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Foreign investors back Brexit Britain

The figures showed the UK drove the bulk of the 17pc increase in FDI inflows to the European Union. - Telegraph
The figures showed the UK drove the bulk of the 17pc increase in FDI inflows to the European Union. - Telegraph

Britain is the number one destination in Europe for foreign direct investment, according to figures that revealed a surge in inflows to levels not seen since before the financial crisis.

In a vote of confidence in Brexit Britain, UK FDI inflows soared to $253.7bn (£197bn) in 2016, up from £33bn the previous year, according to the Organisation for Economic Co-operation and Development (OECD).

This represents the highest level of inflows since 2005.

The figures also showed the UK drove the bulk of the 17pc increase in FDI inflows to the European Union.

Britain also climbed above Ireland, Switzerland, the Netherlands and France to become the top destination for inward FDI across Europe and second only to the US in the OECD club of 35 rich economies.

Shell - Credit: AP
The OECD's FDI figures included Shell's takeover of BG Group, which was announced in 2015 but not recorded in the data until the deal completedCredit: AP

The OECD highlighted that the massive surge in FDI inward flows to the UK was driven by a handful of mega deals.

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This includes ABInBev’s £79bn takeover of SAB Miller to create the world’s largest beer company, oil major Shell’s £34bn acquisition of BG Group, and Softbank’s £24bn purchase of ARM Holdings, two of which were announced well before the Brexit vote.

However, the data also showed the UK remained the top FDI destination in Europe even when these deals were excluded.

Chart: The UK has continued to attract big investments post-Brexit

Maria Borga, senior statistician at the OECD’s investment division, said the sharp increase was a sign of “confidence in the economy”.

While she said the fall in the value of the pound was likely to have been a factor behind the increase in investment, she said Britain’s underlying appeal also played a role.

“The data show the UK remains attractive,” said Ms Borga.

“The impact of the exchange rate cuts both ways because on the one hand it makes it cheaper for companies to buy, but on the other hand the earnings that they make there are worth less when they come back [in the local currency].

"So it could be an indication that [buyers] think that sterling will recover in the future, in which case you’re buying cheap but hoping that the earnings that you’ll get in the future will be worth more.”

Foreign direct investment – which measures physical investments made by a company in a foreign country rather than stakes or positions in foreign companies - is important for the UK economy for job creation, growth and productivity, which lifts living standards.

Overseas investment can also help to drive competition and make companies more efficient.

While the Brexit vote last June led to fears that investment could dry up amid uncertainty over the UK’s future trading relationship with the EU, a string of companies have since announced plans to expand in the UK.

Qatar recently said it would pump an additional £5bn into the UK to invest in infrastructure. The Qataris already own more property in London than the Queen.

The weaker pound has also had a direct impact on mergers and acquisitions activity, forcing AB InBev last year to raise its offer for SAB Miller by £1 a share.

In a reflection of China’s growing influence in the world, the OECD data also showed outward investment by the Chinese exceeded their inward investment for the first time on record.

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