Foreign Investment in the UK: The Facts in 2024

Foreign direct investment, typically abbreviated as FDI, refers to investments from one country into another, where the investor has an effective voice in the management of an enterprise. This typically means a foreign investor will own 10% or more of an enterprise.

There are three main types of inward FDI:

• New – a foreign investor will start a new business, set up a new office, building, or production.
• Expansions – an existing foreign investor will expand an enterprise’s production or operational facilities.
• Merger and Acquisitions – an investor will merge with or buy more than 10% of assets in an established UK company.

To fully understand the extent of the popularity of inward investment in UK cities, you need to know the appropriate facts and figures.

Let’s look at some statistics on trends for foreign investment in the UK property market and beyond over recent years.

55,000 Jobs Boost From FDI in 2020/21

A report from the Department for International Trade found that around 55,319 new jobs were created in 2020/21 due to FDI.

This has, naturally, been highly welcomed by the UK government and received massive government support, with the UK still one of the most attractive locations in the world despite the economic struggles caused by Covid-19.

In fact, in 2020/21, there were around 1,538 foreign direct investment projects.

There were significant regional variations in the number of jobs created due to foreign investments. In the South West, the number of jobs was up 52% over 2020/21, with the East of England and West Midlands attracting more jobs than pre-pandemic levels.

Scotland also saw a jobs boost, with a 10% rise over the previous financial year, while Wales saw new investment projects increase from 61 to 72 in 2020/21.

The main contributors to this jobs boost were in industries like:

• food and drink
• creative and media
• environment
• infrastructure and transportation
• biotechnology
• pharmaceuticals

According to the United Nations Conference on Trade and Development analysis, the UK has the second-highest inward FDI Stock, reaching $2.2 trillion in 2020 – up from $2.1 in the previous year.

While the levels of foreign investment in the UK are still some of the highest in the world, the numbers show that there’s been a steady decline over the past five years, likely linked with the UK leaving the European Union and Covid-19.

Let’s look at the official data from the Department for International Trade to see how job creation and the number of FDI projects have changed since 2016.

Total Number of Jobs Created In the UK From FDI

The total number of jobs created due to foreign investment had dropped by 1% since 2019/20 when 56,117 jobs were created.

These figures are also down from 2016 and 2017, which saw 75,266 and 75,968 jobs created.

Total Number of FDI Projects Since 2016

Alongside job rates dropping since 2016, FDI projects have also seen a gradual decline.

In 2016 and 2017, there were 2,265 and 2,072 FDI projects in the UK.

In 2021, there were around 1,538 projects in the last financial year, a decrease of -32.10% since 2016.

FDI Projects and Jobs Created by UK Region

There are considerable variations amongst the rate of FDI and jobs created in UK regions.

Currently, the top 3 English regions for job creation are London, the North West and the West Midlands, which has seen the creation of 13,832, 4,309, and 4,443 jobs, respectively.

Likewise, the top English regions for FDI projects were London (492), the South East (163), the West Midlands (145) and the North West (139).

As you can see, these investment hubs attract the most significant investment bill and generate far more UK projects compared to other locations in the country.

To find out how much foreign investment in the UK has impacted the country’s property market, all you need to do is look at property market statistics over recent years.

According to official Land Registry data, the average UK property price has soared by over 173.93%, increasing from £97,964 in 2001 to £268,349 in 2021.

This figure is now at £285,000 as of March 2023.

This shows that property prices in the UK have almost tripled over the past 20 years, which is thanks to the increased levels of foreign investment in UK property.

If there hadn’t been such a high number of investors buying property in the UK from overseas, the UK average was estimated to have been just £174,000, which would result in a lower value-added to percentage increase.

With UK property prices now standing at around £285,009 and expecting growth of up to 6.2% by 2026, the impact of foreign investment in the UK is set to continue further down the line.

Huge Student Market Investment From Foreign Investors

Real estate is a hot commodity for many international investors, with UK property offering lower prices and higher rental yields than many other locations like China and Hong Kong.

This is particularly true for the student property market, with many buyers, particularly from China, choosing to buy student accommodation to house their children during their studies.

A report from Savills in 2021 found that over £5.77 billion was spent on purpose-built student accommodation in 2020, which Savills says is a sign of continued confidence in UK real estate to deliver high returns.

The same report shows that the number of UCAS applications in 2021 increased by 8.4% over 2020, with non-EU applicants rising by 17.1. This is significant for investors, as international students are more likely to live in PBSA, with Chinese students around 2.2 times more likely to live in PBSA.

Chinese investment in UK property in student cities like Liverpool and Manchester has become increasingly popular, as one in five students in the University of Liverpool is Chinese.

These interests also extend to cities like London, which are huge for commercial Tips for property investment projects. In fact, £3.69 billion was spent by Chinese buyers on commercial real estate in London in 2017 alone.

The Impact of Brexit on Foreign Investment in the UK

So, what about the impact of Brexit on foreign investment in the UK?

Well, it’s been mixed news for the UK following the Brexit vote. The amount of foreign direct investment has undoubtedly decreased since 2016, with the annual rate of job creation and the number of inward investment projects dropping.

However, this may not entirely be due to Brexit, with 2017 seeing the highest levels of FDI job creation of 75,968 jobs – one year on from the Brexit vote.

Also, while FDI projects dropped to 1,782 in 2018/19, it increased by 4% by 2019/20 – suggesting that Brexit may not be the cause or that the level of inward UK investment hasn’t been as impactful as first thought.