UK Inward Investment At All Time High

The UK's International Investment Positions (IIP) were published recently by the ONS. Inward investment reached a record high of £936bn in 2012 and outward investment stood at £1,088bn, similar to the levels of 2011. Inward investment means investment in the UK by foreign companies and outward investment means investment abroad by UK companies.

UK companies net investment flows overseas decreased from £60.1bn in 2011 to 26.5bn in 2012. Investment flows to Europe show a disinvestment of £0.7bn in 2012, quite a decrease from the £27.3bn in the previous year. Net earnings from overseas investments by UK companies decreased from £100bn in 2011 to £80.2bn in 2012.

Foreign companies continued to increase their investment in the UK during 2012. Net investment flows increased from £28.9bn in 2011 to £35.4bn in 2012. Net earnings by foreign companies investments in the UK decreased slightly from £44.4bn in 2011 to £42.7bn in 2012.

UK FDI statistics are produced in accordance with international standards set by OECD and IMF and their definitions of FDI and balance of payments respectively. FDI estimates are important for measuring the UK balance of payments and they are used by a number of Government departments for briefing and policy purposes. International organisations like Eurostat, UNCTAD, OECD and the IMF also use the FDI figures for policy, analysis and negotiations and the estimates are also widely utilised by commercial companies, academics and independent researchers.

UK FDI Continues To Increase

Companies from the UK have continued to increase their net investment overseas to give the highest figure since 2008 for 2011. Inward investment flows to the UK however continued to fall to reach £31.9bn the smallest since 2004. Outward and inward investment positions increased to reach record highs of £1098.2bn and £766.2bn respectively in 2001. Net earnings from outward investment reached £101.6bn the highest since records began (1958). Net earnings from direct investment are recovering from the falls of 2008. Earnings reached £37.6bn in 2010 and £43.6bn in 2011. Net investment overseas is possibly a reflection of strong growth in emerging markets like China and India.

Global FDI Rises But Financial Turmoil Slows Growth

Inflows of global foreign direct investment (FDI) rose by 2% in the first half of 2011 compared with the second half of 2010 according to the latest Global Investment Trends Monitor released by UNCTAD. The increase maintains the 5% moderate recovery of 2010.

The effects of the financial crisis however are precipitating a slowing down of growth in FDI according to preliminary estimates of cross-border mergers and acquisitions and greenfield investment. The outlook is predicted to remain optimistic with FDI flows expected to be close to pre-crisis levels over the next twelve months. The emphasis on crisis management is making policy makers more cautious diverting attention away from the need for more private investment to generate growth and jobs.

In the first half of 2011 more than half of global FDI was directed towards developing and transition economies as transnational corporations are still directing their investment to emerging markets. Developed economies experienced a 4% decline in FDI in the first half of 2011.

Foreign Direct Investment 2009

Foreign direct investment (FDI) flows abroad by British companies totalled £21.2bn in 2009 down £78.1bn on 2008. It was the smallest net outward flow since 1994. The level of FDI by British companies at the end of 2009 was £1029.7bn down from a previous high of £1073.6bn at the end of 2008. Earnings from FDI by British companies were almost unchanged at £69.6bn in 2009.

Foreign companies invested £45.7bn in the UK in 2009 down £3.2bn on 2008 and the smallest inward flow since 2004. The level of FDI in the UK was £653.6bn from £660.4bn in 2008. Earnings by foreign companies increased by £23.4bn to £26.5bn in 2009.

The majority of the £21.2bn of flows invested in foreign companies was in Europe (£14.4bn) follwed by Africa (£6.6bn) and Asia (£5.5bn). Most of the earnings in 2009 were also made in Europe (£35.1bn). Europe also accounted for most of the £45.7bn invested in the UK (£27.5bn) follwed by the Americas (£20.6bn) while the Americas made the most earnings (£17.7bn).

UK FDI Over A Trillion

Foreign direct investment (FDI) by UK businesses in 2008 increased by £123.2bn to over a trillion for the first time. The International Investment Position was £1039.5bn at the end of 2008. Earnings from FDI totalled £73.3bn in 2008 nearly £21bn lower than 2007 and the lowest since 2004. Inward investment in 2008 was £43.4bn the lowest since 2004. Earnings of foreign companies in the UK fell by £39.4bn to £5.8bn in 2008, the lowest since 1991. Outward investment in 2008 was £85.8bn well down by £73.4bn on 2007 total of £159.1bn.