UK companies continued to increase their net investment overseas in 2011 (£68.2 billion), the highest value since 2008
Inward investment flows into the UK continued to fall during 2011, decreasing to £31.9 billion, the smallest inflow since 2004, although the rate of decrease appears to be slowing
The UK’s outward and inward investment positions reach record highs in 2011 (£1098.2 billion and £766.2 billion respectively)
Net earnings from outward investment by UK companies stood at £101.6 billion in 2011, the highest value since records began in 1958
In 2011, net earnings from direct investment in the UK are recovering from the large fall seen in 2008. Earnings from investment in the UK by overseas companies increased from £37.6 billion in 2010 to £43.6 billion in 2011, the highest value since 2007
Net investment abroad by UK companies may indicate strong growth in some emerging markets such as China and India
This statistical bulletin provides data on Foreign Direct Investment (FDI) flows, positions and earnings involving UK companies. The investment figures are published on a net basis, that is, they consist of investments minus disinvestments. The data in this bulletin are broken down by region and country. A more detailed analysis of the data, including breakdowns by industry, will be published in a second 2011 FDI Statistical Bulletin to be published on 7 February 2013.
FDI estimates are essential for measuring the UK’s Balance of Payments and the UK’s international investment position. FDI earnings figures feed into the Balance of Payments current account, whilst FDI flows form an integral part of the financial account.Nôl i'r tabl cynnwys
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. Please contact us via email: email@example.com or telephone Ciara Williams-Fletcher on +44(0)1633 456455.Nôl i'r tabl cynnwys
Table A: Net investment for outward and inward flows, positions and earnings, 2011
|Values in £ billion|
|Direct investment abroad||Direct Investment in the UK|
|Flows in 2011||Positions at end of 2011||Earnings in 2011||Flows in 2011||Positions at end of 2011||Earnings in 2011|
|Australasia & Oceania||0.9||37.1||2.4||1.4||12.5||0.2|
|Source: Office for National Statistics|
|1. All values are current prices (see Background Notes).|
|2. A minus sign indicates net losses.|
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The growth rate of the global economy slowed in 2011 compared with 2010. The IMF estimated that the world economy contracted by 0.6% in 2009 before expanding by 5.3% in 2010, and at 3.5% in 2011, the world GDP growth rate perhaps hints at the more mixed underlying contributions to world growth across regions. The advanced economies, and the euro area in particular, saw slower growth that was somewhat compensated by strong growth in some emerging markets.
These trends are partly reflected in the destinations of net investment aboard by UK companies. For example, net investment in China and India increased substantially in 2011 compared with 2010. However, net inward investment to the UK showed a more mixed picture, with net investment from all regions falling, except from Australasia & Oceania and Europe. Much of the improvement in net FDI from Europe stems from the low increase in 2010, however it remains below the increase in 2008.
Total FDI analysis (outward and inward investment)
Total FDI net investment flows, 2007 to 2011 (Figure 1 and Table A)
The flow of direct investment abroad by UK companies (outward investment) increased from £25.5 billion in 2010 to £68.2 billion in 2011, an upturn of £42.7 billion. This is the highest net outward flow since 2008, yet it continues to remain substantially lower than the peaks observed in 2000 and 2007 of £154.2 billion and £159.1 billion respectively.
Net investment flows into the UK (inward investment) fell slightly during 2011 (£31.9 billion) to a level comparable with 2004. This continues a downward trend, which started in 2007, although the rate of decrease appears to be slowing.
Total FDI international investment positions, 2007 to 2011 (Figure 2 and Table A)
At the end of 2011, total levels of outward and inward international investment continued on an upward trend. Inward positions (over the last five years) show a steady year on year increase, whereas outward positions demonstrate an upturn since 2008.
The total position of direct investment abroad by UK companies stood at £1,098 billion (£1.1 trillion). This was marginally higher than the levels reported at the end of 2008. The total level of direct investment in the UK by overseas companies at the end of 2011 was estimated at £766 billion.
Both inward and outward levels for 2011 are the largest values reported since 1987, when ONS began collecting position data on an annual basis.
Total FDI net investment earnings, 2007 to 2011 (Figure 3 and Table A)
Net earnings due to and from the UK have shown signs of recovery over the last three years. Net earnings from FDI in the UK (inward earnings) have continued to recover from the large fall seen in 2008. In 2011, net earnings into the UK increased to a level broadly similar to 2007, yet remain below net earnings figures published in 2006. After a fall in net earnings abroad by UK companies (outward earnings) in 2008 and 2009, these have now also risen to a level above the net earnings figures published in 2007.
Net earnings from direct investment by UK companies abroad (outward earnings) amounted to £101.6 billion in 2011, the highest value reported since records began in 1958. This was an increase of £21.3 billion on the amount earned in 2010, indicating that UK businesses may be investing wisely in projects abroad.
