7. Investment

brexit-fact-base-london — Photo by Sichon/Shutterstock

Investment is a key driver of future prosperity:
- domestic investment is called Gross Fixed Capital Formation (GFCF): for the UK more than half is business investment and the rest pubic sector
- foreign investment is called Foreign Direct Investment (FDI)
UK is a low-investment nation ranking:
- 28th out of 31 OECD peers
- bottom of the G7 for 24 of the last 30 years
Brexit impact: business investment is estimated to be 10-12% (or more) lower due to Brexit
In 2024, underlying global FDI flows declined by 11%, continuing a downward trend:
- flows to developed countries fell by 22% in 2024
- FDI plays an important role in UK economy
  - UK ranked 4th globally for FDI inward stock (behind US, EU, China)
  - however, UK is outside the top 20 countries for inward FDI flows
UK’s stock of inward FDI comes mainly from its top trading partners into its main trading sectors:
- EU (35%), US (32%) and rest of Europe (14%)
  - EU share has dropped from 46% in 2016 but is still a key source of inflows
- top UK sectors for FDI (83% of total) are financial services (29%), professional and support services (17%), manufacturing (15%), retail and transport services (12%), information and communication services (10%)
Brexit impact: value of UK inward FDI flows relative to GDP in 2023 fell for the sixth year running since 2016
Freeports and enterprise zones are used to attract investment but, in practice, provide limited economic benefits