The Value of UK Foreign Direct Investment Assets Rises

Foreign direct investment assets capture the investments made by UK-based companies abroad and per the newly released GOV report, UK FDI Investment, Trends and Analysis: 2018 these assets have been on an upward trend since comparable records began in 1987. However, the value of UK FDI assets saw little growth from 2011-15, at the time suggesting that this upward trend may have flattened.

Yet, the value of UK assets increased considerably in 2016, extending to £1,564.2 billion – a rise of 11.4%. For foreign direct investment assets, this is the fastest annual growth rate since 2008 when asset values increased by 25.2% over that year.

Comparably, foreign direct investment liabilities (investments in the UK made by foreign companies) grew by 14.7% the same year, totalling £1,551.7 billion. This growth is the highest in UK liabilities since 2012, when the value rose by 25.8% over the year.

It is the higher growth of UK FDI liabilities that has seen the UK’s net FDI position fall from £494.2 billion in 2008 to £12.5 billion by 2016.

However, to better understand the current position of our FDI assets we must consider where they exist and how they benefit industry – and this is something Turnerlittle.com has investigated.

Currently, total UK foreign direct investment assets in 2016 include a gargantuan £645.1 billion in the EU – the highest total; £357.7 billion in the North Americas and £171.4 billion in Asia. Elsewhere, £139 billion exists in Non-EU Europe, £147.1 billion in Central and South Americas and a total of £103.9 billion in the Rest of World.

Most regions saw an increase in the value of assets 2015-16, except for the Central and South Americas. The largest of these increases occurred in the EU, where assets increased by £94.3 billion to £645.1 billion just last year. It has been noted that the broadly upward increase in asset values is likely to reflect the upward pressure applied from the depreciation in sterling over 2016.

Industry

Investigating more broadly, total UK foreign direct investment assets by industry 2016 include:

All UK industries abroad show higher asset values in 2016 compared with 2015, most notably in manufacturing where assets increased by £44.7 billion – a percentage increase of 15.7%.

Other high rises include information and communication where assets increased by £27.6 billion, an increase of 15.8%, and professional and support where assets increased by £21.8 billion, an increase of 17% on 2015.

Finance and Insurance Sector Breakdown

Shining a spotlight on the industry they know best, Turner Little found the percentage total of financial and insurance sector assets by continent, whereby it is Asia (19.8), Rest of the World (18.9) and the EU (11.3) who hold the highest number of assets.

Marginally lower is Non-EU Europe and the North Americas, at 10.4 and 10.3 respectively. Last, Central and South Americas – with a total of just 2.2 financial and insurance sector assets.

These figures demonstrate a need for the finance and insurance sector to maintain strong ties with Asia, Rest of the World and Europe to continue – and maintain – a healthy number of assets abroad. Indeed, if UK FDI assets in finance and insurance grew by 9.1% in 2015-16, with the right input, this can be expected to continue to expand and flourish in 2018.

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Top Sectors for Foreign Direct Investment in the UK, 2016-17

The newly released Gov report UK FDI Investment, Trends and Analysis: 2018 dictates growth in the value of foreign direct investment (FDI) positions held in the UK by overseas investors (FDI liabilities) exceeded that of UK FDI positions held abroad (FDI assets) in 2016.

In turn, the UK’s net FDI position falling from £50.8 billion in 2015 to £12.5 billion by 2016, the lowest net position since comparable records began in 1997.

In analysing the report, Turnerlittle.com took time to consider the projects and jobs created by FDI in the UK, identifying the 6 sectors benefitting from this type of investment the most.

To achieve this, the Inward Investment Results 2016-17 report released by the Department for International Trade was used as supplementary research, revealing total FDI projects in the UK rose by 2% in 2016-17, from 2,213 (2015-16) to 2,265. This comprises projects by “existing investors” in the UK (1,212) and projects by “new to the UK” investors (1,053.)

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New Investments (up by 9%), Expansions (down by -5%) and Mergers and Acquisitions (down by -6%) are the forms of foreign direct investment taking place in 2016-17. Further, the USA remains the UK’s largest source of inward investment – with 557 FDI projects. The rest of Europe, Middle East and Africa follows (261) as China and Hong Kong slide in third place, at 160.

Yet, the increase in total FDI projects is not mirrored in total jobs, with roles suffering a -7% fall; decreasing from 115,974 in 2015-16 to 107,898 in 2016-17. New roles fell from 82,650 in 2015-16 to 75,226 in 2016-17.

However, we can see where FDI projects are feeding a healthy workforce by comparing total projects and total new jobs in regions across the UK as noted in the table.

Turnerlittle.com found that excluding London, the South East (217), West Midlands (151) and the North West (147) hold the highest number of foreign direct investment projects. This equates to 5,432 new jobs in the South East, 6,570 new jobs in the West Midlands and 6,501 new roles in the North West, 2016-17. Evidencing FDI as an asset to the UK.

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Comparably, Turner Little also considered the sectors benefitting from FDI in the UK.

It was found the Software and Computer Services sector is number one for foreign direct investment, with 418 projects in 2016-17.

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This total is tailed by the Financial Services industry (217) and Business and Consumer Services (211.) Next, Environment, Infrastructure and Transportation, with 184 FDI projects in the UK, Creative Media (151) and Advanced Engineering and Supply Chain – with a total 146.

Lastly, the three sectors with the least FDI projects: Chemicals and Agriculture (50), Extraction Industries (49) and Aerospace (47.)

 

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