Too Simplistic To Attribute All Changes To Brexit, Says Report

Brexit is having some tangible impacts on foreign direct investment (FDI), but it’s important to look at other economic factors before attributing changes to the uncertainty caused by the UK’s decision to leave the EU - says a new report.

According to an FDI review produced for Irwin Mitchell by the Centre for Economics & Business Research (Cebr), many major companies have made announcements about their operations in the UK which demonstrate a more tangible effect of Brexit. 

It says, however, that it is too simplistic to claim that all FDI announcements are because of Brexit, or that the UK is no longer an attractive place to invest.

For example, although Jaguar Land Rover decision to pause its sites across the West Midlands between April 8th and April 12th are attributable to Brexit, Nissan’s decision to move production to Japan also reflects the waning demand for diesel vehicles in Europe coupled with the fast growing Asian market.

It also cites Norway’s sovereign wealth fund which has around $1 trillion of assets. This fund has recently indicated that it will increase its investment in the UK, stating that short-term political developments do not change their long-term view of the UK as a destination for investment. 

Expert Opinion

“Brexit negotiations are at a crucial point now and hopefully by the end of this month there will be far more clarity on how we will leave the EU. The UK continues to be a highly attractive place in which to invest and I’m confident that FDI will increase over the next year.” Bryan Bletso - Partner

The report also highlights some of the latest data on foreign direct investment (FDI) into the UK.

- US investors by a considerable margin have a larger presence in the UK than investors from any other country in terms of the stock of assets held. 

- Collectively though the EU holds a larger stock of UK assets than US investors. 

- The stock of UK assets held by EU investors fell by £124 billion between 2016 and 2017. 

- 28% of the total stock of UK assets owned by foreign entities are portfolio investments, equating to over £3.1 trillion of capital. 

- Nearly two thirds of UK assets held by Irish investors are portfolio investments, where the investor has less than a 10% ownership of the recipient firm. Portfolio investments are far more liquid than direct investments, meaning that there is a higher risk of capital outflows. 

The full report can be downloaded here