Net earnings by foreign companies from direct investment in the UK (inward earnings) also rose in 2011 to £43.6 billion, an increase of £6.0 billion on the amount reported in 2011, indicating that there may be a growing attractiveness by overseas companies to invest in the UK.Nôl i'r tabl cynnwys
Net direct investment abroad by UK companies (Table 1)1
The total figure for outflows from the UK masks some variation in outward direct investment flows by geographic region and country. While outward investment flows to Europe, the Americas and Asia showed positive increases, UK investment into Australasia & Oceania fell from £11.7 billion in 2010 to £0.9 billion in 2011, a decrease of £10.8 billion. This was primarily a consequence of a reduction in the debt owed to UK parent companies by their overseas subsidiaries. This may have been due to the redemption of inter-company loans or movements in short-term trade credit.
Outward investment flows to Europe stood at £30.9 billion in 2011, a substantial increase from £11.4 billion the previous year and the highest value since 2008. This overall figure masks some variation by country. Luxembourg was the primary destination in 2011 for direct investment from the UK, accounting for £8.0 billion of outward investment flows. However, the relative importance of the of Luxembourg (and the Netherlands) as a destination for direct investment by UK companies may partly reflect the presence of so-called Special Purpose Entities (SPEs) in these countries. The term SPE is used to refer to entities such as financing subsidiaries, shell companies and conduits, which typically do not conduct any significant operations in the country in which they are resident other than to pass through investment from their parent company to an affiliate in another country.
The next largest destination within Europe for flows abroad by UK companies was Belgium, accounting for net outflows of £5.6 billion during 2011. In contrast, outward flows to Spain showed a disinvestment of £1.1 billion. The flows to both Luxembourg and Belgium were driven largely by an increase in equity capital transactions during 2011.
The largest increase in outward investment flows in 2011 was to The Americas where UK investment rose to £19.0 billion in 2011 from a disinvestment of £13.8 billion in 2010. This increase was due to substantial levels of reinvested earnings, net change in inter-company debt positions and, again, large transactions of equity capital.
The Americas moved from disinvestment to substantial investment between 2010 and 2011 with a change of £32.8 billion. Some of the main drivers contributing to this swing included transactions of equity capital and also the repayment of inter-group loans and debt between UK parent companies and their subsidiaries in the Americas.
Investment abroad to Europe increased by £19.5 billion, from an investment of £11.4 billion in 2010 to £30.8 billion in 2011.
Of the remaining regions, Asia saw the largest change, where there was an increase in investment from £8.4 billion in 2010 to £20.8 billion in 2011. This was driven by strong growth in emerging markets such as China and India. For example Vodafone Group Plc acquired a controlling stake in Vodafone Essar Ltd of India for a press reported value of £2.6 billion.
Australasia & Oceania saw a reduction in investment, from £11.7 billion in 2010 to £0.9 billion in 2011. This was mainly driven by a substantial drop in investment flows to Australia.
Outward investment to Africa also decreased in 2011, falling from an investment of £7.8 billion in 2010 to a disinvestment of £3.3 billion.
USA witnessed the largest investment change, from a disinvestment of £9.0 billion in 2010 to an investment of £15.6 billion in 2011. This can be attributed to large acquisitions, such as Ensco Plc acquiring Pride International Inc. in the USA for £4.6 billion.
Australia saw the second largest change in flows, from an investment of £11.5 billion in 2010 to £0.4 billion in 2011, a decrease of £11.1 billion.
These changes were largely offset by increases in investment to the Irish Republic, Canada and UK Offshore Islands:
The Irish Republic had an increase of £11.0 billion, from a disinvestment of £7.7 billion in 2010 to an investment of £3.2 billion in 2011
Investment to Canada increased by £10.0 billion in 2011, from a disinvestment of £8.5 billion in 2010 to an investment of £1.4 billion
UK Offshore Islands, which consist of Jersey, Guernsey and the Isle of Man, increased by £8.4 billion, from a net investment of £1.0 billion in 2010 to £9.5 billion in 2011
International investment position - level of direct investment abroad by UK companies (Table 2)1
Europe continues to report the highest levels of direct investment abroad by UK companies and this accounted for 56% of the UK’s outward investment position in 2011. Within Europe, the most dominant locations for direct investment by the UK were the Netherlands and Luxembourg, accounting for £142.8 billion (13% of the world total) and £137.2 billion (12.5% of the world total) respectively.
The Americas remained the most favoured location for UK direct investment abroad with the USA continuing to be the country within this region with the largest level of outward investment. This stood at £293.1 billion in 2011, an increase of £27.7 billion, compared with the previous year. This is equivalent to 27% of the overall level of direct investment abroad at the end of 2011, compared with 25% at the end of 2010.
