Foreign direct investment into the UK over the 2019/2020 financial year constitutes a glimmer of good news for an economy faced with the twin headwinds of a final exit from the EU and the fallout of the Covid-19 pandemic.

On 10 July, the UK Department for International Trade (DIT) published statistics showing an increase in UK inward investment projects in 2019 and the first part of 2020. According to the results, the UK attracted a total of 1,852 new inward investment projects in the 2019/2020 financial year, up 4% on the 2018/2019 financial year.

The US once again topped the list of sources of foreign direct investment (FDI) into the UK, with a total of 462 projects that created 20,131 jobs. Maintaining a close relationship with the US will be key for the British Government when navigating Brexit as the country is by far the most significant FDI source market to the UK.

The US is followed by India, Germany, France and China and Hong Kong, respectively, as sources of FDI. This is significant with trade war tensions still prevalent; the UK is about five times more reliant on the US than China for investment. Other locations highlighted by DIT include Australia and New Zealand, which are responsible for a combined total of 72 projects, and the Nordic and Baltic region with 134 – an increase for both regions.

Looking at UK regions, London remains way out in front with 638 FDI projects in 2019/2020. The South East is in second with 211, with the West Midlands third with 157 FDI projects.

In line with similar reports from across the world, the UK has seen the number of jobs created by FDI decline by 1,508, from 57,625 in 2018/2019 to 56,117 in 2019/2020. This could be partly explained by a combination of increased automation and heightened trepidation from investors about the state of the global economy. More positively, the number of jobs protected by FDI in the UK in 2019/20 increased by 29%.

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Free trade hopes

On announcing the figures, the UK’s international trade secretary Liz Truss commented that there was still work to be done when it came to attracting foreign investment and highlighted the importance of free-trade agreements. Truss also mentioned specific key sectors of focus for the department, including advanced manufacturing, life sciences and renewable energy.

Of these sectors, only advanced engineering and supply chains – the nearest field in the report to ‘advanced manufacturing’ – saw an increase in projects, from 130 in 2018/2019 to 161 in 2019/2020. FDI projects in both the life sciences and renewable energy sectors decreased. Advanced engineering and supply chains also saw a significant increase in total jobs created by FDI, from 2,394 in 2018/2019 to 8,313 in 2019/2020. However, with supply chains disrupted by the Covid-19 pandemic and post-Brexit trade agreements still unclear, these jobs could come under threat in the coming year.


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Furthermore, according to data released by Refinitiv – a provider of global financial market data – the number of UK inbound mergers and acquisitions (M&A) deals has fallen in the energy and power sector, from 42 between 1 January and 13 July in 2019 to 28 in the same period in 2020. However, the value of these deals increased by 14.45% in 2020. The healthcare sector has experienced an opposite reaction, with a slight jump in deal numbers during the same period between 2019 and 2020 – from 30 to 32 – and a decrease of 40.31% in deal value.

Overall, Refinitiv reports that in 2020, up until 13 July there had been a decrease in inbound M&A deals to the UK, from 641 in January to mid-July in 2019 to 455 in 2020. When comparing 2016 and 2020 figures over this time period, the number of deals has decreased by 29% and the value has reduced by 40.8%.

With the threat of a ‘hard Brexit’ looming, and the Covid-19 pandemic creating an air of uncertainty in economies around the world, the future of the UK’s trade and investment remains unclear.