Foreign direct investment involving UK companies (asset and liability): 2017

• This is the first time that we are publishing estimates for foreign direct investment (FDI) earnings (credits and debits) and FDI positions (assets and liabilities) on an asset and liability basis; these statistics are fully consistent with the balance of payments.

• The value of UK investors' earnings on overseas FDI rose by £36.4 billion to £95.4 billion between 2016 and 2017; manufacturing industries accounted for around half of the increase in the value of FDI credits between 2016 and 2017.

• The value of FDI liabilities increased from £1,545.7 billion in 2016 to £1,720.3 billion in 2017; manufacturing (mainly from the food, beverages and tobacco products sub-industry) and professional and support services industries (mainly the professional, technical and scientific sub-industry) made notable contributions to this increase with £49.1 billion and £45.2 billion respectively.

• The UK had a slight negative net FDI international investment position in 2017 of £23.8 billion for the first time since comparable records began.

• The UK had a large negative net FDI position with the US, Japan and Germany among the G7 countries in 2017, which was partially offset by smaller positive balances with France, Canada and Italy.

This statistical bulletin provides information on foreign direct investment (FDI) positions and earnings involving UK companies. The figures are presented using the asset and liability measurement principle and are directly comparable with those presented in the balance of payments. These statistics use the same sources of information as equivalent statistics produced on a directional basis, which are published in a separate statistical bulletin. We have produced a guide to explain the differences between these foreign direct investment measurement principles and Section 7 compares asset and liability FDI statistics with those on a directional basis.

In line with international guidance, UK FDI statistics are presented on an immediate parent country basis; as such, geographical compositions reflect direct relationships between investing parties rather than the residence of the ultimate parent or final destination of the investment. Multinationals often have complex corporate structures, where a parent company controls a large network of interlinked affiliates and branches across the globe. Since published statistics report the immediate parent country, geographical compositions can be distorted in cases where a parent company invests through one or more countries before the investment reaches its final destination. While affecting geographical compositions, aggregate FDI statistics are unaffected by whether they are presented on an immediate or an ultimate basis.

This is the first time that we are publishing these FDI tables on an asset and liability basis and is part of our continuing research on foreign direct investment statistics. This involved developing country-level estimates that are consistent with the balance of payments. This release includes foreign direct investment estimates for 2014 to 2017. The balance of payments estimates published on 29 March 2019 included the latest estimates for 2017. Revised estimates presented here for 2016 will not be incorporated into balance of payments statistics until September 2019. A longer time series for FDI positions (assets and liabilities) from 1987, and for FDI earnings (credits and debits) from 1997 can be found at the links provided.

For consistency, the same country, continent and industry groups are used in this bulletin as those in the directional one. This bulletin presents information on FDI earnings and positions only. The net values for FDI earnings (credits less debits compared with outward earnings less inward earnings) and net FDI positions (assets less liabilities compared with the outward position less the inward position) should be the same using these two measurement principles. However, there are some differences between the net FDI positions, as shown in Section 7. These partly reflect revised property data that have been included in balance of payments statistics but not in the latest directional statistics that were published in December 2018. This information will be part of the revisions to our FDI estimates in the next directional FDI statistical bulletin. We are continuing to develop our FDI statistics under both measurement principles along with preparing tables for FDI flows on an asset and liability basis. We plan to publish the next edition of these asset and liability estimates in early 2020.

Previously, we published asset and liability FDI statistics by industry and continent in our UK foreign direct investment trends and analysis: January 2018 article. This bulletin replaces some of the analysis from that article and provides FDI estimates for specific countries for the first time. Our UK FDI trends and analysis: May 2019 article, published alongside this bulletin includes information on the distribution of UK FDI. We are continuing our analysis of FDI statistics and plan to release the next edition of the trends and analysis series in summer 2019. Any questions about our previous analysis, future plans or new topics to cover can be sent to fdi@ons.gov.uk.

The values of UK foreign direct investment (FDI) credits were converging with those of debits up to 2016. The value of earnings the UK receives on assets held abroad (credits) fell while those on foreign-held FDI in the UK (debits) experienced small growth over the same period. Figure 1 presents the FDI earnings time series using the tables in this statistical bulletin. In 2016, the value of UK FDI credits was £59.0 billion and the value of debits was £58.0 billion. UK net FDI earnings (credits less debits) were £1.0 billion in 2016 having been £20.5 billion in 2014 (from assets of £74.3 billion less liabilities of £53.8 billion).

In 2017, the value of UK FDI credits grew by much more than that of debits. The value of credits went from £59.0 billion to £95.4 billion in 2017, an increase of £36.4 billion. This compares with the value of debits increasing by £6.3 billion, going from £58.0 billion in 2016 to £64.3 billion in 2017. This increased the UK’s net FDI earnings balance to £31.1 billion in 2017, making it the highest net balance since 2012.

