Table of contents
- Main points
- Your views matter
- Overview
- Net FDI flows abroad by component and industry
- Net FDI international investment positions abroad by component and industry
- Net earnings from FDI investment abroad by component and industry.
- Net FDI flows into the UK (inward) by component and industry
- Net FDI international investment positions in the UK (Inward) by component and industry
- Net earnings from FDI investment in the UK (inward) by component and industry
- FDI economic commentary
- Background notes
- Methodology
1. Main points
Net flows of Foreign Direct Investment (FDI) abroad (outward investment) decreased from £27.4 billion in 2012 to £17.2 billion in 2013
The UK international investment position abroad (outward Investment) fell from £1,043 billion in 2012 to £1,035 billion in 2013, the second consecutive fall from a peak of £1,091 billion in 2011
Net earnings from direct investment abroad by UK companies (outwards earnings) fell from £79.9 billion in 2012 to £68.7 billion in 2013
New flows of FDI into the UK (inward investment) fell from £44.6 billion in 2012 to £43.7 billion in 2013
The international investment position held by foreign companies in the UK (inward investment) increased from £960 billion in 2012 to £975.4 billion in 2013. This has increased consistently since 2004, when the international investment position held by foreign companies was £363.4 billion
Net earnings from direct investment in the UK (inward investment) increased from £48.9 billion in 2012 to £54.3 billion in 2013, and have been on an upward trend since the 2008-09 economic downturn
2. Your views matter
We are constantly aiming to improve this release and its associated commentary. We would welcome any feedback you might have and would be particularly interested in knowing how you make use of these data to inform our work. For further information please contact us via email: fdi@ons.gov.uk or telephone Michael Hardie on +44 (0)1633 455923.
Back to table of contents3. Overview
Data on Foreign Direct Investment (FDI) flows, positions and earnings involving UK companies are presented in this release. The investment figures are published on a net basis, that is, they consist of investments minus disinvestments. Investments can include acquisitions of assets or shares and disinvestments can include the disposal of assets or shares.
Estimates are published for 2003 to 2013 – the 2012 estimates are revised and 2013 published for the first time. In previous years this information has been published separately – Foreign Direct Investment (December) and Foreign Direct Investment MA4 (February). The latter being a repeat publication with an additional industry and component breakdown.
The Office for National Statistics (ONS) recently implemented changes to the Balance of Payments (BoP) and International Investment Position (IIP), which are required to meet new international standards and guidelines as a result of the implementation of the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). A summary of these are outlined in Methodological changes to the measurement of the Balance of Payments as a result of the introduction of BPM6.
This statistical bulletin includes information on a direction principle (2003-2013) for continuity of presentation, in response to user feedback. These data are based on the Annual Foreign Direct Investment Survey.
Data on an asset liability principle (2012-2013) will be published alongside the Balance of Payments (30 June). These data, which are also based on the Annual Foreign Direct Investment Survey, will be used to benchmark the data currently published for 2013, which are based on the Quarterly FDI Survey. This benchmarking process will be carried out alongside the release of the 2013 asset/liability data in June.
This approach has been taken to provide users with the longest time series possible for the detailed industry and country breakdowns, which will only be available for 2012 and 2013 when the asset/liability data are published in June. Also to remain coherent with the Balance of Payments benchmarking process, this will be undertaken at the same time.
ONS will consult regarding the publication of asset/liability and directional data over the next year, with a view to amend the next Annual Foreign Direct Investment publication.
FDI net investment flows (Table 1.1)
The net flow of direct investment abroad by UK companies decreased from £27.4 billion in 2012 to £17.2 billion in 2013, the lowest flow recorded since before 2004. Investment peaked at £159.1 billion in 2007 before falling notably in 2008 (£99.3 billion) and 2009 (£25.1 billion), since then the flow of investment aboard by UK companies has remained broadly stable, with average annual investment of £31.1 billion over the period.
Net investment flows into the UK decreased slightly from £44.6 billion in 2012 to £43.7 billion in 2013. These figures are higher than inward investment in 2010 (£32.1 billion) and 2011 (£28.9 billion), but below the average annual investment between 2005 and 2009 (£74.5 billion).
