France and Germany closing gap with UK on foreign investment

A survey by Ernst & Young (EY) has found that among European countries the UK’s market share in foreign direct investment projects fell for the second successive year in 2017, and was likely to suffer a further decline as investors said they favoured Germany for the future, followed by France.

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The UK remains Europe’s top destination for inward investment, but its star is waning as Brexit uncertainty allows Germany and France to close the gap, reports The Guardian.

Last year the UK attracted 6% more foreign direct investment (FDI) projects that the previous year, according to figures compiled by EY in a survey of 450 global investors, but fell behind France, which grew by 31%, and the European average growth rate of 10%.

EY said the UK’s market share fell for the second successive year in 2017 and was likely to suffer a further decline as investors said they favoured Germany for the future. France was in second place, supported by the “Macron effect”, and the UK came third.

The UK attracted 1,205 FDI projects in 2017 compared with France’s 1,019.

Britain enjoyed a 22% boost in foreign investment into digital enterprises, but this compared with an average 33% rise across Europe.

Investor concerns over Brexit were felt most in financial services, business services and a decline in the number of firms opening headquarters in the UK.

EY said the figures contrasted with OECD and United Nations data for the UK that showed a collapse in FDI between 2016 and 2017 of more than 90%. However, the OECD and the 2018 UN Conference on Trade and Development (Unctad) report includes mergers and acquisitions, which soared ahead of the Brexit vote only to collapse in 2017.

EY’s chief economist, Mark Gregory, said his firm’s report focused on projects rather than the purchase of shares in UK businesses.

He said: “Once again we find evidence of an economy in transition with individual sectors behaving in different ways in response to changes in the business environment.”

Gregory said the services sector was the first to delay or switch investment plans while the manufacturing sector, which tends to operate over longer timescales, had proved slower to react to the referendum vote.

Read more of this report from The Guardian.

 

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