*Karl P. Sauvant, PhD*
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*Columbia Center on Sustainable Investment*
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Need for Global Micro-regulatory Frameworks", "How International Investment
Agreements can Protect Free Media", "The Evolving International Investment
Law and Policy Regime: Ways Forward", "China's Outward FDI and
International Investment Law", and  "Policy Options for Promoting FDI in
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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
No. 195  March 13, 2017
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Matthew Schroth ([log in to unmask])
*FDI to the UK will remain robust post-Brexit*
*** <#m_-8679999616324264343__edn1>
Laza Kekic** <#m_-8679999616324264343__edn2>
The UK has been one of the top recipients of FDI among advanced economies
and the biggest recipient of FDI flows into the EU. According to OECD data,
the stock of inward FDI, US$1.55 trillion, in the UK at the end of 2015 was
higher than that of France and Germany combined.[1]
<#m_-8679999616324264343__edn3> However, the result of the June 23, 2016
referendum, in which the country voted by a majority of 52% to 48% to leave
the EU, led many observers to expect that a significant negative impact on
inward FDI would ensue.

The London School of Economics estimated that Brexit would lead to a 22%
decrease in inward FDI flows over the next decade. The study looked at FDI
flows across all 34 OECD countries over the past 30 years and analyzed how
investment is affected by EU membership after controlling for other FDI
determinants.  These figures are similar to other estimates.[2]
<#m_-8679999616324264343__edn4> Many surveys also pointed to a probable
negative impact of Brexit on FDI inflows to the UK. The heads of leading
multinational enterprises, including the chief executives of GE, Airbus,
Cisco, and Hitachi, warned that uncertainty following a vote to leave the
EU could affect FDI decisions.

In assessing the impact of Brexit on FDI, one needs to distinguish between
the short term and long term. Most forecasters predicted that the impact of
Brexit on the economy and investment would be negative even in the short
term. They definitely have been proved wrong. The UK’s real GDP grew by 2%
in 2016, well above predictions. Since the referendum, the country’s
economy has grown faster than that of the euro zone. Business investment,
employment and stock market performance have all exceeded expectations.

According to UNCTAD, inward FDI to the UK surged to US$179 billion in 2016,
the second highest in the world, behind the US, representing a six-fold
increase over the 2015 total (when the UK ranked 12th). Of the total, $101
billion was due to one mega-deal acquisition, but notably this was
finalized after the Brexit referendum.[3] <#m_-8679999616324264343__edn5>

The long-term impact of Brexit is subject to uncertainty. Many investors
may adopt a wait-and-see approach. Much could depend on the precise outcome
of difficult UK-EU exit negotiations, especially for FDI by UK-based
companies that focus on the European market. However, even for the long
term, there are reasons to suppose that FDI into the UK will remain robust,
especially by companies servicing UK and non-European markets.

Most surveys since the Brexit vote point to the likelihood of buoyant
post-Brexit FDI. For example, the annual business survey conducted for the
World Economic Forum by PwC found the majority of the UK’s CEOs to be very
positive about the UK’s prospects. A recent survey by Colliers
International found that London is set to remain the most attractive
location for FDI among 20 world cities.

Surveys of investors show that EU membership, in any case, tends to feature
low down the list of important factors that affect investment. The UK also
has many advantages that will be unaffected by Brexit such as the English
language, light regulation, highly developed capital markets, strong rule
of law, and flexible labor markets.

Since the Brexit vote, foreign investors have continued to open
headquarters in the country. On October 27, 2016, Nissan confirmed that it
will build new models at its Sunderland plant, following unspecified
“support and assurances” from the British government. Announcements from
Boeing, GlaxoSmithKline, Google, Facebook, Apple, Jaguar Land Rover, Tata,
and McDonald’s have all indicated that these companies will continue to
invest in the UK despite Brexit.

