Posted on 09/17/2003 4:35:33 PM PDT by stck
UK slumps down investment league
Britain slips to seventh place in global table; Decline blamed on fall in M&A; Eurozone edges ahead
By Michael Harrison, Business Editor
18 September 2003
The UK has tumbled down the world league of countries attractive to foreign investors with inward investment into the UK declining by 60 per cent, according to a study released yesterday.
The survey shows that foreign direct investment (FDI) into the UK fell to $25bn (£15.6bn) last year compared with $62bn in 2001, while Britain is now only rated as the seventh-best country to invest in compared with a ranking of third the previous year.
In contrast, investment into the eurozone inched upwards, with Germany, its biggest member, recording a 12 per cent increase in flows of FDI last year to $38bn.
Germany is ranked fifth, two places above the UK, as the most popular location for inward investment.
The survey by the management consultancy AT Kearney confirms the findings of other reports showing the UK lagging behind its Continental rivals in attracting overseas investment and will be seized on by the pro-euro camp as further evidence that the pound's absence from the European single currency is hurting the economy.
However, the author of the survey, Paul Laudicina, the head of AT Kearney's global business policy council, said the fall in investment into the UK was largely the result of the sharp decline in merger and takeover activity and not Britain's absence from the euro.
He also pointed out that the decline in stock markets and takeover activity had led to a even steeper 80 per cent fall in levels of FDI into the US last year. "The UK and the US rode the rollercoaster on the way up and now they are riding it on the way down," he said.
The annual Invest UK report, published in July, recorded a 7 per cent fall in inward investment in 2002-03, although again it attributed this largely to the decline in M&A activity. The number of projects involving investment in new or existing facilities actually rose by 19 per cent.
The AT Kearney study, based on an annual survey of 1,000 senior executives around the world, found that for the first time since 1998, the majority of the top 10 destinations for foreign investors were emerging economies such as China, Mexico, Poland, India, Russia and Brazil.
Although the UK has lost some of its attraction as a location for foreign investors, this was because they were putting more and more of their money into Eastern Europe, rather than into countries which are part of the eurozone. Poland, for instance, jumped from 11th to fourth position in the league table of 25 countries.
The survey also stressed that the UK continued to exert a strong pull on foreign investors even though it was outside the European single currency. "Global investors value the UK's pro-business climate, policies towards foreign takeovers, deep and liquid capital markets and flexible labour market," Mr Laudicina said.
Although FDI into the eurozone grew by 0.8 per cent last year, this was largely accounted for by the increased investment into Germany. France slipped from fifth to 11th place in the league, with FDI declining from $55bn in 2001 to $51.5bn, while Italy fell from sixth position to 12th.
China overtook the US last year as the country with the biggest FDI in the world by value and, for the second year running, it came top in the AT Kearney survey of most popular locations.
This was despite an overall decline in FDI worldwide to $651bn in 2002 compared with $824bn the year before and a peak of $1,400bn in 2000.
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