Overseas investment falls in UK

PAUL WALLACE

British firms invested three times as much overseas in 1994 as foreign companies invested in the UK. There was a particularly sharp fall in direct investment into the UK from companies in North America.

Total investments overseas are calculated by the Central Statistical Office to have amounted to pounds 18.5bn, pounds 2bn more than its earlier estimate. Meanwhile, the CSO has revised down its estimate of inward investment by pounds 500m to pounds 6.1bn.

The geographical breakdown for 1994, available for the first time, shows that the US continues to be the country attracting the most investment from the UK. In 1994, it accounted for 28 per cent of total investment. The next largest recipient was the Netherlands, with 13 per cent, followed by Australia with 10 per cent.

British companies stepped up their overseas investments in 1994 by almost pounds 2bn. But the big increase was to countries outside the European Union and North America, where direct investment by British companies almost doubled. The increase to Latin America was particularly marked. By contrast, investment to the EU fell 10 per cent and to North America by 32 per cent. Inward investment fell over a third to pounds 6.1bn, its lowest since 1986. In 1989 and 1990, it was running at three times that level.

The geographical breakdown showed investment from North America plunging from pounds 5.2bn in 1993 to pounds 1.8bn. However, investment from countries in the EU rose from pounds 1.7bn to pounds 3.3.bn.

In the first half of 1995, British companies have again increased their investments overseas, which are running at an annual rate of pounds 23bn.

However, there has been a recovery in inward investment, which is running at an annual rate of pounds 14bn.

The importance of sustaining such a recovery is not in doubt. According to the DTI, 40 per cent of manufacturing exports come from foreign-owned enterprises. Overseas companies account for 18 per cent of all manufacturing jobs and a third of net capital expenditure.

The problem Britain faces is one of increasing competition. Other countries in the EU are making much more active efforts to attract inward investment and the EU itself is facing competition from central and Eastern countries.

According to Regions of the New Europe, a study by Ernst & Young, 20 per cent of investment in Europe is being directed to countries of the former Eastern bloc.