This note defines FDI and looks at recent trends in UK and world FDI

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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.
  • Outward FDI measures investments made by domestic companies in a foreign economy.

FDI statistics measure two different concepts – flows and stocks:

  • Flows measure annual levels of investment on a net basis.
  • Stocks record the total book value of all existing FDI, inward or outward.

FDI in the UK

In 2018:

  • The value of foreign direct investment into the UK, i.e. inward flows, into the UK were worth £49.4 billion, down from £80.6 billion in 2017.
  • The value of inward FDI in the UK (i.e. the stock of FDI invested in the UK) was £1.5 trillion, up from £1.4 trillion in 2017.
  • The UK’s outward FDI flows (i.e. investments made by UK companies in companies abroad) were worth £6.3 billion, down from £99.5 billion in 2017.
  • The value of the UK’s outward investment position abroad (i.e. the stock of UK FDI invested abroad) was £1.40 trillion, up from £1.37 trillion in 2017.

World FDI

In 2018:

  • World flows of inward FDI fell 13% to $1.3 trillion from $1.5 trillion in 2017; this follows a record high of $2.0 trillion in 2015.
  • The USA had the highest level of inward investment at $252 billion; the UK ranked 6th in the world.
  • The total value of inward FDI stocks was $32.3 trillion – the USA accounted for just under a quarter of the total, the UK for 6%.
  • The USA was also the largest holder of stocks of outward FDI. The UK was the fifth largest holder of outward FDI stock, accounting for 5% of the world total.

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