For the UK, in common with other nations, FDI represents a vital source of capability, economic activity and jobs. The UK’s continued capacity to attract FDI remains under close scrutiny as this source of capital offers a unique insight into how foreign investors and businesses view the UK’s potential.
Last year, our research suggested that it was doing reasonably well managing the challenges posed by Brexit and ongoing technological change. This year, our report shows that the FDI market in Europe has been very challenging and that the UK has seen a reduction in FDI volumes and a decline in investor sentiment. Our analysis shows that Brexit has changed the economic situation in the UK and urgent action is needed to chart a new path to future success in this new environment.
The FDI figures for 2018 tell their own story
While the UK held onto its longstanding position as Europe’s FDI leading recipient, the number of projects it attracted in 2018 fell 13% from the previous year, against a backdrop of a 4% decline in FDI projects in Europe a whole. As a result, the UK’s share of all European projects slipped to 17% – its lowest level in the two decades we have been publishing our attractiveness surveys.
A more detailed look at the findings helps identify the challenges. The UK’s recent success in attracting manufacturing FDI came to an abrupt end with a 35% fall in the number of new factory projects in 2018.
At the same time, our figures show that the UK managed to remain the leader in attracting digital investments in Europe, but its market share of digital investments in Europe fell to 23%.