By the end of 2011, the levels of investment in Asia and Australasia & Oceania both rose by £17.9 billion and £5.1 billion respectively.
The largest change in the value of outward positions between 2010 and 2011 was seen by the USA, where levels increased by £25.6 billion, from £184.8 billion at the end of 2010 to £210.4 billion at the end of 2012.
UK Offshore Islands also witnessed an increase in outward position values, reporting £40.1 billion at the end of 2011, a rise of £10.6 billion. However, it should be noted that these countries contain SPE’s, which could distort the outward investment figures.
The outward position figures for both Brazil and Hong Kong also increased during 2011 by £7.9 billion and £5.6 billion respectively.
The overall increase in net outward positions was offset by Canada, where the positions abroad by UK companies decreased by £5.1 billion, from a value of £32.5 billion at the end of 2010 to £27.5 billion at the end of 2011.
Net earnings from direct investment abroad by UK companies (Table 3)1
The largest change came from Europe where the net earnings from direct investment by UK companies increased by £15.7 billion. Earnings from Asia and Africa also increased slightly, by £3.2 billion and £0.2 billion respectively. These increases were partially offset by a decrease in earnings from Australasia & Oceania (£3.7 billion).
UK owned companies resident in the USA were the single largest source of earnings, accounting for 20% of the overall total, followed by those resident in the Netherlands and Luxembourg, contributing 13% and 12% respectively2. These increases were offset by net losses of £0.7 billion by UK owned companies resident in the Republic of Ireland.
One useful indicator related to direct investment earnings is the rate of return. This is normally defined as income on direct investment equity as a percentage of the overall direct investment position. As rates of return increase, it implies that direct investment enterprises are more profitable and can be used, in combination with consideration of many other factors, in drawing inferences about the competitiveness of different economies. Overall, the rate of return for outward direct investment abroad by UK companies was 9% in 2011, steadily increasing on both 2010 (8%) and 2009 (7%) figures.
There was some substantial variation in rates of return across geographic areas and countries. Rates of return for UK outward investment in both Africa and Asia were both around 20% and 15% respectively in 2011, while the overall rate of return from direct investment in Europe and Australasia & Oceania was considerably lower at approximately 7% and 6% respectively.
The largest change in net earnings abroad by UK companies was attributed to Europe where net earnings increased from £30.9 billion in 2010 to £46.6 billion in 2011.
The Americas saw a £5.8 billion increase in net earnings abroad in 2011, from £21.5 billion in 2010 to £27.2 billion in 2011.
In addition, net outward earnings to Asia rose from £15.9 billion in 2010 to £19.1 billion in 2011, an increase of £3.2 billion.
The Irish Republic reported the largest change in net earnings abroad by UK companies in 2011. They rose from a negative net figure of £10.1 billion in 2010 to a reduced negative earnings value of £0.7 billion.
At the end of 2011, the net earnings abroad from the UK to the USA increased by £5.5 billion, from £14.6 billion in 2010 to £20.1 billion in 2011.
Net earnings abroad to the Netherlands and Russia also increased between 2010 and 2011 by £3.1 billion and £1.8 billion respectively.
The overall increase in net earnings abroad by UK companies in 2011 were offset by Australia, which reported a decrease in net earnings of £3.5 billion, from £5.5 billion in the 2010 to £2 billion in 2011.
Notes for outward investment
- See background note 3 for an explanation of foreign direct investment.
- See background note 5 for further guidance on interpreting FDI by country.
Net direct investment in the UK by foreign companies (Table 4)1
The Americas continue to report the highest levels of foreign direct investment into the UK by foreign companies accounting for 45% of the UK’s inward investment position in 2011. However, the figure of £14.2 billion at the end of 2011 reflects a substantial fall of £14.4 billion of inward flows when compared to the previous year and is the lowest value since 2004.
Europe saw an increase of inflows between 2010 and 2011, reporting a net inward flow to the UK of £13.2 billion at the end of 2011, compared with a low value of £0.4 billion reported in 2010.
This low level of inward investment from the Americas and Europe may be due to a number of factors such as a relatively low level of acquisitions of equity capital, the reporting of large losses and some substantial disposals and reductions in inter-company loans.
Inward investment into the UK companies from the Netherlands rose from a net disinvestment of £4.2 billion in 2010 to £13.1 billion in 2011 and reflects an increase in net inflows of £17.3 billion during 2011.
Inward investment from Belgium also increased from a net investment of £0.1 billion in 2010 to a net investment of £9.1 billion in 2011, a rise of £8.9 billion. The large proportion of this increase came from flows of equity capital, with large transactions including the acquisition of GDF Suez of 70% interest in International Power Plc.
