'Takeover target' UK attracts record $165bn investment

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The Independent Online

Britain attracted a record amount of foreign investment last year, according to figures yesterday that confirmed the UK's position as the world's leading takeover target.

Foreign investors injected $165bn (£91bn) in 2005, the largest amount ever recorded in the UK and triple the $56bn received in 2004, the Organisation for Economic Co-operation and Development said. It was also the largest for any OECD member.

The OECD said total investment into its 30 member countries rose 27 per cent to $622bn, the largest volume since the peak of the dot.com boom in 2001. But it warned a trend towards protectionism could halt the growth.

The record inflow into the UK was boosted by a wave of takeovers towards the end of last year that saw companies such as P&O, the shipping giant, Allied Domecq, the drinks company, and Abbey, the high street bank, fall into foreign hands.

"The high figure reflects, in part, the fact that many of the world's largest cross-border takeovers in 2005 targeted UK-based companies," the OECD report said. There were 21 cross-borders takeovers of UK companies in 2005, the largest number for any OECD country.

However, the headline number was distorted by transactions such as the multi-billion pound restructuring of Royal Dutch Shell.

The total includes mergers and acquisitions, cross-border loans and capital transactions as well as "traditional" green field investment such as a new factory.

A report last month by Ernst & Young looking just at direct investment in new outlets showed Britain's share of FDI within the European Union fell last year.

Meanwhile, official figures show that takeovers of UK companies in the fourth quarter of last year, at £15.2bn, were the strongest since the third quarter of 2000.

The Government has hailed M&A activity as a sign that the UK is seen as competitive. But critics have said it shows the UK is an easy target for predatory takeovers by foreign companies.

Overseas investment by UK companies also rose but to only $101bn, meaning the UK has become a net importer of direct investment for the first time in 15 years. France was the biggest overseas investor.

While there was little sign of a slowdown in M&A activity in the UK, with BAA, BOC, Pilkington and Westinghouse all falling into foreign hands, the OECD warned of "clouds on the horizon" among its members. It said several countries had tightened FDI rules because of fears of "negative consequences of globalisation".