European investors shun UK

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The Independent Online

Inward investment into the UK from mainland Europe plunged by 80 per cent last year because of the Government's continued refusal to enter the euro, according to an authoritative study published yesterday.

Inward investment into the UK from mainland Europe plunged by 80 per cent last year because of the Government's continued refusal to enter the euro, according to an authoritative study published yesterday.

But at the same time Britain became a much more attractive location for American companies, helping to make it the fourth most popular country in the world for foreign investors compared with last year's ranking of seventh.

The survey, carried out by the management consultants A T Kearney and based on interviews with a panel of the world's top 1,000 businesses, also found that the willingness of companies to expand abroad rose last year for the first time since 2000 when foreign direct investment (FDI) hit a record $1,400bn (£782bn).

According to the survey, the three accession countries of Poland, the Czech Republic and Hungary were all more attractive than the UK to European companies last year, even though none of them is yet in the euro. The UK slipped from eighth to 12th position.

However, Britain shot up inpopularity with American investors, jumping from 11th to second, despite the strength of sterling against the dollar which made it more expensive for US companies to set up plants or buy companies here.

The survey also notes that the bitter transatlantic dispute over the war in Iraq failed to dent capital flows, with FDI from the US into Europe rising by one-third to $61bn.

Notwithstanding the surge in US investment into Britain, the overall flow of FDI into the country fell by a half in 2003 to $14.5bn, mainly as a result of reduced investment from other European countries and outright withdrawal by some investors.

The two most favoured locations for inward investment were again China followed by the US.

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