FDI and the UK’s economy
Foreign Direct Investment (FDI) is a critical component of economic growth for many countries.
Over the past decade, the value of inward FDI in the UK has seen significant growth. The latest ONS figures show that the UK’s inward FDI position rose by £126 billion, climbing from £1,942 billion in 2021 to £2,068 billion in 2022.
With the UK government announcing the recent International Investment Summit within the first few weeks of coming to power and the appointment of Poppy Gustafsson as the Minister of State for Investment, FDI is clearly a major part of the UK’s current growth strategy.
The summit, held on October 14 2024, showcased the UK's economic strengths in key areas such as technological advancements, infrastructure and life sciences. It secured a record-breaking £63 billion in private investments, which is expected to create nearly 38,000 new jobs across the UK.
This significant influx of investment spans various sectors, including technology, infrastructure and renewable energy, demonstrating strong global confidence in the UK’s economic stability and growth potential.
What is FDI?
Foreign direct investment (FDI) refers to cross-border flows where an investor establishes a lasting interest in a foreign subsidiary. For this to reflect a long-term interest, typically 10% or more of the organisation’s voting power must be under the control of the foreign investor. Examples of FDI include Greenfield FDI, where a new establishment is formed, and Mergers & Acquisitions (M&A), which refers to the take over of an existing business. Inward FDI is widely considered to be a key factor in promoting the domestic economy, having the potential to raise productivity, facilitate the transfer of technology and open doors for collaboration, innovation and sustainability.
FDI projects: trends by year
The number our projects is an important metric for measuring FDI and is an accurate indication of the level of trust and confidence foreign investors have in the UK. Considering the projects in FDI is crucial to understand the diversity, sustainability, and long-term economic impact of investments on the host country's development.
Source: Department for Business and Trade
The impact of FDI on employment
Data relating to jobs are also encouraging.
According to the latest statistics from the Department for Business and Trade (DBT), 1,555 projects landed in the UK during the 2023/24 financial year as a result of FDI, resulting in 71,478 new jobs being created.
Out of these projects, 1,023 represented new investment, with 357 involving an expansion of an existing investment and the remainder accounted for by mergers and acquisitions (including joint ventures).
The new National Security and Investments Act
When the National Security and Investments Act came into force at the start of last year, it was anticipated that around a third of all corporate transactions would be impacted. But, in reality, it’s been around 40%. We look at how the NSIA’s scope extends well beyond normal corporate sale and purchase or investment transactions.