2012 Reports

Inward FDI in the United Kingdom and its policy context

Driffield, Nigel; Lancheros, Sandra; Temouri, Yama; Zhou, Ying

Over the past 30 years, the United Kingdom (UK) has performed exceptionally well in consistently attracting significant volumes of inward foreign direct investment (IFDI). Of all foreign affiliates located in the EU-27 in 2010, 15% were in the United Kingdom (more than 45,000 affiliates). These foreign affiliates employed over 3.7 million workers, representing 13% of the employed UK labor force. IFDI stock represented an impressive 48% of the United Kingdom's GDP in 2009, as well as in 2010, when it reached US$ 1.1 trillion, the second largest globally after that of the United States. IFDI flows, which declined considerably in 2008 as well as 2009 and 2010, amounted to US$ 51 billion in 2010 and were just over 20% of gross fixed capital formation. According to UNCTAD data, in 2011, IFDI stock in the United Kingdom rose to US$ 1.2 trillion and IFDI flows, to US$ 54 billion. The recent global financial and economic crisis has had a significant negative impact on the investment of foreign multinational enterprises (MNEs) and has interrupted the upward trend in UK IFDI seen till then. However, it is hoped that the continued strength and the location of the UK economy, together with coordinated policy measures by the Government, will lead to a renewed surge in IFDI.