What does the 2021 budget mean for FDI to the UK?

The announcement of the chancellor’s budget brings positive news for Foreign Direct Investment (FDI) in 2021.

Foreign direct investment (FDI), from a UK perspective, refers to an investment from foreign investors who add to or acquire equity share capital in a UK resident affiliate enterprise (subsidiary or associate) or branch by a non-UK parent company or head office.

The latest budget indicated that there would be a substantial investment-led recovery post-pandemic. Investments such as the ones listed below were some of the examples mentioned:

  • Eight new English Freeports will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.
  • The £375 million UK-wide ‘Future Fund: Breakthrough’ will invest in highly innovative companies that are aiming to raise at least £20 million of funding.
  • New overseas visa schemes helping ambitious UK businesses attract international talent.
  • Extension to Furlough – the government will continue paying 80% of employees’ wages for hours they cannot work, with employers asked to contribute 10% in July and 20% in August and September. 
  • A new Help to Grow scheme to offer up to 130,000 companies across the UK a digital and management boost.
  • Incentive grants for apprenticeships will rise to £3,000, with £126m allocated for traineeships. 
  • Launching a review of Research & Development tax reliefs to make sure the UK remains a competitive location for cutting-edge research.

The UK currently ranks second in the world for inward FDI stock globally (second only to the US) and the role of foreign investment in economic growth, productivity, and employment plays a substantial part. However, its effect does vary across the country with London being the largest destination for FDI in the UK, accounting for 35% of all FDI projects in 2018-19, followed by the South East with 11%.*

While just 4% of local business units in the UK were foreign owned in 2018, they accounted for nearly 40% of UK turnover and employed 4.9 million people.*

It has also been estimated that foreign investment landed through the support of HMG in 2019/2020 is expected to contribute to economic growth by generating around £2.8bn worth of gross value added over the next three years to the UK economy.

So in conclusion it is safe to say that if more trade is attracted to the UK, more investment will be made and therefore more jobs will be created.

If you’re looking to expand into the UK then we can help you on the journey. It pays to have the right advisers on board to help you set up in the UK. Paul Beare Ltd has been helping businesses like yours for almost a decade. Whether its tax and payroll or accounting and banking, we know where the likely bumps in the road are, and we can go with you on each step of the way.  

*Statistics provided by Department for International Trade, March 2021.