The values of FDI credits were higher in 2017 than 2016 for most industries

Much of the increase in UK FDI credit values was from increases in the manufacturing, mining and quarrying, and financial services industries. Figure 2 shows the industrial composition of UK FDI credits between 2014 and 2017. Further details on the industries in each grouping can be found in Section 8. The value of manufacturing credits increased the most in manufacturing between 2016 and 2017, going from £19.1 billion to £36.4 billion, an increase of £17.3 billion. Looking at the sub-industries within this group shows that the value of credits for food, beverages and tobacco products went from £7.5 billion to £19.2 billion over the same period. This increase of £11.7 billion accounted for around two-thirds (67.6%) of the increase in manufacturing credits and just under one-third (32.1%) of the increase in total UK credits.

There were also notable increases in the value of credits for mining and quarrying and financial services. Mining and quarrying credits went from negative £0.8 billion in 2016, to £5.0 billion in 2017, increasing by £5.8 billion. This rise reflects the very low value of credits reported in 2016, where the change from 2015 is more modest by comparison, being £0.8 billion higher in 2017. Most of this change for mining and quarrying is from a few companies. On the other hand, the changes for financial services are more broadly distributed across companies. The value of financial services FDI credits increased from £9.7 billion in 2016 to £13.3 billion in 2017.

The value of FDI credits was higher in 2017 than in 2014 for all industrial groups except mining and quarrying. This also applies to retail and transport industries even though this was the only grouping for which the value of credits fell between 2016 and 2017, from £7.5 billion to £6.8 billion. Yet the 2017 value was still higher than that recorded in 2014 (£3.9 billion) for those industries.

The values of credits increased on UK FDI with all continents in 2017 from 2016

The highest value of UK FDI credits in 2017 was generated on investments held in EU countries. This was followed by credits from the Americas and Asia. Credit values from all three of these continents increased notably in 2017 from 2016 (Figure 3). The largest value increase was for the Americas, going from £11.3 billion in 2016 to £26.8 billion in 2017. However, part of this increase reflects the low credit values reported for this continent in 2015 and 2016. There were a few companies that accounted for nearly all of the increase in 2017 for the Americas. The value of credits on UK FDI held in the EU also increased notably, from £24.1 billion in 2016 to £32.1 billion in 2017, as did credits from non-EU Europe, which were £6.2 billion in 2016 compared with £11.6 billion in 2017. In both cases, there were a few companies that accounted for most of the respective changes.

Even though the value of credits increased over the most recent year for all continental groups presented in this bulletin, the values in 2017 for both Asia and Africa were below their respective values in 2014. This shows that most continents have seen the value of credits increase even if the value of credits may have decreased in between. Indeed, non-EU Europe was the only continent for which the value of credits has increased year on year since 2014.

Before 2017, the value of the stock of direct investments that UK companies held overseas – assets – was slightly higher than that on the stock of foreign-owned direct investments in the UK – liabilities. In 2016, the value of UK FDI assets was £1,633.1 billion compared with liabilities of £1,545.7 billion. Therefore, the UK’s net international investment position (assets less liabilities) was £87.4 billion. In 2017, the value of UK FDI assets increased by £63.4 billion to £1,696.5 billion, whereas liability values increased by more, £174.6 billion to £1,720.3 billion. This led to the UK having a slight negative net FDI position of £23.8 billion in 2017, which was the first time this had happened since comparable records began in 1987¹.

The value of FDI liabilities increased for all industries in 2017

The biggest increases in the value of UK FDI liabilities between 2016 and 2017 came from the professional and support, and manufacturing industries. Manufacturing liabilities increased from £357.3 billion in 2016 to £406.4 billion in 2017, a rise of £49.1 billion. Approximately three-fifths (£29.8 billion) of that increase was from liabilities in the food products, beverages and tobacco products sub-industries. Professional and support liabilities also increased by £45.2 billion, going from £123.3 billion to £168.5 billion over the same period. Most of that increase was from professional, scientific and technical services sub-industries, the liabilities for which increased by £42.1 billion.

The value of UK FDI liabilities was also higher for all industries in 2017 compared with 2014. Liabilities with manufacturing industries increased the most over that period, by £157.4 billion. When taken together with the £109.0 billion rise in financial and insurance industries, these two groupings accounted for two-thirds of the increase in UK FDI liabilities values between 2014 and 2017. The broader increase in liabilities values for all industries shows that most have contributed to the upward trend in total FDI liabilities values since 2014.

