FDI and the UK’s economy
Foreign Direct Investment (FDI) is a critical component of economic growth for many countries.
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 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.
The earnings generated from this stock of FDI are considerable, and the latest statistics suggest that the UK economy benefitted by £97.9 billion in 2022 – increasing by £22.8 billion from £75.1 billion in 2021.
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.
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
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).