Foreign direct investment, business insights in the UK: January 2021 to January 2022

• Nearly half (47.1%) of trading respondents with FDI links reported no effect on turnover compared with normal expectations in early January 2021; the proportion of respondents reporting no effect was 12.3 percentage points higher (59.4%) by late December 2021. 

• The proportions of respondents reporting lower-than-expected turnover decreased between January and December 2021; the proportion for companies with FDI links was 19.4 percentage points lower (at 16.5%), and 17.7 percentage points lower (to 28.9%) for those without FDI links. 

• Over half of respondents with FDI links reported having cash reserves that would last more than six months in each wave of 2021; this proportion increased from 53.2% in early January 2021, reaching 62.2% in mid-April 2021.

• On average in 2021, higher proportions of companies with outward FDI links reported cash reserves lasting longer than six months (56.9%) compared with companies with inward FDI links (50.1%); companies with both inward and outward FDI links had the highest proportion (59.8%) of all link types.

This article updates our previous article from July 2022 that focused on the experiences of companies with and without foreign direct investment (FDI) links during the coronavirus (COVID-19) pandemic. Respondents are identified by linking unweighted microdata from the Business Insights and Conditions Survey (BICS) with FDI microdata. Those BICS microdata are a subsample of responses unlike some BICS results that are weighted to reflect the whole UK business population. These results should be treated with caution as the sample varies from wave to wave and so these estimates only reflect responding businesses. The reference period for this analysis covers 28 December 2020 (BICS Wave 22) to 9 January 2022 (BICS Wave 47). 

Turnover compared with expectations 

Nearly half (47.1%) of trading respondents with FDI links reported no effect on turnover compared with normal expectations in early January 2021 while 35.9% experienced lower turnover (Figure 1). By late December 2021, the proportion of respondents reporting no effect was 12.3 percentage points higher (59.4%), whereas the proportion reporting lower turnover decreased by 19.4 percentage points to 16.5%.

In early January 2021, 38.4% of respondents without FDI links reported that there was no effect on their turnover compared with normal expectations and 46.6% reported lower-than-expected turnover (Figure 2). By late December 2021, the proportion reporting no effect had increased by 10.7 percentage points to 49.1% while those reporting lower turnover than expected was 17.7 percentage points lower at 28.9%.

The proportions of respondents with and without FDI links reporting turnover below normal expectations followed similar trends in 2021 (Figure 3). On average, the proportion of companies with no FDI links reporting lower-than-expected turnover was around 8 percentage points higher than for companies with FDI links. However, this difference narrowed to within 3 percentage points in mid-August 2021 and early September 2021. By the end of December 2021, this difference increased to 12 percentage points, which coincided with the re-introduction of economic restrictions towards the end of 2021, as was also the case at the end of 2020.

This section covers the responses to the Business Insights and Conditions Survey (BICS) question that asked businesses to report how long they thought their cash reserves would last. By linking these responses with foreign direct investment (FDI) microdata for the businesses that are present in both, the financial positions during the coronavirus (COVID-19) pandemic were compared for companies with and without FDI links from 28 December 2020 (BICS Wave 22) to 9 January 2022 (BICS Wave 47).  

Over half of respondents with FDI links reported having cash reserves that would last more than six months in each wave of 2021 (Figure 4). This proportion increased from 53.2% in early January 2021, reaching 62.2% in mid-April 2021. The proportion of respondents reporting cash reserves lasting more than six months fell to 51.3% by July 2021, before increasing again to 62.3% in late December 2021. While suggesting that economic conditions for companies with FDI links may have deteriorated over the summer, the proportions for reserves lasting up to six months or no reserves were more stable by comparison.

The proportion of respondents without FDI links who reported cash reserves of more than six months increased steadily throughout 2021, from 29.5% in early January 2021 to 40.5% at the end of October 2021. This proportion then fell to 36.9% by the end of December 2021 (Figure 5) as economic restrictions were re-introduced at the end of the year.

We can also look at the average respondent proportions by type of FDI link over 2021 (Figure 6). On average, higher proportions of companies with outward FDI links reported cash reserves lasting longer than six months (56.9%) compared with companies with inward FDI links (50.1%). However, companies with both inward and outward FDI links had a slightly higher proportion (59.8%) on average during 2021. Nevertheless, the proportions reporting reserves lasting longer than six months by all companies with FDI links were higher than the average for companies without any FDI links (34.7%).

Foreign direct investment (FDI) 

Foreign direct investment (FDI) is cross-border investment made with the objective of establishing a lasting interest in the host economy. FDI is also defined by control relationships, where the direct investor (parent company) controls at least 10% of the voting power (ordinary shares) of the direct investment enterprise. These relationships can be measured in two directions: outward and inward. Outward refers to the direct investments of UK-resident companies in other countries, while inward refers to the direct investments in the UK from non-resident companies. 

Coronavirus 

Coronaviruses are a family of viruses that cause disease in people and animals. They can cause the common cold or more severe diseases, such as COVID-19. 

COVID-19 

COVID-19 is the name used to refer to the disease caused by the SARS-CoV-2 virus, which is a type of coronavirus. The Office for National Statistics (ONS) takes COVID-19 to mean the presence of SARS-CoV-2 with or without symptoms. 

Cash reserves 

The money a company has available to meet short-term and emergency funding needs.

Business Insights and Conditions Survey 

The Business Insights and Conditions Survey (BICS) is a fortnightly online questionnaire from a sample of approximately 39,000 businesses. Respondents are asked for their experiences at the time of answering the questionnaire, or over a stated reference period.  

Results presented in this article are a variation from the regular published BICS data and are based on a subset of the BICS sample. We used unweighted results, which are not directly comparable with the fortnightly Business insights and impact on the UK economy bulletins. Additionally, the sample is not necessarily representative of all UK companies: inferences are only relevant to the businesses that responded. 

Dates of the reference and survey live period of each wave of the BICS can be found on the Business insights and impact on the UK economy dataset webpage. 

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in our Business Insights and Conditions Survey (BICS) QMI. 

Foreign Direct Investment Survey 

The main source of information for UK foreign direct investment (FDI) statistics is the annual Foreign Direct Investment Survey; separate surveys are used to collect data on inward and outward FDI. The samples for the FDI Survey are taken from the annual populations, which are informed by the previous survey responses of companies and the Inter-Departmental Business Register. A commercial data source was also used to inform the FDI population from 2020 onwards. This is combined with data from the Bank of England for all monetary financial institutions, such as banks, and other sources for property and public corporations in FDI. 

More quality and methodology information on strengths, limitations, appropriate uses, and how UK total FDI statistics were calculated is available in our Foreign direct investment QMI. 

Data linking 

This article links respondents to BICS with the FDI population at the enterprise level. This is because various parts of the multinational enterprise might be selected for each survey, which makes it harder to link those responses. By using the enterprise group, this identifies respondents to BICS that have a reporting unit somewhere in their UK corporate structure that also have at least one link with a foreign parent company or affiliate. This means it may not necessarily be the BICS reporting unit itself with the link to a foreign company.