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Foreign investment into UK firms rises by £289bn despite COVID

·Reporter
·2-min read
Foreign investment into UK firms
The value of inward FDI earnings in professional and support industries was nearly five-times higher in 2020 than in 2019. Photo: Daniel Sorabji/AFP via Getty Images

Foreign direct investment (FDI) into UK companies saw an increase in 2020 despite the coronavirus pandemic, new figures show.

According to data from the Office for National Statistics (ONS), the value of the UK’s inward FDI saw the biggest upswing, rising by 17.6% or £288.7bn ($391bn) in comparison with 2019 (+£67.6bn).

Outward FDI stocks also grew by 0.8% or £13.5bn, this rose by £119.4bn in 2019 from 2018.

The coronavirus pandemic had a slightly more negative impact on outward FDI earnings, with the total value of outward profits halving from £101.7bn in 2019 to £50.8bn in 2020.

This was not evenly spread across sectors, with manufacturing and information technology seeing a boost in outward FDI earnings over the same period.

Outward FDI earnings are the profits UK firms receive from their affiliates in other countries, which would be affected by economic restrictions in the countries where they are based.

Graph: ONS
Graph: ONS

For manufacturing, UK outward earnings in petroleum, chemicals, pharmaceuticals, rubber and plastic products rose by almost £3bn in 2020 from 2019. Meanwhile, earnings among food, beverages and tobacco sectors increased nearly £2bn higher over that period — the highest value since 2017.

Despite that, the value of inward FDI earnings rose in 2020 compared to 2019, although it was still less than 2018 levels.

The value of inward FDI earnings in professional and support industries was nearly five-times higher in 2020 than in 2019, mainly from a few firms with some reporting higher inward FDI profits over £1bn.

Graph: ONS
Graph: ONS

When comparing the value of inward FDI earnings across continents, profits with the EU dropped £14.7bn in 2019 compared with 2018, and inward profits with the Americas was £8.3bn lower.

The ONS has said that a combination of the coronavirus pandemic and changes to statistical populations and sampling methods, affected the FDI figures for 2020.

Separate figures from the ONS also show that UK-resident special purpose entities (SPE's) accounted for more than the total (120.4%) of UK flows of FDI liabilities in 2020.

SPE's also accounted for 46.0% of UK FDI debits (income on inward FDI) and 29.1% of UK FDI liabilities (inward stock of investment), and 11.9% of UK FDI assets in 2020.

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