Increases in FDI liability values have mainly come from the Americas and non-EU Europe

EU countries held the highest value of direct investment liabilities in the UK in 2017. It was worth £689.8 billion in 2017, which was a slight increase on the value of £670.9 billion in 2016. The bigger increases in FDI liability values came from the Americas and non-EU Europe between 2016 and 2017. The value of FDI liabilities with the Americas went from £544.9 billion in 2016 to £614.9 billion in 2017, an increase of £70 billion. This was mainly from higher FDI liability values with the US in mining and quarrying, the manufacture of food, beverage and tobacco products and information and communication services industries. These increases were seen across a range of companies for that continent. The value of FDI liabilities with non-EU Europe increased by £47.1 billion, going from £179.2 billion in 2016 to £226.3 billion in 2017. FDI liabilities with the UK offshore islands accounted for most of this increase, and in professional, scientific and technical services in particular.

The general upward trend in FDI liability values can be seen in most of the continents between 2014 and 2017. The greatest increase across that period is for FDI with the Americas, which increased from £456.6 billion in 2014 to £614.9 billion in 2017. The values of FDI liabilities were also higher with Australasia and Oceania and Africa, even if the trends in these values have not been as noticeable compared with those observed with the other four continents.

Notes for: The value of UK FDI liabilities increased by more than assets in 2017, creating a slight negative net FDI international investment position

1. The time series for FDI assets and liabilities are available. Please note, the earlier statistics up to 2014 may not be fully consistent with more recent estimates.

The new foreign direct investment (FDI) statistical tables published with this bulletin include country estimates for FDI involving the UK on an asset and liability basis. These statistics are consistent with the balance of payments and can therefore provide some information on the UK’s net international investment position (the value of assets less liabilities) by country. The other G7 countries – Canada, Germany, France, Italy, Japan and the US – accounted for around one-third (31.9%) of UK FDI assets and more than two-fifths (41.1%) of UK FDI liabilities in 2017. Of these countries, the UK had a positive net international investment position with half of them in 2017.

The UK’s largest positive net international investment position among the G7 economies in 2017 was with France. UK FDI assets with France were £102.6 billion compared with liabilities of £81.4 billion, giving a net position of £21.2 billion (Figure 5). The net FDI position with France has increased year-on-year since 2014, where it was a negative balance of £18.7 billion. France was the only country among the G7 where the net investment position changed from negative to positive, which came from both the value of assets increasing and the value of liabilities decreasing over that period.

However, the positive net FDI position with France (of £21.2 billion) was much smaller than any of the three G7 countries with which the UK had a negative net position. The largest negative position in 2017 among these countries was with the US, which was negative £93.1 billion from assets of £350.4 billion and liabilities of £443.5 billion (Figure 5). The US is also the only country among the G7 where the net FDI position was positive in 2014 and negative in 2017, falling by £105.2 billion from positive £12.1 billion in 2014. Unlike FDI with France, this change has come from the value of UK FDI liabilities with the US growing faster than FDI asset values in the US.

The UK’s net FDI positions with both Germany (Figure 5) and Japan have remained negative between 2014 and 2017, yet have become more negative over that period. The UK’s net position with Germany went from negative £30.4 billion to negative £39.8 billion while that with Japan went from negative £35.7 billion to negative £72.9 billion. The gradual decrease in the net FDI position with Germany has been the result of relatively stable asset values and slightly increasing liability values over each year. Yet for the UK’s net position with Japan, most of the change was in the latest year, where the net position was £31.7 billion lower in 2017 than in 2016. This came from a large increase in the value of UK FDI liabilities with Japan compared with relatively constant asset values.

We have also published Foreign direct investment: UK trends and analysis, May 2019 alongside this bulletin. The short article analyses the distribution of UK FDI assets and liabilities in order of descending value. It also explores the distribution of net FDI earnings between 2014 and 2017.

Foreign direct investment (FDI) is a component of the balance of payments. Estimates are included for FDI earnings, positions and flows in the quarterly balance of payments statistical bulletin and the annual Pink Book. These statistics are presented on an asset and liability basis, making them consistent with these publications.

More detail on FDI involving UK companies can be found in our UK foreign direct investment: trends and analysis series. Experimental statistics in the July 2018 article outline the characteristics of businesses with and without FDI links and also presents UK FDI using the country of the ultimate (rather than the immediate) parent company.

We have also published an International perspective on UK foreign direct investment: 2018. This article:

• looks for similarities in the trends of net FDI earnings and current account balances of other countries to that of the UK

• compares the industrial composition of the outward FDI positions of other countries

• assesses the role of the UK in FDI from the perspective of other countries

Cross-border mergers and acquisitions (M&A) are included within the definition of FDI. M&A deals occur when a parent company acquires at least 50.1% of the voting power (ordinary shares) of another company. FDI also includes these instances along with minority holdings of between 10% and 50% of the voting power. The Mergers and acquisitions involving UK companies statistical bulletin contains quarterly statistics on M&A activity while the mergers and acquisitions annual overview articles provide more detail on annual M&A activity or the industry of M&A deals.

