“And we have record foreign direct investment of £1.3 trillion – more than any other country in the EU.”
Boris Johnson’s speech to the Conservative Party conference this week contained a list of the party’s economic achievements while in government.
There’s one claim in particular that some FactCheck readers have been querying – that foreign investment is still at a record high following the Brexit vote.
The short answer is that the Prime Minister accurately quoted one official statistic which does show that Britain is still a popular destination for foreign investors.
But other ways of measuring investment are much less flattering, and Mr Johnson failed to mention more recent bad news about investment into the UK – which some commentators have explicitly blamed on Brexit uncertainty.
Foreign direct investment (FDI) refers to significant investments made by overseas investors in domestic companies.
Downing Street pointed us to the latest worldwide figures for 2018 published by the United Nations Conference on Trade and Development in June this year.
There are two main measures. “Flow” is the value of investments made from abroad over a given year and “stock” is the value of the equity held by foreign investors at the end of the year.
Boris Johnson was talking about “stock” in his speech. The book value of foreign investments at the end of 2018 was actually higher than £1.3 trillion – it was around £1.48 trillion, according to the UN.
This was indeed a record high, and higher than any other EU country. In fact, Britain ranked third in the world for inward FDI stock in 2018, behind Hong Kong and the United States.
Mr Johnson didn’t mention the alternative “flow” figure though, possibly because the latest numbers do not show a record high. In fact, FDI flows to the United Kingdom declined by 36 per cent between 2017 and 2018, as new equity investments halved, according to the UN data.
And that came after an even bigger fall in inward investment flow the year before. In all, FDI flows fell by nearly two-thirds, or more than £100bn, between 2016 and 2018.
It’s fair to say that FDI flows are often volatile and there was a massive spike in 2016, so arguably the 2017 and 2018 figures weren’t all that bad in historic terms.
But there has been other bad news on foreign investment since these figures were published.
Statistics from the Department for International Trade show that the number of major investment projects fell by 14 per cent from 2017/18 to 2018/19 and the number of new jobs created fell by 24 per cent.
Other indicators are more positive: the value of stock and the number of cross-border investment projects rose after the Brexit vote. So the picture is mixed.
But while there is no proof that Brexit is to blame for changes in foreign investment flow, some commentators including the accounting firm EY have said they believe the political uncertainty around our exit from the EU is making the UK less attractive to investors.
Using Mr Johnson’s preferred measure, the “stock” of inward foreign direct investment, the latest available figures do show a record high. It’s actually higher than the £1.3 trillion figure he used.
But other measures of foreign investment, like the annual flow of investment into the UK, have fallen since 2016.
Overall, it’s fair to say that the UK has historically been a favourite destination for global capital, and overseas investors continue to hold large amounts of equity in UK firms compared to other EU countries. There are mixed signals on whether Brexit is changing that.