An Overview of
FDI into the UK
In 2021, the UK’s inward FDI position stood at £2,002 billion, up slightly compared to the £1,919bn in 2020. This is according to data released by the ONS.
Much of the uptick was due to an increase in foreign corporations’ proportion of UK companies’ share capital and reserves.
Figure 1 graph: Stock of FDI in the UK controlled by foreign companies, £million
United Nations (UN) data from January 2023 shows that after a relative recovery of global FDI over the course of 2021, recent economic developments have affected FDI in 2022. While Q1 2022 saw high levels of FDI, this fell back in Q2 as political uncertainty from the war in Ukraine and high inflation globally made some businesses less willing to engage in foreign investment.
Rising interest rates have acted as a deterrent for investment, making it more expensive for businesses to finance investments with debt. The data shows that cross-border M&A sales were 6% lower worldwide in 2022. International project finance values were also more than 30% lower in 2022 compared to 2021.
Despite this, the UK remains a relatively popular destination for FDI. While the completion of mergers and acquisitions (M&A) from overseas buyers fell in the last quarter of 2022, activity was stronger overall than in both 2020 and 2021. Overseas M&A activity into the UK resulted in 1,125 completed transactions last year compared to 1,104 in 2021 and 927 the year before that.
The US accounted for 324 deals in 2022 followed by France and then Sweden. Ireland was in fourth place followed by Canada, the Netherlands, Germany, Jersey, Guernsey, and Luxembourg. The manufacturing sector had a particularly strong year in 2022, with M&A activity involving UK-based manufacturers at its highest level since 2016. 1,344 UK manufacturing businesses were the target of M&A activity last year, compared to 1,285 in 2021 and 1,231 in 2020.
This suggests that post-pandemic FDI activity is proving resilient, promising further opportunities for growth and partnerships in 2023.