Direct Foreign Investment Essay

1554 words - 6 pages

Describe pattern of DFI into/out of U.K.The UK has been a popular economy to invest into in recent years second only to the United States. Endorsed by the fact that with only one percent of the world's population the UK receives nearly 8% of the worlds cross border foreign investment. The greatest amount of investment occurred in 2000 with a staggering 116,552 million dollars of investment into the UK, the highest figure ever recorded. In this year the amount of investment from Europe rose by 14 billion (but fell by 1 billion from the Americas). The amount of direct foreign investment has gradually been increasing over the past twenty years up until the year 2000, there was a reduction between the years 2000 and 2001 resultant, most probably from the events of September the 11th which follows the global trend. Out of the top 500 firms that operate in the UK, 313 of them are foreign owned. There are a number of reasons as to why the UK would be an attractive place to invest in including: it is English speaking (common language), it has access to the large European market both geographically and in the fact that there are no trade tariffs imposed, it also has a large and educated workforce to name but a few.Outward investment from the UK is considerably greater than inward investment. One fifth of developed country outflows come from the UK and the majority of this goes to the US. The amount of direct foreign investment has gradually been increasing since the 1980s most probably influenced by the 1979 abolition of foreign exchange controls which freed the flow of financial capital between the UK and overseas, in 1992 the approximate amount of foreign investment overseas was in the region of $27 billion this is in contrast to the amount in 1998 which reached $114.2 billion dollars.Describe the pattern if DFI into/out of UK compared with the rest of Europe.The pattern of DFI in comparison with the rest of Europe is that there is a far greater amount of DFI crossing UK boundaries than there is on average in Europe. Europe has been criticised, in the past as being over regulated, overtaxed and inefficient for this reason it is believed that DFI has been steered into UK at the cost of Europe. The UK is Europe's favourite investment location; in 2000 there was a 5% increase in investments in Europe yet in the UK there was an increase of 13%. The UK's investment market share in Europe is 26% the next largest being France with a 15% share.However this pattern looks to be changing. In the first six months of 2001 the number of new investment projects in Europe increased by 2% yet there was a fall in the UK of 25%. The rise of 2% in Europe is misleading as, in the European union countries suffered an average decrease of 15% however projects in Central and Eastern Europe rose by 54%. As with the UK the USA is most certainly the largest investor into Europe, again there was also a decline of investment due to the economic global downturn and most specifically...

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