UK tops the table for inward investment in Europe

The United Kingdom won more foreign direct investment (FDI) than any other country in Europe in 2011, according to a new survey by one of the world’s leading business analysts

The UK attracted 17 per cent of the available overseas business investment last year, with Germany second on 15 per cent, according to the report by Ernst & Young.

Ernst & Young is one of the largest professional service firms in the world and one of the “big four” accounting firms, along with Deloitte, KPMG and PricewaterhouseCoopers. The company is a global organisation with member firms in more than 140 countries, headquartered in London.

The investors told the survey that the country’s quality of life, culture and language, the stable political environment as well as technology and infrastructure were the main attractions to investing in the UK.

Other key findings showed that foreign investors expect the UK's attractiveness to further improve over the next three years, with financial services, energy and utilities and manufacturing becoming major growth sectors, and with already strong sectors such as research and development and innovation and financial services set to be further reinforced.

The United States of America remains the largest investor in the UK, followed by Germany, India, France and China.

The report said: "The UK’s continued position at the top of the European FDI rankings both for projects and employment is good news, and underlines the country’s resilience and sustained attractiveness to companies from all over the world."

It went on: "The UK’s long-standing leadership in European FDI is a direct result of two key factors: its position as the investment location of choice for US companies, and its strength in several key sectors, including the seemingly-declining financial services industry."

UK Trade & Investment Minister Lord Green commented: "Investment is critical to our economic recovery and future prosperity, so it is good news that the UK remains the most attractive destination in Europe for foreign direct investment. But there is no room for complacency, which is why the government is committed to making the UK the best place in Europe to do business.

"We have carefully listened to investors' views. Reforms to corporation tax, the introduction of the patent box and the Olympics business programme are designed to show the world that Britain is open for business and welcomes investment."

The Ernst & Young survey reported: “The 500 decision-makers we interviewed in overseas-based companies said the most attractive aspects of the UK from an FDI perspective are its quality of life, culture and language; stable political environment; and technology and infrastructure.

Most respondents expected the UK’s attractiveness as a location for FDI to improve further over the next three years, and some 86 per cent were “definitely” or “fairly” confident that the UK would be able to overcome its current economic challenges.

“This latter point is vital, as - according to the survey responses - the level of demand within the UK is the most important driver of FDI decisions, and the ability to use the UK as an export base is the second most important.”

Lord Green stressed that the UK Government was taking positive steps to attract foreign investors. In this year’s Budget, for example, the UK underlined its commitment to delivering greater certainty in the tax regime and cut the 50p top rate of income tax to 45p. Corporation tax will be further reduced to 22 per cent by 2014, which will be supported by the introduction of a new patent box in 2013 with a reduced corporate tax rate of 10 per cent.

Policy changes such as these will foster the UK’s competitiveness - and there are many promising signs in this area, he added.

The UK’s balance of trade is benefiting from increasingly strong exports of cars to China, Russia and the USA, helping the UK to reach a position where car exports exceed imports. Earlier this year saw a series of very positive motor industry announcements, with Vauxhall confirming that its new Astra will be manufactured at Ellesmere Port and Tata would be further investing in Jaguar Land Rover.

by Dick Meredith, London Press Service.