Foreign Direct Investment

The president of the US Chamber of Commerce, Tom Donohue, reaffirmed yesterday that American businesses would continue to invest in Britain regardless of whether it joined the euro. Speaking at a press conference in London with Digby Jones, head of the CBI, he expressed his satisfaction with the US-Britain relationship and hinted that mooted EU chemicals regulations could drive US business away from Europe . Asked about inward investment, the subject of one of the Chancellor's five tests on the euro, Mr Donohue said that Britain 's strong relationship with the US did not depend on the euro. "The UK is the largest investor and receiver of investment for the US in the world," he said. "We have a common language, a common system of finance and a similar judicial system, and I can see all kinds of investment continuing from the US . (Independent UK 17 Jun 2003 ) 

The latest wheeze of the pro-euro lobby is to claim that Britain is losing inward investment as a result of not joining the euro. They're half right. There does now seem to be some evidence that Britain's share of inward investment is dropping. A report from accountants Ernst & Young makes this point very clearly -- but it does NOT link the decline to the euro. On the contrary, it is quite specific. It blames poor economic performance in the USA, where much of our inward investment comes from. Key points to remember: · Research shows that investors come to Britain for low taxes, low regulation, and the English language -- not for the EU or the euro. · Britain has always got the lion's share of investment from the US -- so a US downturn hits us first · EU enlargement gives investors ten new low-wage destinations in the EU -- another threat to inward investment in Britain · The CBI says this Labour government will have increased taxes on business by £47 billion in eight years. Labour has also massively increased regulation -- and seven of the CBI's top regulatory gripes come straight from Brussels. David Frost is Director General of British Chambers of Commerce representing 135,000 businesses. He says: "Our competitive advantage is being eroded. We have seen a growing burden of legislation and red tape hitting business. That tax and legislative burden is not shared by our competitors. The impact has been that our share of foreign investment is going down". So let's be clear. Inward investment is going down, but it's nothing to do with the euro. It's the fault of this Labour government, allowing our tax and regulatory advantages to be eroded -- and of Brussels for piling on red tape. (January 2003 Roger Helmer's electronic newsletter from Brussels, rhelmer@europarl.eu.int)

Inward investment is still pouring into Britain. We receive more inward investment than France or Germany and National Statistics figures in June showed inward investment up 10 percent in 2001. Confidence in Britain as a place to invest is also rising outside the euro according to a recent AT Kearney report, and a recent UNCTAD report showed that the UK had risen from fourth to second place in the inward investment league table in 2001. There is no evidence to suggest that we are "missing out" by keeping control of our own economy - what we are "missing out" on is higher unemployment, higher inflation and slower growth. ("No" Bulletin 18/10/02)

The Government's Trade and Industry Secretary Patricia Hewitt has suggested that inward investors will be less likely to invest in Britain outside the euro, despite the fact that a new survey this week has shown that Britain rose from fourth to second place in the world investment rankings. The new survey, by the United Nations, showed that between January and September 2001, Britain attracted $54.6 bn of investment - more than France ($29 bn) and Germany ($20.8 bn) combined. Having been ranked third in 2000 because of the enormous investment Vodafone's acquisition of Mannesman generated, Germany slipped back to seventh place. Ms Hewitt said, "We will assess the five tests together, but the views of the inward investors, certainly from Japan and Asia, are very clear." Patricia Hewitt is stuck in the past. The euro lobby is obsessed with Japanese investment and carmakers. However, Asia as a whole accounts for less than 5 percent of the total investment of the UK (compared to 35 per cent for the US) and cars account for just 4 percent of British exports to the EU. ("NO" Campaign bulletin 25/1/02)

New figures out this week from the Office for National Statistics, show that inward investment in 2000 reached record levels. The total stock of investment in 2000 reached £291.8bn, compared to £238.3 bn in 1999 - a rise of over 20 percent. ("No" Bulletin 13/12/01)

Figures released by Invest.UK on 11 July showed that Britain received record levels of inward investment in 2000. The main points of Invest.UK's annual review were: § The stock of inward investment rose to £341 billion, 36 percent higher than in 1999. § There were 869 investment projects compared to 757 the previous year, a rise of 15 percent. § This investment created over 70,000 new jobs in Britain. § The US is the largest investor in Britain, accounting for nearly half of all projects. US inward investment alone created nearly 40,000 new jobs. ("No" bulletin 12/7/01)

