FDI in UK (GBP bn)
Top Investors in UK (2008)
Break up of Investment in UK (GBP bn)
Sector breakup of Indian investments into the UK (GBP mn)
Earnings of Indian Companies in UK (GBP mn)
The direct investments made by Indian investment into UK at the end of 2008 witnessed a 17 fold increase from the corresponding figures of 2007. Indian direct investments into the UK jumped from GBP 151mn in 2007 to GBP 2,578mn in the year 2008. In stark contrast the investments from UK into India dropped from GBP 650mn to GBP 467mn in a similar time-frame.
The decline in investment levels of investments originating from the UK can be clearly attributed to the economic crises and strong coupling effect to EU zone and global economy. On the other hand India’s investment levels demonstrate its industries loosely coupled nature to the world economy but more importantly the growing appetite of Indian corporates’ need to establish a global presence.
India was also ranked the top investor into the UK from amongst Asian nations when taking into account the metric of total number of investments made. At the end of 2008 its companies had already made investments into 108 projects and/or new initiatives.
Using the metric of quantum of investments, India was ranked the 4th largest investor into the UK with a 5% share of overall FDI received by the UK in 2008. The countries that exceeded India’s investment levels in 2008 are: USA (41% share), Netherlands (35% share) and Germany (11% share).
The most interesting revelation is that the top 5 investing nations into the UK make up for 96% of the total FDI the country received in 2008.
These figures depict that the UK is still very heavily dependent on the US and Europe for sourcing FDI. The European countries accounted for 51% of UK FDI and 41% from United States alone. Only 5% of UK’s investments came from Asia nearly all of which originated from India. African nations only captured 2% of FDI and Australasia less than 1%.
Indian companies used both organic expansion as well as acquisitions as a strategy to establish presence within the UK. Although generally Indian investments have been increasing not only in the UK but across the world, it must be highlighted that the big jump in the quantum of Indian investment has been largely due to the result of two major acquisitions: ONGC’s acquisition of Imperial energy and HCL’s acquisition of Axon. These transactions were greater than GBP 1bn and greater than GBP 350bn respectively. It is also the reason why the investment figures are likely to be suppressed in Table 3. It is also highly unlikely that the level of Indian investment will be the same in the years 2009 and 2010 given the state of the world economy.
Other big investments into the UK included: Thomson Corporation’s acquisition of Reuters Group for approximately GBP 8.5bn; Akzo Nobel’s acquisition of Imperial Chemical Industries for approximately GBP 8.1bn and Sunrise Acquisitions Ltd, a consortium that was led by Heineken NV and Carlsberg A/S, acquiring Scottish & Newcastle Plc for approximately GBP 7.6bn.
Investments from India increased across a range of sectors including IT, Life Sciences and advanced engineering sectors. Indian companies were particularly active in the Financial Services sector as off late a number of banks have established presence in the country. The most prominent ones include
India Infrastructure Finance Company Ltd, Tata Capital, Religare’s acquisition of Hichens, Harrison & Co Plc and Union Bank of India.
Although the single largest Indian investment into the UK was in the natural resources sector, the vast majority of the other projects were in the services sector in line with the other investments into the UK. This trend is unlikely to change anytime in the near future. Sectors that will continue to dominate Indian expansion into the UK will be in the areas of Finance Services as more and more banks find the lure of Non-Resident Indians (NRIs) to hard to resist. The Information and Communication Technology sector is likely to see more and more activity in the near future as UK Government and industry embark on a long haul of cost-cutting measures. Other areas include real estate; business services and Retail.