FDI net international investment positions (IIP) (Table 1.2)
The net position of international investment held abroad by UK companies decreased from £1,043.4 billion in 2012 to £1,035 billion in 2013, the lowest net position of direct investment aboard since 2009 (£981 billion).
The net position of direct investment held in the UK by overseas companies at the end of 2013 was estimated at £975.4 billion, an increase compared with £960.1 billion reported in 2012. The level of inward investment has increased considerably since 2004, when direct investment in the UK by overseas companies was £363 billion.
FDI net investment earnings (Table 1.3)
Net earnings from direct investment by UK companies abroad decreased from £79.9 billion in 2012 to £68.7 billion in 2013. This was the lowest level of earnings since 2009, when earnings from direct investment held abroad was £67.9 billion.
Net earnings from FDI in the UK increased from £48.9 billion in 2012 to £54.3 billion in 2013. Net earnings have followed an upward trend since the 2008-09 economic downturn, when net earnings from FDI in the UK fell dramatically to £3.1 billion in 2008 from £45.1 billion in 2007.
Foreign direct investment abroad by geography and industry (Table 3.2)
In 2013 just under three-quarters (74.4%) of the international investment position held abroad by UK companies was in Europe and USA. This grew in the USA from £190.4 billion in 2012 to £241.2 billion in 2013, but fell in Europe from £572.3 billion in 2012 to £528.9 billion in 2013. The investment position held by UK companies in Asia and Australasia & Oceania increased, while there was a small fall in the UK’s investment position in Africa.
The 2013 increase in investment position in the Americas was supported by a positive investment flow of £28.3 billion and the fall in Europe by a negative investment flow of £17.6 billion. The former reflects a £10.1 billion investment in the Financial Services industry. There was a positive investment flow of £6.9 billion to Australasia & Oceania, but the investment position only increased by £2.2 billion, suggesting that the stock of assets held by UK companies fell in value. There was also a disinvestment of £1.1 billion in Asia; however the investment position increased by £6.9 billion, due to an increase in value of the assets held by UK companies.
Net earnings from the direct investment held by UK companies abroad varied noticeably by region. In Europe, earnings fell slightly by £0.7 billion to £26.7 billion between 2012 and 2013; a notable fall in financial services was partially offset by mainly smaller gains elsewhere. Earnings in The Americas and Asia both fell from £24.1 billion to £19.3 billion and £17.0 billion to £14.0 billion respectively. The latter reflects a fall in earnings in the petroleum, chemicals, pharmaceuticals, rubber, plastic products industry, where earnings fell from £2.0 billion in 2012 to negative £1.9 billion in 2013.
Foreign direct investment in the UK by geography and industry
The net position of direct investment in the UK by overseas companies has increased consistently since 2003, with all regions contributing, albeit at different rates. The most notable contributions came from Europe and the Americas; together these accounted for nearly 90% of the inward investment position in the UK in 2013. The European investment position, however, did fall slightly from £553.8 billion in 2012 to £547.7 billion in 2013, while the investment position held by the Americas increased from £305.1 billion in 2012 to £319.3 billion in 2013. The inward investment position from Asia remained broadly stable, while there were increases in the investment position held by companies from Australasia & Oceania and Africa.
Despite the investment position in Europe falling, there remained a positive investment flow in 2013 of £12.5 billion, suggesting that the value of the assets held by European companies in the UK fell compared with 2012. In contrast the increase in the investment position in the Americas was supported by an investment flow of £14.3 billion in 2013. The flow of investment from Asian into UK companies decreased from the previous year but remained positive, which when analysed alongside the broadly stable investment position shows that some assets held have fallen in value.
Earnings received by foreign investors in the UK increased from £48.9 billion in 2012 to £54.3 billion in 2013. The largest contribution came from Europe (£24.0 billion in 2012 to £31.5 billion in 2013).
Rate of return analysis
Another useful Foreign Direct Investment indicator is the rate of return, which is calculated as earnings divided by positions.
Overall, the implied rate of return for outward direct investment abroad by UK companies fell between 2012 (7.7%) and 2013 (6.6%), and has only been lower on one occasion (2008 – 6.5%) since 2004. In contrast, the rate of return for foreign companies investing in the UK increased between 2012 (5.1%) and 2013 (5.6%). This compares favourably with the rate of turn experienced during the 2008-09 economic downturn, but not favourably to the rate of return prior to this period.
