In this page: FDI in Figures | What to consider if you invest in the United Kingdom | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information
According to the World Investment Report 2021 published by UNCTAD, FDI inflows into the UK declined for the second year in a row, reaching USD 20 billion in 2020, compared to USD 45 billion in 2019 (-57%). Equity investments decreased by 35%, mainly due to some divestments (e.g. Swiss Re sold its ReAssure group to Phoenix Group Holding for USD 4.2 billion). The stock of FDI in 2020 was about USD 2.2 trillion. The UK was the 16th-largest recipient of global FDI flows, losing five positions from the previous year. The Brexit process has raised many concerns from some investors about increased trade costs with Europe and the volatility of the pound sterling. The main investment partners of the United Kingdom (in terms of FDI stocks) are the United States, the Netherlands, Luxembourg, Belgium, and the British offshore islands (Channel Islands and Isle of Man). Most FDI flows are directed to the financial services sector, professional, scientific and technical services, retail and wholesale trade, transportation and storage, and the IT sector. According to the latest figures from OECD, in the first half of 2021 FDI inflows to the UK totalled USD 45.5 billion, compared to disinvestment of USD 1.8 billion recorded in the same period one year earlier (when a negative inflow of USD 18 billion was recorded in Q2/2020 alone, following the outbreak of the COVID-19 pandemic).
The UK has amended the legal grounds on which the government can intervene in certain mergers under the Enterprise Act. The changes lowered the jurisdictional thresholds for merger review in three specific sectors: artificial intelligence, cryptographic authentication technology and advanced materials. The UK’s National Security and Investment Act 2021 (“NSIA 2021”) entered into force on 4 January 2022. The new law introduced a distinct investment screening regime for companies seeking to gain control of a company or asset in 17 sectors of the economy deemed relevant to the UK’s national security interests (e.g. energy, robotics, defence, AI, transport, communications, etc.). The process for notification will involve an electronic submission to the Investment Security Unit (“ISU”) at the Department for Business, Energy & Industrial Strategy (“BEIS”), which has the power to impose conditions on transactions and even to unwind or block them. Despite the Brexit process, the British economy is resisting: London remains the financial capital of Europe, home to the European headquarters of almost 60% of companies on the Fortune 500 ranking. Furthermore, Great Britain maintains a strong currency, and the country remains one of the most important European consumer markets. The United Kingdom was eighth out of 190 economies in the latest Doing Business ranking established by the World Bank, gaining a position compared to the previous edition.
Foreign Direct Investment | 2019 | 2020 | 2021 |
---|---|---|---|
FDI Inward Flow (million USD) | 45,454 | 18,194 | 27,561 |
FDI Stock (million USD) | 2,045,057 | 2,219,917 | 2,634,202 |
Number of Greenfield Investments* | 1,537 | 1,023 | 1,073 |
Value of Greenfield Investments (million USD) | 36,078 | 39,189 | 44,476 |
Source: UNCTAD, Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Main Investing Countries | 2019, in % |
---|---|
United States | 24.5 |
Netherlands | 10.7 |
Luxembourg | 8.6 |
Belgium | 7.5 |
UK Offshore Islands | 7.4 |
Japan | 5.8 |
Germany | 5.8 |
France | 4.6 |
Main Invested Sectors | 2019, in % |
---|---|
Financial services | 24.3 |
Professional, scientific and technical services | 9.0 |
Retails and wholesale trade, repair of motor vehicles and motorcycles | 7.3 |
Transportation and storage | 6.8 |
Information and communication | 6.4 |
Mining and quarrying | 6.0 |
Electricity, gas, water and waste | 5.6 |
Source: Office for National Statistics - Latest available data.
One of the main strengths of the UK economy in attracting FDI is that its economy is one of the most liberal in Europe and its business environment is extremely favourable to FDI :
The main weaknesses of the UK's economy are:
Country Comparison For the Protection of Investors | United Kingdom | OECD | United States | Germany |
---|---|---|---|---|
Index of Transaction Transparency* | 10.0 | 6.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 7.0 | 5.3 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 8.0 | 7.3 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
The UK offers following free trade zones:
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Latest Update: January 2023