According to a report produced by the accountants Ernst & Young Britain attracted 26 percent of foreign direct investment in Europe last year, which puts the country well ahead of all others. Moreover, the percentage had risen from 24 in 1999. The closest rival is France with 15 percent, a 3 percent fall from the previous years. Germany’s share fell from 9 to 7 percent. The majority of the British projects were in the high technology service sector, while more manufacturing projects were attracted to mainland Europe. Of the regions, London is the single most attractive one in Europe with the Thames Valley performing strongly. The report deals only with foreign investment projects, not with merger and acquisition activity. It looks at the number rather than the value of these projects, and is, therefore, rather limited. It does, however, show that not joining the euro has not made Britain less attractive to foreign investors. A different report by Deloitte Research shows that Britain remains the favoured destination of American investors. In 1999 $10.1 billion was invested in Britain, up from $6.2 billion in the previous year. The second largest sum, $4.2 billion went to Germany. (EUobserver.com 8/5/01)

As a proportion of GDP inward direct investment to the UK in '99 was 27.3%, the highest in the group of 7. The EIU study points out that remaining out of EMU has not compromised our ability to attract inward investment in '99 the year of the euro's launch, with it totaling $84.8 billion, almost twice the level of Germany's. This also happened to be a record. Furthermore the EIU report states that FDI inflows in the UK in 2000 are estimated to have exceeded the '99 total. Wider still and wider - inward investment appears to say something about how foreign companies see us but it is our share of outward investment that the truly international nature of our outward economy is made most clear, as the chart reveals the UK is the world's second largest supplier of FDI in that it contributes more than two thirds of America's an economy roughly six times our size. The UK stock of outward FDI is equal to Germany and France added together and our share of the world's total is rising. (Sunday Telegraph Business Comment Feb. 25th, 2001)

Britain has the seventh most free economy in the world according to a annual survey undertaken by the Heritage Foundation, the leading Washington-based think tank. The 2001 Index of Economic Freedom, published in London on 6 December, measures the degree of flexibility in economies on different factors including levels of taxation, regulation and inflation, and openness to foreign investment. On this basis Britain significantly outscored the large Euroland countries. Germany is the 20th most free economy in the world, Italy the 32nd, Spain the 35th and France the 39th. The Heritage Foundation concludes that very free economies enjoy greater prosperity in the long term. (No-bulletin 72, 11/12/00)

A recent study by Ernst and Young has highlighted the difficult business environment faced by investors in Euroland. The study, The Attractiveness of France as a Business Site, was based on responses from the heads of 350 French inward investors. Only 45 per cent said that the membership of the euro gave businesses a competitive advantage. 56 per cent of the firms in the survey intend to move at least some of their French operations abroad; Britain was the most popular alternative destination. Companies' greatest worry was the level of regulation in France, in particular the 35 hour week and the high overall burden of taxation. (No-euro bulletin 3/11/00)

Britain is booming outside the euro with a record surge in foreign firms setting up here, according to a survey yesterday. The number of overseas companies choosing this country as a base jumped by nearly 25 per cent in the last two years - despite the continuing strength of the pound. The figures will be a another setback for single currency campaigners. They have claimed repeatedly throughout this period that investment would dry up if Britain failed to commit itself firmly to joining the eurozone. The number of foreign-owned companies here surged from 23,300 in 1998 to 28,777 this year, according to a report from Dun & Bradstreet, the business information firm. More than a quarter of foreign firms now in the UK are offshoots of US companies. Many European firms also regard Britain as a great place to do business, despite the supposed drawbacks of being outside the euro. Around 10 per cent of the foreign firms in Britain are Dutch or French. Germany has the fourth largest number of UK off-shoots. (D Mail 16/8/00)

