(Bloomberg) — The UK has seen investment from overseas collapse in the past two years, underscoring its diminishing allure as a global business destination since Brexit, revised United Nations data show.
FDI inflows were negative in 2021, meaning foreign firms pulled more investment from the UK than they put in. Inflows rebounded in 2022. However, at just $14.1 billion, they were were less than a fifth of the average in the three years prior to the pandemic.
The report published Wednesday shows the impact on sentiment toward the UK as domestic and European businesses adapted to new trade costs and hurdles stemming from their downgraded trade relationship.
The UN Conference on Trade and Development statistics are a closely watched bellwether of how the UK is performing since rupturing trade ties with the EU at the start of 2021. That’s because FDI generally helps raise national productivity, economic output and wages.
The sharp reversal of investment in 2021 coincided with the spread of the Covid-19 omnicron variant, which spurred health-related lockdowns in Britain during much of the year.
Unctad had projected positive investment inflows for 2021 in last year’s World Investment Report. But the agency revised its data downward this year to better reflect modifications to statistical models made by the UK Office for National Statistics.
Last year, France overtook Britain in new FDI projects for the first time in 20 years, according to EY’s 2023 UK attractiveness survey. The accounting firm said the overall decline in investment projects was largely due to a significant fall in digital technology, Britain’s leading sector for FDI.
Covid-19 vaccine producer AstraZeneca Plc and carmaker Stellantis NV have blamed government policies for forcing them to look abroad for factory sites.
The London School of Economics has predicted that new restrictions on the UK’s ‘single passport’ privileges following Brexit would lead to big cuts in activity in the financial services industry, which has been among the largest recipients of FDI inflows.
The sector still lacks equivalent access to the EU market despite last month’s memorandum of understanding aimed at coordinating cross-border regulation for the financial industry.
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