Back to table of contents4. Net FDI flows abroad by component and industry
Component analysis (Table 1.1 and Table 2.2)
Net FDI flows are made up of three primary components: reinvested earnings (sometimes known as unremitted profits); equity capital transactions (including mergers, acquisitions and disposals); and other capital transactions (including inter-company loans).
Figure 1: FDI net flows abroad by UK companies (outward)
Source: Office for National Statistics
Download this chart Figure 1: FDI net flows abroad by UK companies (outward)
Image .csv .xlsSummary
Figure 1 shows total net direct investment abroad decreased from £27.4 billion in 2012 to £17.2 billion in 2013, which reflects a fall in reinvested earnings, which fell from £20.2 billion in 2012 to just under £1 billion in 2013. This was partially offset by other capital transactions, which increased from £6.3 billion in 2012 to £7.5 billion in 2013.
Services
UK net investment abroad involving services industry companies increased in 2013 with the largest contributions coming from Europe and the Americas. In Europe, investment decreased most notably in the retail & wholesale trade, repair of motor vehicles & motor cycles and professional, scientific & technical services industries. There was also an increase in investment in the financial services industry, from a disinvestment of £4.8 billion to an investment of £0.8 billion, which reflects increased investment by Luxembourg (+£5.9 billion), Sweden (+£2.1 billion), and the Netherlands (+£1.2 billion). However, this was partially offset by a disinvestment in the financial services industry in France (-£7.2 billion), Switzerland (-£3.3 billion), and Ireland (-£1.4 billion).
Production
UK net investment abroad to the production industry fell for the third consecutive year, from £22.0 billion in 2011 and £14.7 billion in 2012, to a disinvestment of £10.8 billion in 2013. The disinvestment in 2013 was mainly due to the petroleum, chemicals, pharmaceuticals, rubber, and plastic products industry (£11.7 billion) in Europe. Other notable disinvestments occurred in the mining & quarrying industry in Russia (£10.1 billion) and the Near and Middle East Countries (£5.9 billion).
Back to table of contents5. Net FDI international investment positions abroad by component and industry
Component analysis (Table 1.2)
FDI international investment positions are made up of three primary components: UK companies share of their foreign companies’ affiliates share capital and reserves, inter-company account balances and foreign branch head-office account movements to the UK parent.
Figure 2: FDI net international investment positions abroad by component and industry
Source: Office for National Statistics
Download this chart Figure 2: FDI net international investment positions abroad by component and industry
Image .csv .xlsThe net international investment position decreased from £1,043 billion in 2012 to £1,035 billion in 2013, the second consecutive fall from a peak of £1,091 billion in 2011. This change reflects a fall in share capital and reserves, which decreased from £1,101.6 billion in 2012 to £1,031.9 billion in 2013. This was partially due to the net amount due to UK parents on the inter-company account, which continued to be negative for the fifth consecutive year. In addition to this, the net amount due to UK parents on the branch head-office account at the end of the period decreased from £40.1 billion to £21.1 billion, but nevertheless had a positive impact on the UK investment position.
Services
The services industry accounted for 46.4% of the UK’s investment position held abroad in 2013, down from 50.6% in 2012. Within the services industries, financial services accounted for £263.5 billion at the end of 2013, compared with £294.5 billion at the end of 2012; Netherlands, Switzerland, France, and Luxembourg were the largest contributors to this change. Information & communication services accounted for £94.6 billion at the end of 2013, compared with £114.0 billion at the end of 2012; again the largest changes were in Europe.
Production
The UK outward net position for the production industry increased from £357.8 billion in 2012 to £376.8 billion in 2013. The mining & quarrying industry accounted for £198.7 billion of the investment position held abroad by UK companies in 2013, increasing from £177.8 billion in 2012. The majority of which is held in Europe (£62.1 billion), followed by Asia (£24.5 billion). Other important production industries include the food products, beverages & tobacco products and the petroleum, chemicals, pharmaceuticals, rubber & plastic products, which accounted for £54.5 billion and £62.9 billion of the total investment position respectively in 2013.