COMPUTER giant NEC last night smashed the myth that Japanese firms will quit Britain unless we join the euro. Its president insisted Britain is the best place in Europe to do business. Koji Nishigaki also said NEC could easily live with the strong Pound, rubbishing claims by other Japanese firms they cannot cope with its high value. His view is a slap in the face to pro-euro fanatic Foreign Secretary Robin Cook, who has insisted a flood of Japanese firms would leave. NEC, Japan's largest computer maker, has its main UK base in Mr. Cook's constituency of Livingston, West Lothian. Mr. Nishigaki's comments confirm the City's view that Japanese firms' threats to leave are scare tactics. He dismissed fears that exchange rates were crippling Japanese firms. He said: "People claim that Sterling is too high compared with the euro. Of course we'd prefer the Pound to be lower, because that would increase our profits. But it's not so big an issue for us just now." Mr. Nishigaki stressed the flexibility of the British workforce and the fact we speak English are more important to NEC than the Pound's level against the euro. (The Sun 7/8/00) According to the Japanese Kyoda news agency, Toyota is planning to step up production at its British plant by around 30 per cent next year. It will spend "several billion yen" to transfer production of the Corolla hatchback to its plant in Burnaston, Derbyshire. Out of 3.4 million British companies, only around 50,000 export to the Eurozone. (BfS Bulletin 10/8/00)

Germany has postponed the introduction of a new law which would make it difficult for foreign companies to take over German firms against the will of their management, Financial Times Deutschland reported on Wednesday. Germany had set back its plans by six months, while European authorities in Brussels draw up similar plans, FT Deutschland said. "If it looks likely that EU guidelines will be debated quickly by the European parliament, then we will wait. But if the debate takes years, then we will press ahead with our plans," the newspaper quoted a spokesman for German finance minister Hans Eichel as saying. A spokesman for the German finance ministry, Joerg Mueller, confirmed the content of the remarks, but denied suggestions that this meant the German law had been postponed. "The bill is scheduled to come into effect from January 1, 2001. We haven't yet decided whether that timetable will be kept to or not," said Mueller. (FRANKFURT, Aug 2, 2000 AFP)

A poll of major investors in the City of London by the London First Centre revealed that a decision to stay outside the euro would make no difference to investment in the City. Nine out of ten said their financial commitment would not change if Britain stays out of the euro while 1 in 50 said that they would invest more if we stayed out of the euro. (BfS bulletin 21/7/00)

Official ONS figures for 12 months to March 2000 show Foreign Direct Investment up 23% to all time high of £252.4 bn. The source of these investments was: USA 48% Japan 7.7% Germany 7% Canada 6% France 6% (others 25.3%) Jobs created by these investments... (000): USA 68.0, France 14.6, Japan 11.4, Canada 10.4, Germany 9.0, S Africa 3.3, Netherlands 1.9, Sweden 1.8, Ireland 1.4, Australia 1.2 (Eurofaq posting C Speight 5/7/00)

Tide of inward investment in the UK:- 1996 £147.6 billion 1997 £167.1 billion 1998 £207.5 billion 1999 £252 billion (Sunday Telegraph - May 21 2000)

Stock of Foreign Direct Investment in Britain, end 1997, £bn: Financial services - 38;Mining (incl.oil & gas) - 25; Retail/wholesale trade - 14; Property & business services - 11; Chemicals and fuel products - 9; Textile, wood, printing & publishing - 8; IT & communications - 8; Electricity, gas & water - 7; Food products - 6; Metal & mechanical products - 6; Hotels & restaurants - 3; Transport equipment (including cars) - 2. (Source: ONS 4/7/00)

The Japanese account for a minute part of all inward investment. The figures are: the USA 53%; Switzerland 16%; Netherlands 6%; Germany and France 5% each; Australia 3%; Irish Republic, Belgium and Bermuda 2% each; Norway 1%; Japan 1%. (Eurofaq posting, 1998 figures 1/7/00)

Dr John Hulsman of the Heritage Foundation, a leading Washington-DC based think tank, pointed out this week: "If Britain joins the euro, it loses all of the economic advantages that are the reason that America invests in Britain in the first place" (Newsnight, Wednesday 28 June 2000).

A new survey has however shown that only 15 per cent of Japanese companies operating in Britain think that they would benefit from British adoption of the euro. The survey, for Japan’s External Trade Organisation, showed that another 15 per cent thought that British participation would cause them substantial problems, while the rest said there would be no overall business benefit (Financial Times, 18 April 2000).

