Brexit Strikes Fear into UK Foreign Direct Investment

May 24, 2016

By Thy

Concern over the EU referendum has weighed on the confidence of foreign investors in the U.K. this year, which might put the top European FDI destination at risk.

The Bank of England reported that the EU was the U.K.’s biggest investment partner. Moreover, giving up the EU membership would make U.K. less attractive in the eyes of non-EU investors.

U.K. was named as the top Europe’s foreign direct investment (FDI) destination as EY’s 2016 European attractiveness survey reported that FDI inflows to Europe hit record high in 2015 with 5,083 projects.

FDI in the U.K., accounting for one-fifth of the Europe, increased 14% to an all-time high. The Greater London led the urban area in Europe with 406 projects out of 1,065 landing in the U.K. last year.

“Unquestionably it’s possible the EU referendum is weighing on investors’ minds in terms of future projects. Our research has demonstrated that any deterioration in the terms in which UK businesses can access the European single market could be a concern for investors,” said Mark Harvey, EY senior partner, Scotland.

Concern over the high property prices, labor costs as well as deteriorating infrastructure has also driven the investors’ perceptions gloomier. For those reasons, only 36% of international companies in the EY’s survey were positive on the future attractiveness of the U.K. as an FDI destination, remarkably down from 54% last year.

The FDI directly benefits the FDI-related employment in the U.K., and the FDI inflows in the long run could be hit by a vote to the EU, potentially posing a threat to the labor market. In addition, Finance Minister George Osborne has warned that Britain would lose at least half a million jobs within two years if a Brexit happened.

It’s only one month away from the due date of the EU referendum, but Brexit has been heavily speculated to impact all the possible corners of the U.K economy.


If you want to harness the wisdom and insights from the crowd to monitor your portfolio free of charge, please sign up for myMarkets.

Tags:, ,