Blog: UK remains attractive for foreign investment despite Brexit – FM | Financial Management

The UK’s strong industrial base and geographic location continue to make it attractive for investment. These advantages are underpinned by robust legal and regulatory frameworks, and strong corporate governance code that international investors understand and that provides some stability, said Tej Parikh, chief economist at the Institute of Directors.

The world-class universities located across the UK, and associated access to highly qualified graduates, is a further asset.

Financial services and professional services are particularly successful sectors and continue to attract investment from abroad, Parikh noted.

A notable development over the last five to ten years is the emergence of startups in the tech space, and UK fintech and digital firms are attracting significant international investment. Alongside these, renewable energy is another potential growth area for FDI.

“We’re at the stage where we’re evaluating the risk of these strengths being undermined by Brexit, the pandemic, and other factors,” Parikh said.

Manufacturing is one area that has become less attractive to international investors, particularly in light of withdrawal from the single market, but the UK’s strength as a financial services hub hasn’t been dented by much even after the loss of passporting rights within the EU, he added.

However, Parikh noted that the last three years of Brexit and political change has undermined the reputation of the country and its stability, and these factors could become difficult for investors to navigate as UK laws and regulations are reworked to replace EU regulations.

With the end of freedom of movement and consequent reduced access to skilled workers, coupled with existing shortages of talent in the STEM (science, technology, engineering, and maths) fields, “foreign investors know there is a risk that a UK firm may not have access to certain skillsets”.

The nation’s physical and digital infrastructure also requires attention. “When the government set out its industrial strategy in 2017, investors could see that the UK was planning to reinvest in its roads, rail, digital networks, towns, and cities, and that helped attract foreign investment,” he added. “Brexit and the pandemic mean the government’s focus has gone elsewhere.”

Samantha White is a freelance writer based in the UK. To comment on this article or to suggest an idea for another article, contact Chris Baysden, an FM magazine associate director, at Chris.Baysden@aicpa-cima.com.

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