United Kingdom - Foreign investment

In 2000 and 2001, Forbes magazine rated London Europe's top business city. London is the headquarters for 130 of the top 500 global companies. With few exceptions, the United Kingdom does not discriminate between nationals and foreign individuals, and imposes few impediments to foreign ownership. Public-sector procurement policies seek best value and best practice regardless of national origin. The privatization of state-owned utilities is ongoing, and offers additional opportunities for foreign investment.

Over the 10-year period 1992 to 2002, foreign direct investment (FDI) inflow totaled $484.5 billion, the second highest in the world (after the United States by some distance: the US 10-year total was $1.3 trillion). In 1997, FDI inflow rose 60% over 1996 to $33.3 billion, placing the United Kingdom third in the world, behind the United States and China. FDI inflow peaked in 2000 at $116.6 billion (a fourth-place finish, behind the United States, Belgium-Luxembourg, and Germany), and then fell to $62 billion in the economic slowdown of 2001. Estimates for 2002 are for a decline of FDI inflow to $25 billion, reflecting both the bursting of the dot-com bubble and the 60% worldwide decline in FDI following the 11 September 2001 terrorist attacks in the United States. "New economy" businesses in 2003 were more likely to be consolidating under heavy debt burdens than looking to expand through cross-border mergers and acquisitions.

The United Kingdom's outward FDI has normally exceeded its inward flow. Before World War I, British overseas investments were valued at more than $30 billion (adjusted into 1960 dollars). Even in the period between the two world wars, British foreign investments remained remarkably high. After World War II, the United Kingdom, having given up many of its overseas dependencies and having incurred enormous foreign debts to wage the war, had to liquidate a large part of its overseas holdings. As its economy recovered, the United Kingdom again began to invest overseas. From 1955 to 1964, gross total private capital outflow was at an annual average of £300 million. The abolition of exchange controls in 1979 also encouraged overseas investment. By 1985, private British investment overseas (direct and portfolio) had risen to £76.7 billion ($101 billion). In 1994, outward FDI amounted to £100 billion ($154 billion). In 1997, the outflow was $43.7 billion. The United Kingdom is the largest source of FDI in the United States, and in 2000, the inflow amounted to almost $37 billion. However, in 2001, the flow was a negative divestment of over -$16 billion out of the United States.

User Contributions:

Comment about this article, ask questions, or add new information about this topic: