Skip to content. | Skip to navigation

Personal tools
Sections
You are here: Home The Brexit debate Brexit would harm the UK's inward investment

Brexit would harm the UK's inward investment

— filed under: , ,

It should be remembered that for all of the period that covers these figures, the expectation among political commentators and pollsters was that the UK would vote 'remain', and so many potential investors for the year to 2016 may simply have discounted the Brexit factor.


By Professor Nigel Driffield, of Warwick Business School


"There are many well understood reasons why the UK remains so successful in attracting inward investment. Language is one, but perhaps the most important is labour market flexibility. Hiring and firing are much easier in the UK  than in most other EU15 countries, as is foreign acquisition of UK companies. Also in the treatment of things like license fees to foreign holding companies, payments for intellectual property from the foreign parent and other tax policies the UK seems more sympathetic to firms than much of the EU.

"With the fall in sterling post-Brexit, the purchase of UK assets, particularly commercial property freehold has become cheaper.

"Looking forward, the big unknown is what sort of Brexit we will have. It is clear that the UK's membership of the single market is a key feature of FDI in the manufacturing sector, as well as in many service sectors including professional services and R&D.  What is equally important, however, to many firms is free movement of people. The largest European firms need to be able to relocate key staff without recourse to work permits or quotas.

"What is clear going forward is that the UK is going to remain open for inward investment, and indeed may have to work a bit harder to attract it at the same levels post-Brexit.

"On the one hand currency devaluation makes investing in the UK cheaper, which, if bolstered by a competitive tax regime may offset some of the downsides of Brexit depending on what deal the UK eventually has concerning access to the single market.

"However, it is likely that higher proportions of investment coming into the UK will be acquisition of existing assets, and in property, rather than new activity which generates high value jobs. The biggest deterrent to inward investment is uncertainty, so whatever the Brexit deal finally becomes, the sooner that is sorted out the better in terms of the UK retaining its position as a leading destination for FDI."


Nigel Driffield is a Professor of International Business at Warwick Business School and researched the effect of Brexit on foreign direct investment (FDI).

Document Actions
EU Alerts

EUbusiness Week no. 851
Time to speed up climate action
→ EUbusiness Week archive

The Week Ahead no. 486
Sustainable development goals - strengthening geographical indications - e-Health security - collective interest of consumers - consumers' 'right to repair' - strengthening media freedom

Subscription options