The following regions witnessed large changes of net direct investment flows into the UK by foreign companies:
Australasia & Oceania showed an increase in flows to the UK of £3.8 billion, reporting a net investment of £1.4 billion in 2011 compared with a net disinvestment figure of £2.4 billion in 2010
The Americas saw a decrease of £14.4 billion, reporting a net inflow figure of £14.3 billion in 2011
Asia also reported a decrease in flows into the UK, from £5.3 billion in 2010 to £3.0 billion in 2011
The Netherlands incurred the highest increase value for net flows of direct investment into the UK for 2011, reporting a net investment value of £13.1 billion. This figure represents an increase of £17.4 billion on the 2010 net disinvestment value of £4.2 billion.
The value of net inward flows to the UK at the end of 2011 decreased from the following countries:
USA saw reduced inward flows investment of £15.0 billion by the end of 2011, a decrease of £7.8 billion
Germany reported a £7.2 billion reduction of flows of direct investment to the UK in 2011, a net disinvestment value of £4.4 billion
UK Offshore Islands also reported a decrease in net flows of direct investment to the UK for 2011 (£6.3 billion), showing the 2011 value as a net disinvestment of £2.7 billion
Net international investment position - direct investment in the UK by foreign companies (Table 5)1
Overall the rise in the level of inward investment in the UK in 2011 was primarily attributed to an increase in the value from Europe, where investment rose by £20.3 billion, from in £417.2 billion in 2010 to £437.5 billion in 2011. Asia also showed an increase in inward investment by £11.2 billion between 2010 and 2011.
The UK’s largest inward investment positions within Europe were from the Netherlands (£123.2 billion), France (£58.9 billion), Germany (£49.2 billion) and Luxembourg (£48.5 billion) accounting for approximately 22% of the total level in 2011.
International reporting standards require inward direct investment to be reported according to the immediate investing country rather than the ultimate source of investment. As noted in the section on outward investment positions, a consequence of this is that the relative importance of certain countries such as the Netherlands and Luxembourg may be partly due to the presence of relatively high numbers of ‘Special Purpose Entities’ (companies whose primary purpose is to ‘pass through’ investment) in those economies.
The USA remained a prime source of inward investment into the UK, with companies from the USA holding £203.8 billion of investment in the UK at the end of 2011, accounting for approximately 27% of the overall inward investment position. This was an increase of £5.6 billion from the previous year, mainly due to an increase of equity capital and a reduction in the inter-company debt position.
Similarly to the Netherlands Hong Kong reported a large change in international investment positions into the UK during 2011 (£20.5 billion). Both countries saw increases of £10.9 billion on their 2010 values.
Belgium witnessed the second largest change of inward positions at the end of 2011, reporting a value of £16.6 billion, an increase of £8.7 billion.
The overall increase in the international investment position figures for 2011 were offset by a reduction in the level of positions in both Luxembourg and France. Luxembourg reported a decrease in value from £58.2 billion at the end of 2010 to £48.5 billion at the end of 2011, while France reported a value of a £58.9 billion at the end of 2011, a reduction of £8.3 billion.
Net earnings from direct investment in the UK by foreign companies (Table 6)1
UK companies owned by parents in the USA reported the highest net earnings in 2011, with a value of £18.0 billion. This was followed by France, with net earnings of £5.2 billion in 2011.
Net earnings of UK companies with parents in Asia, increased by £2.1 billion on the negative value in the previous year, to a net investment of £1.9 billion at the end of 2011, while net earnings of UK companies with parents in Australasia & Oceania were reported as £0.2 billion.
As noted in the section on outward investment, one useful indicator related to direct investment earnings is the rate of return. Overall the implied rate of return for inward investment into the UK increased to 6.0%, up from 5.0% seen in the previous year. However, the rate of return remains lower than the 2007 value of 7.0%.
The Americas saw the largest change in net earnings from direct investment in the UK by foreign companies. Net earnings increased from £17.3 billion in 2010 to £20.9 billion in 2011, an increase of £3.6 billion. Furthermore, in 2011, net earnings into the UK by the Americas slightly overtook net earnings into the UK from Europe. This substantial increase put the Americas marginally ahead of Europe.
Asia also reported an increase of inward earnings for 2011 with an investment value of £1.9 billion, up from a disinvestment value of £0.2 billion reported in 2010.
The following countries reported reductions in their values of net earnings to the UK during 2011:
- UK Offshore Islands reported a decrease of £2.2 billion on the 2010 figure of £4.1 billion, falling to £1.9 billion in 2011.
- Switzerland reported a decrease of £2.0 billion on their 2010 value, reporting a value of negative earnings for 2011 of £1.5 billion.
Notes for inward investment
- See background note 3 for an explanation of foreign direct investment.
- See background note 9 for further guidance on interpreting FDI by country.
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