Our article exploring foreign investments considers trends in cross-border investment within the Pink Book 2018. This includes FDI in addition to portfolio investment and other investments since 1999.

International guidance on compiling foreign direct investment (FDI) statistics allows for these to be presented using the asset and liability or directional measurement principle. Asset and liability statistics are fully consistent with the balance of payments, which measures the transactions of UK residents with the rest of the world. Directional FDI statistics look at the net transactions of parent companies with their subsidiaries, including those parents not resident in the UK. Both measurement principles can be calculated from the same FDI survey data, where a comparison of these calculations can be found in foreign direct investment measurement principles explained. This section compares the asset and liability statistics for FDI positions and earnings with those in our other statistical bulletin on a directional basis. In both cases, the net positions and net earnings values should be identical whichever measurement principle is used. Table 1 presents the comparison for FDI credits and debits against FDI earnings and Table 2 compares FDI assets and liabilities with outward and inward positions.

The asset and liability FDI statistics are higher than the respective directional equivalent estimates in every year covered by this bulletin. This is because the asset and liability statistics count every FDI asset held by a UK-resident company and every liability of non-UK residents. These are added together irrespective of whether the asset (or liability) is held by a (non-) UK-based parent company or subsidiary. However, directional statistics subtract any transactions from subsidiaries back to their parent company. The net FDI positions presented in Table 2 are close but slightly different between asset and liability compared with directional statistics. This partly reflects revised property data that have been included in the latest balance of payments (asset and liability) estimates but not yet included in the equivalent directional statistics. We are also continuing to develop our FDI statistics for these bulletins, which will also include tables on FDI flows.

Africa:

Algeria, Angola, Benin, Botswana, British Indian Ocean Territory, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo, The Democratic Republic of the Congo (Zaire), Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea Bissau, Côte d'Ivoire (Ivory Coast), Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome & Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, South Sudan, St Helena, Ascension & Tristan da Cunha, Sudan, Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe.

Americas:

Anguilla, Antigua & Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Bonaire, Sint Eustatius & Saba, Brazil, Canada, Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Curacao, Dominica, Dominican Republic, Ecuador, El Salvador, Falkland Islands, Greenland, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Montserrat, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Saint Lucia, Sint Maarten, St Kitts & Nevis, St Vincent & the Grenadines, Suriname, Trinidad & Tobago, Turks & Caicos Islands, United States, Uruguay, Venezuela, British Virgin Islands, US Virgin Islands.

Asia:

Abu Dhabi, Afghanistan, Armenia, Azerbaijan, Bahrain, Bangladesh, Bhutan, Brunei Darussalam, Burma/Myanmar, Cambodia, China, Dubai, Georgia, Hong Kong, India, Indonesia, Iran, Iraq, Israel, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Laos, Lebanon, Macao, Malaysia, Maldives, Mongolia, Nepal, North Korea, Oman, Pakistan, Palestinian Territory, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Sri Lanka, Syria, Taiwan, Tajikistan, Thailand, Timor-Leste, Turkmenistan, United Arab Emirates, Uzbekistan, Vietnam, Yemen.

Australasia and Oceania:

American Samoa, Antarctica, Australia, Bouvet Island, Christmas Island, Cocos (Keeling) Islands, Cook Islands, Fiji, French Polynesia, French Southern & Antarctic Lands, Guam, Heard Island & McDonald Islands, Kiribati, Marshall Islands, Micronesia, Nauru, New Caledonia, New Zealand, Niue, Norfolk Island, Northern Mariana Islands, Palau, Papua New Guinea, Pitcairn, Samoa, Solomon Islands, South Georgia & The South Sandwich Islands, Tokelau, Tonga, Tuvalu, US Minor Outlying Islands, Vanuatu, Wallis & Futuna.

EU Europe:

Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Non-EU Europe:

Albania, Andorra, Belarus, Bosnia & Herzegovina, Faroe Islands, Gibraltar, Guernsey, Holy See (Vatican City State), Iceland, Isle of Man, Jersey, Liechtenstein, Macedonia, Moldova, Montenegro, Norway, Russian Federation, San Marino, Serbia, Switzerland, Turkey, Ukraine.

The Foreign direct investment Quality and Methodology information document contains important information on:

• the strengths and limitations of these data and how they compare with related data

• users and uses of these data

• how the output was created

• the quality of the output including the accuracy of these data