Government statistics analysed by Grant Thornton found that UK investment in
foreign companies was concentrated in the EU, where it more than doubled to
£12.0bn, and other developed countries, where it more than trebled to £13.3bn.
The number of deals involving UK companies investing abroad were at their
highest level since 2000 at 388, with the total value of £37.7bn – the highest
since 2001 and 15% higher than the 2005 total of £32.7bn.
Investment in developing countries such as India and China fell from £7.2bn
in 2005 to £5.0bn in 2006, despite a major government-sponsored push to
encourage UK involvement in emerging markets. This was a cause for concern,
according to Grant Thornton, which claimed that UK businesses are “writing their
own death warrants” by ignoring opportunities from the world’s fastest growing
economies. “UK businesses are missing out on vital import and export
opportunities,” said Anuj Chande, international business partner at Grant
The UK remains attractive to inward investment, however, with 242 deals being
completed in Britain by foreign companies, which, together, invested £75.5bn – a
50% increase on the £50.3bn of investment in 2005.
It seems, however, that emerging economies are increasingly interested in
investing in the UK. A staggering £40bn, spread across 32 deals, was invested in
the UK by developing economy companies – an almost eight-fold increase on the
£5.3bn recorded in 2005. Developed countries outside the EU or US invested more
than £16.0bn spread across 46 deals, leaving just £18.5bn for US and EU-based
investment in the UK.
“We are seeing far less aggressive takeover strategies by US firms, which,
hampered by a weak dollar, have left the door open for businesses from other
countries such as India and China to launch ambitious takeovers in the UK.
Tata’s recent acquisition of Corus being the latest example,” said David Brooks,
head of M&A at Grant Thornton. “Foreign companies are attracted to the UK by
its favourable regulatory regime, its competitiveness in the global market and
its veritable lack of protectionist policies. It is now seen as a
tried-and-tested region for successful cross-border M&A.”
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