Today, instead of serving as a catalyst for economic growth through free trade, the EU is focusing inward, promoting trade among its members but raising walls against the rest of the world. Today, in order to join the EU, nations are forced to raise tariffs on the rest of the world's goods and yield their sovereign right to engage in trade expansion agreements with other nations. (D Telegraph article by Senator Phil Gramm 16/5/00)

When the euro was launched, the euro lobby claimed that we would lose investment by remaining outside. Clearly this has not happened. As the AT Kearney report in January 2000 showed, investors have become more confident in Britain in recent years. Investors come to Britain because we have lower taxes and less regulation than the Eurozone. The biggest threat to investment is giving away control over our economy which would destroy our flexibility and take us back to boom and bust. (January 2000)

In January, the pro-euro campaign claimed that inward investors would leave Britain because we are outside the euro. We predicted events would prove them wrong and they have - spectacularly. "Last year £15 billion came from Europe to Britain, and £22 billion from America. We attract more inward investment than France and Germany put together - in fact, German companies want to move to Britain. This is because we have a much more competitive dynamic economy. (Business For Sterling Press Release 15 December 1999)

In 1998 foreign direct investment into the EU more than doubled to £61.7bn. The UK figure also more than doubled to £32bn, 52% of the total. (The Week in Europe 8/7/99). This at a time when there was great uncertainty whether the UK would join the euro and we are told foreign investors will pull out - Ed

Business Flees from Euroland. As the British Prime Minister hopes the UK economy may converge with that of Germany, recent announcements confirm a different trend. Earlier this month the TV manufacturer Sony closed its plant in Germany to open production in Wales. Last week General Motors confounded scare stories about car manufacture in Britain by returning its major engineering centre from Germany to UK. US company Dana, the world's largest axle manufacturer, left its message in no doubt by placing its entire plant on lorries and reassembling it in Leeds. And Europe's biggest insurer, the German company Allianz, has placed a two week deadline on its government to reverse crippling new tax proposals or it will leave for the City of London. Britain's success relies on sensible labour laws and competitive taxation and, of course, freedom from the straightjacket of the "euro". (Eurocritic Web Magazine posted 28/2/99)

Foreign direct investment in Britain in 1977 leapt by 38% to £21.8bn, the highest figure ever recorded. It is said that inward investors would shy away if Britain failed to join the euro, the opposite is in fact the case. The biggest inward investor was the USA. Britain receives 40% of all inward investment in Europe thanks to low costs, low government interference and flexible labour markets. Britain is also the world's second largest overseas investor, after the US. (D Telegraph 16/12/98)

Stock of Foreign Direct Investment in Britain, end 1997, £bn

"Although car makers enjoy a high political profile, as a group they are in fact relatively small investors " (Economist , 22nd January 2000)

BRITAIN has consolidated its place as the number one destination for inward investment in Europe, despite being outside the euro, according to US management consultants AT Kearney. Furthermore, only 3pc of directors at the world's largest companies say they will cut investment to those countries, like Britain and Switzerland, who remain outside the euro. Coupled with two other surveys showing British businessmen are losing faith in the euro, the findings contradict claims by Peter Mandelson that Britain's economic future depends on joining the single currency. In its twice-yearly survey of 250 executives at the world's 1,000 largest companies, AT Kearney found that Britain is the first choice of foreign companies hoping to make investments in Europe. The executives said that Britain was the third most attractive investment destination in the world, after the US and China. Since the launch of the euro, Britain actually rose in the league table, from fourth to third. By contrast, Germany has slipped from fifth to eighth in the world table. Official figures for inward investment in the financial year 1998-99 will not be published until next month, but AT Kearney expects them to soar from around £22 billion to £63 billion. Britain attracts 40pc of the European total. Separately, a survey for NCM, a company which insures exports, found that exporters are rapidly losing faith in the single currency. There has been a 14pc drop to 51pc for those companies in favour. Today's edition of Accountancy Age also has a survey showing 42pc of finance directors believe that it would be wrong to join the euro in the next Parliament, up from about 30pc before the currency was launched. (Electronic Telegraph 1/7/99)