UK Second After France in Attracting Foreign Investment in Europe

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The UK lost out to France as the most popular European destination for foreign investors for the second year in a row, amid disruption from Brexit and the coronavirus pandemic. During 2020 the UK secured 975 inward investment projects compared with France’s 985 projects, according to accountancy firm EY. The UK had dominated foreign direct investments (FDIs) into Europe for the first 18 years of the annual survey of foreign investments. However, the UK lost its crown for the first time to France in 2019 as businesses grappled with uncertain prospects for a trade agreement between the UK and the EU. A last-minute deal was struck on Christmas Eve of 2020, only a week before the UK’s departure from the EU’s single market. Attracting foreign investment to a “global Britain” is a key aim of the Conservative government, whose leaders argued that leaving the EU would make the UK a more attractive destination. The government has set up an Office for Investment to attract inward investment but it has also made it easier to intervene in foreign takeovers on national security grounds. Evidence for significant Brexit benefits has so far been limited – although comparative analysis has been made much more difficult by the global pandemic disruption. Some experts have already detected Brexit effects on trade, which is linked to foreign investments. Academics at Aston University in Birmingham last month published research suggesting that Brexit caused services exports to fall by £114bn between 2016 and 2019. EY said that the decline in investment from countries such as Japan suggested that “the appeal of the UK as an export base is much less than it was” because of Brexit. Upturns in investment from other countries outside the US, EU and Japan may not be “of a scale to compensate for lower activity in the traditional base”, the report said. However, the pandemic caused a big drop in international investments across the world: the United Nations’ trade body found that global FDI fell by 42% in 2020 – its lowest level in 26 years last year, according to research by Simon Evenett, the professor of international trade at Switzerland’s University of St Gallen, and Johannes Fritz of the St Gallen Endowment for Prosperity through Trade. Examples of big foreign direct investments announced in 2020 were the Japanese carmaker Nissan’s programme to upgrade its Sunderland car factory, an expansion by the online retailer Amazon and data centres for the Japanese technology company NTT. The report also found that the outlook for UK investment may have improved thanks to the speed of its Covid-19 vaccine rollout in comparison with rivals, Kay said. A survey of 570 international investors found that the UK was seen as Europe’s most attractive investment location, a rapid turnaround from the autumn when it lagged behind France and Germany.