In addition to the UK’s traditional location advantages, several factors
suggest that FDI flows to the UK post-Brexit will continue to be robust. A
weakened pound will boost FDI inflows. FDI will also be encouraged by the
country’s political stability and by the new opportunity to deregulate.
Strong FDI inflows will also depend on government policies such as cuts in
the corporate tax rate, investment in infrastructure and the pursuit of new
trade deals across the globe. The government and the Bank of England will
have to dampen inflationary pressures that threaten growth. Above all, the
government will need to reduce uncertainty by outlining a clear goal for
post-Brexit relations with the EU and by expeditious negotiations with the
EU on Brexit after Article 50 is triggered.

*** <#m_-8679999616324264343__ednref1>* The Columbia FDI Perspectives are a
forum for public debate. The views expressed by the author do not reflect
the opinions of CCSI or Columbia University or our partners and supporters.
** <#m_-8679999616324264343__ednref2> Laza Kekic ([log in to unmask]) is
an independent consultant. The author is grateful to Axel Berger, Jeremy
Clegg and Magnus Runnbeck for their helpful peer reviews. *Columbia FDI
Perspectives (ISSN 2158-3579) is a peer-reviewed series.*
[1] <#m_-8679999616324264343__ednref3> OECD, *FDI in Figures* (Paris: OECD,
[2] <#m_-8679999616324264343__ednref4> LSE Centre for Economic Performance,*
The Impact of Brexit on Foreign Investment in the UK* (London: LSE, 2016),; *see also*
PricewaterhouseCoopers, *Leaving the EU: Implications for the UK Economy*
(London: PWC, 2016),
[3] <#m_-8679999616324264343__ednref5> UNCTAD, *Global Investment Trends
Monitor*, No. 25 (Feb. 2, 2017).

*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Laza Kekic, ‘FDI to the UK will remain robust
post-Brexit,’ **Columbia FDI Perspectives, No. 195, March 13, 2017.
Reprinted with permission from the Columbia Center on Sustainable
Investment (***
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at **[log in to unmask]* <[log in to unmask]>*. *
For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Matthew Schroth, [log in to unmask]

   - No. 194, Ilan Strauss and Vasiliki Mavroeidi, “How India can benefit
   from FDI: lessons from China,” February 27, 2017.
   - No. 193, David Collins, “Investment contracts are not a substitute for
   investment treaties,” February 13, 2017.
   - No. 192, Joseph (Yusuf) Saei, “Influencing investment disputes from
   the outside,” January 30, 2017.

*All previous FDI Perspectives are available at *
*. *

*Other relevant CCSI news and announcements*

   - *On May 11-12, 2017*, The Asia FDI Forum III
   gather top academia, government, company and civil society practitioners in
   Hong Kong, who will discuss regional investment trends, highlight specific
   features of China’s and EU’s investment treaties and policies, and explore
   the various legal and policy implications that the treaty currently under
   negotiations between them will have. Organized by the Faculty of Law of
   the Chinese University of Hong Kong
   the Centre for Financial Regulation and Economic Development
   and Tsinghua Law School
   with the support of the Columbia Center on Sustainable Investment and the
   World Economic Forum, the Asia FDI Forum III will host a comprehensive
   discussion on the PRC-EU negotiations for an investment treaty, where
   attentive analysis and new proposals will both emerge. *For more
   information, and to register, please go here
   - CCSI's Nicolas Maennling was interviewed by Barron’s
   on how deregulations proposed by the Trump administration will likely
   impact Environmental, Social and Governance (ESG) investment trends. The
   article argues that due to increasing risks related to climate change and
   other ESG factors, investors may push for disclosures by companies even
   without government requirements. While deregulation may benefit companies
   that do not take sustainability into account in the short term, the
   increasing trend of investors using ESG filters will continue to grow.
   - *June - August 2017:* We are accepting applications for our three
   upcoming executive trainings: on Extractive Industries and Sustainable
   (June 5-16, 2017), Sustainable Investments in Agriculture
   (July 12-21, 2017), and Investment Arbitration for Government Officials
   (July 31-August 10, 2017). Each program is designed to equip participants
   with the necessary skills, analytical tools, and frameworks to address
   relevant challenges and opportunities, and to encourage a rich dialogue
   about best practices from around the globe. *More information about each
   training, including brochures and applications, is available at the links
   above.* Applications are accepted on a rolling basis. Participants will
   receive a Statement of Attendance from Columbia University.

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Columbia University
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