FDI and The UK’s Sectors
Financial sector dominates inward investment
The UK’s largest FDI position can be found in financial services, with £596bn attributable to that industry. This is equal to around 30.1% of all inward FDI in the UK. The total stock of inbound FDI for financial services increased by £43bn between 2020 and 2021. 39% of this rise was from the USA. Foreign-owned banks with offices in the UK makes up the large proportion of the FDI in this sector.
The industry with the second-largest stock of inward FDI is the professional, scientific, and technical services industry.
The total stock of investment in this sector currently amounts to £279bn. This is significantly smaller than the stock found in the financial services industry, but still up on 2020 levels. The USA was also the biggest contributor to the rise in the stock of FDI in this sector.
Other services, which include real estate or hospitality services, recorded the third-largest investment position in 2021, at £209bn. This is followed by the retail sector in fourth place, though the sector saw its position fall compared to 2020, by £59 million.
Financial Services
⇧ 7%*
Professional, scientific and technical services
⇧ 1%
Other services
⇧ 20%
Retail and wholesale trade, repair of motor vehicles and motor cycles
↔ 0%
Information and communication
⇩ -11%
Administrative and support service activities
⇧ 79%
Food products, beverages and tobacco products
⇧ 12%
Transportation and storage
⇩ -3%
Electricity, gas, water and waste
⇩ -2%
Metal and machinery products
⇩ -16%
*All percentages compared against 2020 values
Looking at the number of projects being delivered as a result of FDI, software and computer services enjoys the most, with 304 – up from 264 in the previous year. With a market value of $1 trillion, it’s no surprise that the UK is prioritising digital technology – and the figures suggest that the country is leading global innovation.
According to recent government statistics released at the end of 2022, the UK’s tech sector retains its number 1 position in Europe and number 3 position worldwide.
Reporting on the boom in the industry over the past ten years, Tech Nation reports that: “Based on projections, [the sector in the UK] will be worth $2.6tn if the momentum gathered over the last decade is maintained for the next… In London alone, venture investment increased from $100m in 2010 to $25bn in 2021 – firmly establishing London as the Silicon Valley of Europe and the UK as a global center of innovation and venture capital.” As businesses globally continue to prioritise digital advancement, the UK has an excellent opportunity to attract investors into this sector and continue its success story of the past decade.
Software and computer services is followed by the environment, infrastructure and transportation sector with 170 inward FDI projects, supporting a total of 10,980 jobs in the UK. Projects in this sector increased by 45% in 2021-22, highlighting the growing importance of the environmental sector. Meanwhile, the renewable energy sector also saw a 140% rise in the number of projects, reaching 60 in 2021-22.
This shouldn’t come as a surprise. Countries and businesses are increasingly working towards a low-carbon economy and environmental sustainability. As a result, these sectors are attracting investment as sustainability becomes more important to international investors. Businesses which have clear ESG objectives are more likely to be attractive to investors.
Figure 3: Top 10 sectors for FDI projects in the UK, 2021/22
Figure 3: Top 10 sectors for FDI projects in the UK, 2021/22
Key sector insights
