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Summary

Foreign direct investment (FDI) is defined as investment in an enterprise operating in a foreign economy, where the purpose is to have an ‘effective voice’ in the management of the enterprise.

In FDI statistics, an ‘effective voice’ is owning 10% or more of a company; any investment below this is counted as ‘portfolio’ investment and not included in FDI statistics.

FDI can be either inward or outward:

  • Inward FDI measures investments made in a country from another country – for example investment from a foreign country into the UK.
  • Outward FDI measures investments made by domestic companies in a foreign economy – for example investment from the UK into a foreign country.

FDI statistics measure two different concepts – flows and stocks.

  • Flows measure annual levels of investment on a net basis. For example, in the UK, inward flows would measure foreign companies’ investments in the UK, while outward flows would measure investments made by British companies abroad.
  • The stock measure records the total book value of all existing FDI, inward or outward at the end of a given period, rather than being a sum of investment over time.

This briefing examines recent trends in UK and world foreign direct investment (FDI) using data from the Office for National Statistics (ONS), United Nations Conference on Trade and Development (UNCTAD) and Department for Business and Trade.

UK FDI

In 2022:

  • The value of foreign direct investment into the UK, i.e., inward flows, into the UK were worth £22.9 billion, down from £43.1 billion in 2021.
  • The value of inward FDI in the UK (i.e., the stock of FDI invested in the UK) was £2.1 trillion, up from £1.9 trillion in 2021.
  • The value of outward FDI flows (i.e., investments made by UK companies in companies abroad) was £78.7 billion, compared to £61.4 billion in 2021.
  • The value of the UK’s outward investment position abroad (i.e., the stock of UK FDI invested abroad) was £1.9 trillion, up very slightly from £1.7 trillion in 2021.

World FDI

In 2023:

  • The value of world inward flows fell to $1.3 trillion, from $1.4 trillion in 2022. The value of world inward FDI flows fell sharply in 2020, from $1.7 trillion in 2019 to $1.0 trillion in 2020, as the covid-19 pandemic and related lockdowns, which slowed existing investment activity. Levels of world inward FDI flows have generally increased since 2020 but have remained below 2019 levels.
  • The USA maintained its position as the world’s largest recipient of inward FDI flows, accounting for a quarter of world inward investment flows.
  • The USA is also the world’s largest investor abroad, accounting for just under a quarter of outward FDI flows.

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