Back to table of contents6. Net earnings from FDI investment abroad by component and industry.
Component analysis (Table 1.3)
Net FDI earnings abroad by UK companies are made up of three primary components. These include net subsidiaries profit, net interest incurred by UK companies and net branch profits.
Figure 3: FDI net earnings abroad by UK companies (outward)
Source: Office for National Statistics
Download this chart Figure 3: FDI net earnings abroad by UK companies (outward)
Image .csv .xlsIn 2013, net FDI earnings abroad decreased when compared with 2012, falling from £79.9 billion to £68.7 billion. This is a return to levels experienced during the 2008-09 economic downturn.
Services
Total earnings from direct investment in the services industry decreased slightly in 2013 by £2.7 billion to £25.5 billion, mainly due to a notable decrease in earnings from the financial services industry, particularly in Europe, and falls in Luxembourg and Switzerland. Other industries remained largely consistent, with several slight increases, partially offsetting the decline in financial services earnings.
Production
Earnings from UK investment in the production industry abroad decreased to £32.1 billion in 2013, compared with £39.5 billion in 2012. This reflects fully in the mining & quarrying, petroleum, chemicals, pharmaceuticals, rubber & plastic products and transport equipment industries. Earnings within petroleum and chemicals industries underwent a notable decline in Asia, from a £2.0 billion investment to a disinvestment of £1.9 billion in 2013. Food products, beverages and tobacco products was the production industry where earnings increased notably, from £3.8 billion in 2012 to £5.6 billion in 2013.
Back to table of contents7. Net FDI flows into the UK (inward) by component and industry
Component analysis (Table 1.1)
Net FDI flows are made up of three primary components: reinvested earnings (sometimes known as unremitted profits); equity capital transactions (including mergers, acquisitions and disposals); and other capital transactions (including inter-company loans).
Figure 4: FDI flows into the UK (inward) by component and industry
Source: Office for National Statistics
Download this chart Figure 4: FDI flows into the UK (inward) by component and industry
Image .csv .xlsTotal net FDI flows in the UK decreased from £44.6 billion in 2012 to £43.7 billion in 2013. This was considerably lower than the peak of £96.8 billion reported in 2005. Equity capital, which is net acquisitions and disposals of UK companies involved in FDI, has been the main contributor of total net FDI flows since 2004. This fell from £31.2 billion in 2012 to £23.8 billion in 2013, and has been on a broad downward trend since 2007. In contrast, unremitted branch profits have been on an upward trend since 2011, and increased from £0.8 billion in 2012 to £12.8 billion in 2013. Inter-company movements, contributed negatively by £9.0 billion, following positive contributions of £3.7 billion and £2.4 billion in 2011 and 2012 respectively.
Services
Net investment into the services industry decreased slightly from £36.2 billion in 2012 to £31.6 billion in 2013. This reflects a decrease in the investment flows from Europe which fell to £10.5 billion in 2013, down from £23.0 billion. The professional, scientific & technical services industry was the main driving force behind the fall in flows from Europe, with a decrease of £3.0 billion reported within this industry in 2013. However, the financial services reported a decrease in investment flows from £13.9 billion to £12.2 billion. This decrease was most prominent in Europe where an increase of £4.9 billion was reported between 2012 and 2013.
Production
Net investment into the production industry improved from £5.9 billion in 2012 to £9.4 billion in 2013. This reflects a change from a disinvestment of £3.7 billion in 2012 to an investment of £4.2 billion in 2013 in the mining & quarrying industry – United States of America (£4.8 billion). Five out of nine production industries reported an increase in investment in 2013, however a disinvestment of £1.7 billion was observed in the petroleum, chemicals, pharmaceuticals, rubber and plastic products industry, from a disinvestment of £0.3 billion.
Back to table of contents8. Net FDI international investment positions in the UK (Inward) by component and industry
FDI international investment positions are made up of three primary components: UK companies share of their foreign companies’ affiliates share capital and reserves, inter-company account balances and foreign branch head-office account movements to the UK parent.
