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.

Slight Increase In M&A Transactions

There were, in total, 116 domestic and cross-border transactions involving UK companies during the third quarter of 2013 according to the ONS statistical release on mergers and acquisitions. The number remains level when compared with the second quarter and there is a slight increase when compared with the 112 of same period last year.

There were 60 domestic acquisitions involving a change in majority share ownership between UK domestic companies. While the number remained similar to Q2 2013 (64) the value fell from £2.1bn in Q2 to £0.8bn in Q3.

There were 46 acquisitions of foreign companies by UK companies involving a change of majority share ownership, an increase of 39% compared with the previous quarter. The value of inward acquisitions fell considerable from £23.7bn in Q2 to £2.1bn in Q3. One significant transaction was however responsible for the spike in Q2 2013.

There were also 7 inward disposals and 3 outward disposals.

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.

Foreign Investment In UK Up To £12bn

Foreign companies invested £12bn in a total of 51 UK companies in Q3 compared with £2.7bn in 43 companies in Q2 2010. British companies invested £5bn in a total of 40 foreign companies in Q3 2010 compared with £2.4bn in 44 companies in Q2 2010. British companies invested £2.6bn in 52 UK companies in Q3 compared with £2.1bn in 91 British companies in Q2 2010.

Low Levels Of Interest In M & A

Foreign companies increased their interest in the UK from £4bn in Q3 2009 to £13.8bn in Q4. The number of transaction was more or less unchanged. Over 2009 as a whole however the value of acquisitions in UK by foreign companies was the lowest since 1993 at £30.8bn, a decrease of 41%. UK companies' interest in foreign companies decreased from £2.5bn in Q3 to £0.9bn in Q4, the lowest since records began in 1987. The total value of acquisitions by UK companies in foreign companies in 2009 as a whole was £9.9bn, the lowest since 2004. UK companies decreased their interest in UK companies from £1.9bn to 1.3bn between Q3 and Q4 2009. The total value for 2009 was £12.1bn, the lowest level since 1994.

The number of transactions in the UK by foreign companies in Q3 2009 for the £4bn was 27 and the £13.8bn in Q4 was from 26 transactions, the highest quarterly value since Q2 2008. Among the transactions taking place were the acquisition of Barclays Global Investors by Blackrock, Friends Provident by Resolution and the disposal and acquisition of Gatwick Airport. Foreign companies also disposed of 11 UK companies during the quarter. The total number of acquisitions in the UK by foreign companies in 2009 was 100 down from 252 in 2008, the lowest since 1988. A total of 78 of the 100 were direct transactions. Inward investment came mainly from Europe with 62% with 54% of the total came from EU countries, American companies accounted for 37% with the US accounting for 34% of the total and Africa, Asia and Oceania 1% each.

Transactions abroad by UK companies totalled £0.6bn in value in 2009 from £17bn in 2008. Another lowest figure since records began in 1987. Net transactions in the UK by foreign companies amounted to £24bn in 2009 from £47.4bn in 2008. Net cross-border acquisitions and disposals of UK companies totalled -£23.4bn in value.

The number of transactions abroad by UK companies was 26 in Q3 and 25 in Q4 2009 for a total value of £2.5bn and £0.9bn respectively. UK companies secured the disposal abroad of 6 companies worth £2bn in Q4 2009. Transactions taking place included the disposal of SPE S.A. by Centrica, of Aviva Australia Holdings by Aviva Plc and Balfour Beatty Plc's acquisition of Parsons Brinckerhoff Inc. The annual total of £9.9bn was from 99 transactions down from 298 in 2008, the lowest since 1987. Of the total of 99, 81 were direct transactions. The Americas were the primary destination for UK companies accounting for 50% of the total of overseas transactions, the EU accounted for 17%, Africa 16% and Asia 10%.

UK companies decreased their interest in UK companies in Q4 by 67% to £12.1bn but significant transactions included the acquisition of the Central African Mining and Exploration Company by the Eurasian Natural Resources Corporation and the acquisition of Avalon Acquisitions by Just Retirement (Holdings). There were a total of 59 transactions during Q4 2009 compared with 62 in Q3. They consisted of 39 acquisitions of independent companies and 20 by company groups that involved subsidiaries.

The total number of mergers and acquisitions in 2009 was 266 worth £12.1bn, 180 were mergers and acquisitions of indpendent companies and 86 were sales of subsidiaries between company groups.

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.