How can the UK recover from FDI blow?

A new report has indicated that Foreign Direct Investment (FDI) heading to the UK has more than halved last year, as the value of foreign companies’ investment in the UK fell by 57% to $19.7 billion, down from $45.4 billion in 2019. Meanwhile, Government statistics show that India is the UK’s second biggest backer, and over 52% of all FDI heading from India comes to British shores. FDI output from India has tripled in the last year according to the Reserve Bank of India – showing that as India experiences its remarkable economic boom, the UK is set to benefit; and this looks likely to become more fruitful as both countries work towards a free trade agreement.

The figures, compiled by MoneyTransfers.com using data from the Organisation for Economic Co-operation and Development, reflect the amount of investment in or profits made by foreign companies in a certain country. It showed that Britain was the 12th most popular nation for foreign investors behind countries such as Germany, Mexico, India, Sweden, Canada and Brazil.

China was the single largest recipient of foreign capital, beating America for the second time ever – the first being in 2014. The pandemic appears to have accelerated the shift to Asia, as India was the third largest recipient of foreign capital as inflows rose 27% to $64 billion.

Nayan Gala, founder of JPIN VCATS, discusses why India could be a key partner for the UK’s FDI:

“It hasn’t been an easy year and a half for anyone, and this has been reflected into the FDI stats – with investment coming to the UK halving. Inversely, FDI heading to Asia has boomed – with Chinese and Indian growth leading the charge. We don’t think this will last too long, as investments and IPOs in the British tech industries have boomed and 2021 is looking to be a much better year, however it is food for thought – and will make leaders and businesses want to future-proof their economies by collaborating with the Asian giants.

India could be a key benefit to the UK – as India invests heavily into Britain, and more growth on the subcontinent means more investment overseas in general, and therefore to the UK. Furthermore, a free trade agreement, which we could see come to fruition this year, can only increase the attractiveness and therefore the total amount of investment.”