Channel: Investment

Tuesday, December 07, 2010
Foreign Investment in UK: US holds the key
Tables & Graphs

UK is known to the world as one of the most favourite investment destination. Though the global recession has affected the quantum of investment in UK, it is still doing well in terms of FDI inflow. But looking at the fierce competition from China and India, it is imperative now that UK takes formidable stepsto boost the investment.


The United Kingdom received a FDI inflow of GBP 49.8 billion in year 2008 as compared to GBP 93.1 billion in year 2007. Net direct investment by foreign companies in UK companies amounted to £49.8 billion in 2008, a decrease of £43.4 billion on the inward flows of £93.1 billion recorded in 2007 and the lowest recorded since 2004 (£30.6 billion).


The largest decrease in investment flow into the UK was from Europe, which fell by almost half (£24.5 billion), from £49.8 billion in 2007 to £25.3 billion in 2008. There was also a large decrease in investment from the Americas, down from £32.5 billion in 2007 to £21.1 billion in 2008. Investment flows from Asia fell from £9.9 billion to £2.5 billion.


Investment in UK companies from Australasia and Oceania changed from £0.5 billion in 2007 to a net disinvestment of £0.2 billion in 2008.Investment from Africa increased from £0.5 billion to £1.1 billion. The USA was the largest investor in the UK in 2008, with investment flows of £20.6 billion, which represented 41 per cent of the world total. The second largest investor was the Netherlands with £17.5 billion, representing 35 per cent of the total.


It can be seen from the graph that the major FDI contributor has been Europe for the past 10 years and its culmination was in year 2005-06 when Europe bagged a share of 82.7%. Second major contributor has been the same for the past decade i.e. Americas which comprises Brazil, Canada and U.S.; Asia being the third largest contributor followed by Australasia & Oceania and Africa.


USA tops the chart of FDI for UK with a mammoth 29.67% of the total FDI followed by Germany which invests 20.5%. These major countries account for the 87.64% where as the top 5 countriesí share is 82.25 which has increased from the past year when the share from top 5 nations was 75%. Year2006-07ís topper Spain has moved to the third place in the year 2007-08 whereas third spot USA of the last year has claimed the 1st ranking this year. Japanís share has also increased to 6.33 % from the last yearís 5%. It is clear that Asian countries still lag far behind their European peers in investing in UK. There is a requirement from both sides to deepen the investment relations.


Some of the important sectors attracting FDI have been Real estate & business services, Financial services, Transport & Communications, Retail/Wholesale trade & repairs, Electricity, gas & water, Food products, Mining & quarrying (including oil/gas). The sectors which have attracted most of FDI in the year 06 and 07 whereas they were laggards in the early part of the decade are Food Products, Office, IT & communications equipment, Retail/Wholesale trade & repairs and financial services. Those sectors which have lost sheen over the past 3-4 years are Mining & Quarrying (including oil/gas), Electricity, gas & water and Transport & Communications.


The crux of the story is that UK provides suitable opportunities for foreign firms and so has been an ideal destination for foreign investment. But the tale of the story clearly reveals that there is no reason to be complacent as chase for foreign money is getting intense with emerging markets trying to grab their share. This fact is equally bolstered by the huge fall in FDI in 2008. So time demands that UK be more competitive to beat its new rivals.


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