Central and Eastern European investment activity remains to be seen, but this downward trend does not bode well for businesses in the Midlands."