Figure 5: FDI net international investment positions in the UK held by foreign companies (inward)
Source: Office for National Statistics
Download this chart Figure 5: FDI net international investment positions in the UK held by foreign companies (inward)
Image .csv .xlsForeign companies’ share of UK companies share capital and reserves increased from £799.6 billion in 2012 to £836.8 billion in 2013. This has been increasing consistently on an annual basis since 2004, with the exception of 2009. The other two components are comparably small and stable: net amounts due to foreign parents on the inter company account – decreased from £120.4 billion in 2012 to £84.1 billion in 2013 and the net amount due to foreign parents on the branch head office account increased from £40.1 billion in 2012 to £54.5 billion in 2013.
Services
The UK inward net positions within the services industry increased from £595.4 billion in 2012 to £632.4 billion in 2013, and accounted for 64.8% of the total UK inward position at the end of 2013, a slight increase from 62.0% in 2012. This increase was mainly due to Europe and the United States, where positions increased by £15.1 billion and £8.4 billion respectively in 2013. While the majority of the services industries within Europe have increased between 2012 and 2013, the industry which provided the largest contribution was financial services, which increased by £10.3 billion.
Production
Within the production industry, the investment position decreased in 2013 for the first time since 2010, down from £323.1 billion in 2012 to £299.1 billion. The mining & quarrying industry remained broadly stable, £84.8 billion in 2012 to £84.6 billion in 2013, whereas there was a decrease in the investment position of the petroleum, chemicals, plastic and fuel products, from £37.3 billion in 2012 to £30.8 billion in 2013. A decrease was also observed in other manufacturing products which was £35.4 billion in 2013, down from £42.3 billion in 2012.
Back to table of contents9. Net earnings from FDI investment in the UK (inward) by component and industry
Component Analysis (Table 1.3)
Net earnings from FDI in the UK are made up of three primary components. These include net subsidiaries profit, net interest incurred by UK companies and net branch profits.
Figure 6: FDI net earnings into the UK by foreign companies (inward)
Source: Office for National Statistics
Download this chart Figure 6: FDI net earnings into the UK by foreign companies (inward)
Image .csv .xlsNet profits, or reinvested earnings, have been on a broad upward trend since 2008 and have been the main contributor to FDI earnings since 2004. Net profits increased from £35.7 billion in 2012 to £42.5 billion in 2013. The remaining components: net interest accrued to foreign parent companies and foreign companies share of UK branches net profits have been broadly stable since 2010, having taken different paths in the pre-2010 years.
Services
Earnings in the services industry increased from £25.9 billion in 2012 to £34.5 billion in 2013. This was mainly due to Europe, where earnings almost doubled, from £11.3 billion in 2012 to £19.1 billion in 2013. This is partly attributed to the financial services industry, where earnings increased from £3.6 billion in 2012 to £7.3 billion in 2013.
Production
Earnings from foreign direct investment within the production industry decreased from £18.8 billion in 2012 to £14.3 billion in 2013. This was mainly due to the United States which recorded figures of £3.4 billion in 2013, down from £6.1 billion in 2012, indicating that earnings from foreign direct investment in the UK’s production industry almost halved for American investors. While a downward change was observed across every manufacturing industry with the exception of transport equipment, the main negative change for the United States was the mining & quarrying industry where earnings fell from £2.4 billion in 2012 to £1.2 billion in 2013.
Back to table of contents10. FDI economic commentary
The UK experienced better economic conditions in 2013 as annual GDP growth increased to 1.7% from 0.7% in 2012. The UK also remained one of the most active countries for outward and inward FDI in the world. Data from the OECD suggest that 6.3% of the total world inward FDI position was due to the UK in 2013, with the UK holding the same proportion of the total world outward FDI position too. This is smaller than that of the United States (19.1% and 25.1% of the world inward and outward positions respectively) but higher than the proportions held by the other G7 nations.
Global economic activity was largely maintained in 2013. The latest International Monetary Fund (IMF) data estimated that world real GDP grew by 3.3% in 2013 after growing by 3.4% in 2012. The advanced economies grew by 1.4% in 2013, compared with growth of 1.2% in 2012. This is partly reflecting the continuing economic adjustments in some economies following the 2008-09 economic downturn. Meanwhile, growth in the rest of the world slowed to 4.7% compared with 5.1% in 2012. The IMF found that a number of emerging markets now have lower potential growth rates than in earlier years.
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