2012 Reports

Outward FDI from the United Kingdom and its policy context

Driffield, Nigel; Temouri, Yama; Zhou, Ying

The United Kingdom consistently has ranked among the biggest investor economies in terms of outward foreign direct investment (OFDI). However, the recent financial and economic crisis has had a strong negative effect on OFDI from the United Kingdom. OFDI flows fell from their peak in 2007 (US$ 272 billion) to their lowest level of the decade in 2010 (US$ 40 billion). This sharp decline in OFDI flows was reversed in 2011, with flows recovering to around US$ 107 billion. The OFDI stock of the United Kingdom fell by 17% in 2008 compared with that in 2007. However, by 2011 the country’s OFDI stock had recovered some of the lost ground and was only 6% lower than at the peak of 2007. With regard to FDI policy, while the United Kingdom Government has long supported inward investment with general and specific measures, and systematically supported exporting, it has not either supported or discouraged outward FDI for at least 30 years. As United Kingdom OFDI is diversified both across industries and globally, it may be advisable in the current economic climate for the Government to increase its support to outward FDI in order for United Kingdom firms of all sizes to reap the benefits of overseas markets.