According to theWorld Investment Report 2023published by UNCTAD, after the decline observed during the previous year (USD -71.1 billion), FDI inflows were positive by USD 14 billion in 2022, still way below the average recorded in the 2018-20 period (USD 66.6 billion). In the same year, the total stock of FDI stood at USD 2.7 trillion. According to EY, the UK recorded 929 FDI projects in 2022, down 6.4% from 993 in 2021, of which 299 were located in London. A key factor in the UK’s overall decline in project numbers was a significant fall in digital technology, its leading sector for FDI. Tech projects declined by almost a third (32.2%), from 345 in 2021 to 234 in 2022, with the UK’s share of Europe’s digital projects falling from 29.2% to 19.8% in the same period. Over the past decade, the UK has been one of Europe’s top recipients of FDI and it remains the top destination for U.S. outbound investment. However, the Brexit process has raised many concerns from some investors about increased trade costs with Europe and the volatility of the pound sterling. Data from the Office for National Statistics (ONS) show that the United States maintained its dominant position in terms of both immediate (GBP 675.7 billion) and ultimate (GBP 817.4 billion) inward FDI. Following the U.S., Japan and France held the second and third highest ultimate positions at 8.8% and 6.2%, respectively. The sectors attracting the majority of foreign investment are financial services; professional, scientific and technical services; retail and wholesale trade; transportation and storage; and ICT (OECD). According to the latest figures from the OECD, in the first half of 2023, FDI inflows to the UK were negative by USD 63.3 billion, compared to a positive flow of USD 18.3 billion recorded in the same period one year earlier.
The UK has amended the legal grounds on which the government can intervene in certain mergers under the Enterprise Act. The changes lowered the jurisdictional thresholds for merger review in three specific sectors: artificial intelligence, cryptographic authentication technology and advanced materials. The UK’s National Security and Investment Act 2021 (“NSIA 2021”) entered into force in 2022. The new law introduced a distinct investment screening regime for companies seeking to gain control of a company or asset in 17 sectors of the economy deemed relevant to the UK’s national security interests (e.g. energy, robotics, defence, AI, transport, communications, etc.). The process for notification will involve an electronic submission to the Investment Security Unit (“ISU”) at the Department for Business, Energy & Industrial Strategy (“BEIS”), which has the power to impose conditions on transactions and even to unwind or block them. Despite the Brexit process, the British economy is resisting: London remains the financial capital of Europe, home to the European headquarters of almost 60% of companies on the Fortune 500 ranking. Furthermore, Great Britain maintains a strong currency, and the country remains one of the most important European consumer markets. The UK ranks 4th among the 132 economies on theGlobal Innovation Index 2023and 30th out of 184 countries on the2023 Index of Economic Freedom.
