What does FDI mean?
Foreign direct investment (FDI) is defined as investment in an enterprise operating in a foreign economy, where the purpose is to have an ‘effective voice’ in the management of the enterprise. In FDI statistics, an ‘effective voice’ means owning 10% or more of a company; any investment below this is counted as a ‘portfolio’ investment and excluded from FDI statistics.
FDI can be inward or outward. Inward FDI is investment from a foreign country into the UK. Outward FDI is investment from the UK into a foreign country.
FDI covers a range of company investments, such as:
- establishing a branch or subsidiary in a foreign country, injecting start-up capital – a ‘greenfield’ investment;
- buying or selling (fully or partially) the equity of an existing foreign company – M&A activity; or,
- putting additional capital into an existing foreign subsidiary or allowing it to retain profits rather than returning them to the parent.
FDI statistics measure stocks and flows.
- Stock of FDI is the net book value of foreign investment (it is not the cumulative sum of annual FDI flows). Stock is subject to changes in valuation in company accounts and exchange rate fluctuations, which means its value can change without new flows.
- Flow of FDI is the amount invested in a given period, usually one year. Annual flows can be volatile, reflecting, for example, one-off M&A activity rather than significant ‘greenfield’ investments.
If you would like to know more about FDI, please see the House of Commons Library Report of 2023 on FDI statistics, or the annual UNCTAD World Investment Report (2024) or the OECD’s reports on FDI.
Recent global trends
Global FDI in 2024 increased marginally from $1.45 trillion to $1.51 trillion. However:
- this headline figure was inflated by volatile financial flows through European economies with high conduit flows.
- when these flows are excluded, global FDI flows declined by 11% from $1.67 trillion to $1.49 trillion:
- marking the second consecutive year of double-digit contraction;
- confirming persistent fragility in international investment flows.
The decline in FDI flows was in stark contrast to the rise in GDP and trade since 2016 (see Figure 7.3).
Figure 7.3: Trends in FDI, GDP and trade
Source: UNCTAD, World Investment Report 2025, Chapter 1
Global FDI trends: 2024 vs 2023
UNCTAD commented on the main global FDI trends in 2024 (see Figure 7.4).
Greenfield project announcements showed mixed signals:
- the number of projects announced in industrial sectors increased slightly (by 3 per cent), but their value fell by 5 per cent;
- nonetheless, at $1.3 trillion, the value of greenfield announcements remained at historically high levels – the second highest on record;
- activity was strongest in supply chain–intensive manufacturing industries, with regions such as South-East Asia, Eastern Europe and Central America benefiting most;
- these trends reflect the continued effort by multinational enterprises (MNEs) to rebalance production locations amid a shifting global trade environment.
Cross-border mergers and acquisitions (M&As) increased by 14 per cent in 2024 to reach $443 billion (predominantly FDI flows in developed countries), yet:
- this recovery built on a low base and leaves M&A activity well below the average of the past decade;
- there is a longer-term trend of declining shares of cross-border deals relative to total M&A activity, as firms increasingly opt for domestic and near-market acquisitions:
- this trend reflects growing sensitivity to geopolitical risks, regulatory hurdles and shifting industrial policies.
Global FDI flows fell by 11 per cent in 2024, to $1.5 trillion; however, this figure conceals wide differences in performance across economies:
- developed countries experienced a 22 per cent contraction, while flows to developing economies were stable:
- much of the global decline was due to a 58 per cent fall in FDI to Europe;
- other contributors were the decline of FDI to China, where inflows dropped by 29 per cent, and South America, where inflows declined by 18 per cent.
- by contrast, several regions recorded growth:
- North America saw a 23 per cent increase in FDI, with inflows in the United States of America up 20 per cent, mostly driven by a doubling of M&A sales values and by large-scale investment in high-tech and clean energy sectors.
- ASEAN recorded a 10 per cent growth in inflows, Central America a 4 per cent growth and Africa 75 per cent.
- The increase in Africa led to a new record for FDI inflows to the region. The sharp rise was driven primarily by a single development mega-project in Egypt – valued at $35 billion; yet even excluding this project, the region still recorded a 12 per cent increase.
- the relative resilience of developing regions reflects ongoing investor interest in market-seeking and resource-based investment, and the growing role of South–South capital flows.
Figure 7.4: FDI trends in 2024 vs 2023
Source: UNCTAD, World Investment Report 2025, Chapter 1
Global rankings – inward FDI stock
FDI plays an important role in the UK economy and the UK’s global ranking indicates the UK’s relative attractiveness as a destination for foreign investment. As an EU member and ‘gateway to Europe’, the UK had previously benefited from strong inflows of foreign investment, particularly in the 1980s.
In 2023 the UK’s stock of inward FDI was (see Figure 7.5):
- 92% of GDP compared to 65% for the EU (the data excludes Special Purpose Entities – SPEs);
- ranked fourth globally in terms of size, behind the US, EU and China, and just ahead of the Netherlands.
Figure 7.5: Global rankings for inward FDI stock (2024)
Source: OECD, FDI in Figures, April 2024
Global rankings – FDI inflows
The global rankings for recent FDI inflows tell a different story for the UK. In 2024, the US, China, Singapore and Hong Kong continued to dominate global inflows as they had in 2023 (Figure 7.6). However, despite its high level of FDI stock, the UK ranked outside the top 20 for inflows in 2024 (as it did in 2023).
Figure 7.6: Global rankings for FDI inflows 2024 and 2023
