Global Investors Demonstrate Strong Confidence in Post-Brexit Britain, Committing a Record £2 Trillion in Investments
Foreign Direct Investment (FDI) serves as a significant gauge of economic confidence in a country. When international investors decide to channel funds into the UK, it signifies their trust in the nation’s economic stability and potential for profitable returns. This influx of capital can lead to job creation, technology transfer, and increased competitiveness in the global market. Conversely, when British companies invest abroad, it indicates their strength and confidence in their domestic operations, allowing them to expand their reach and influence in international markets.
Inward and Outward Foreign Direct Investment (FDI), 2022
- Total Investment Stock:
- Inward Foreign Direct Investment: Foreign companies invested a total of £2,068.0 billion into the UK economy.
- Outward Foreign Direct Investment: British companies invested a total of £1,904.8 billion in foreign markets.
[Source: Office for National Statistics, 08 Oct 2024.]
2. Increase in investment
- Annual increase in inward FDI: £126.8 bn
- Annual increase in outward FDI: £176.4 bn
Increased Investment Activity:
- Inward Foreign Direct Investment (FDI) experienced an annual increase, reaching a total of £126.8 billion. This indicates a growing interest and confidence from international investors in the domestic market.
- Outward Foreign Direct Investment (FDI) also saw a significant annual rise, amounting to £176.4 billion. This reflects the expansion of domestic businesses and their increased engagement in global markets.
In 2016, numerous experts predicted that foreign companies would cease investing in the UK if it decided to leave the European Union, especially if it exited the EU’s Single Market and Customs Union. They argued that without access to these profitable markets, the UK would lose its attractiveness for investment. However, contrary to these forecasts, recent data demonstrates that these predictions were unfounded. Since the 2016 Referendum, the UK has actually seen a surge in foreign investment, underscoring its enduring appeal as a prime destination for investors.
Inward and outward investments have reached record highs. In 2022, both the UK’s inward and outward foreign direct investment (FDI) positions increased compared to 2021. The inward FDI position rose by £126.8 billion, reaching £2,068.0 billion, while the outward position grew by £176.4 billion, totalling £1,904.8 billion. Specifically, the outward FDI position with the EU saw a £104.1 billion increase, with a significant rise of £145.9 billion in the Netherlands, partially offset by declines in other EU member states.
Germany, the powerhouse of the EU's economy, confronts mounting challenges that demand urgent attention. During a press conference in Berlin, Finance Minister Robert Habeck disclosed that Germany's economic outlook is more dire than anticipated just three months prior. Instead of the modest growth of 0.3% that was expected, the economy is now projected to contract by 0.2%. This shift underscores the critical need for strategic interventions to steer the economy back on track.
“The upturn is therefore being delayed once again, but now mainly not because of cyclical factors that have become worse or developed more slowly, but because structural factors are making it so much more difficult.”
- Robert Habeck, German Finance Minister, Berlin, 09 Oct 2024
The situation worsens with Intel, the leading global chip manufacturer, withdrawing from a significant €30 billion investment plan for a new production facility in Germany. This setback compounds Germany's challenges, especially following last month's news that Volkswagen, the renowned car maker, is contemplating closing some of its domestic production plants for the first time due to declining demand.
Following the historic decision by the British populace to exit the European Union, an independent United Kingdom has surfaced as a compelling investment prospect for corporate board directors globally. This newfound appeal is driven by the UK’s potential for regulatory flexibility, access to diverse markets, and strategic geopolitical positioning, making it a focal point for international business and investment strategies.
Despite record levels of both inbound and outbound investments, alongside rising earnings that boost tax revenues, it is perplexing why Sir Keir Starmer and Chancellor of the Exchequer Rachel Reeves seem determined to understate the dynamic and thriving UK economy they have inherited.
