The largest 25 outward investors by stock of foreign direct investment (FDI) accounted for 44% of UK FDI assets in 2018, compared with 39% of UK FDI liabilities for the top 25 inward investors.
The share of FDI assets held by the largest 25 outward investors in 2018 was lower than that in 2014, whereas the share of liabilities for the largest 25 inward investors was higher in 2018 than in 2014.
19 of the companies in the top 25 highest outward investing companies in 2018 were also in the top 25 in 2014.
Companies in services industries within the top 25 companies accounted for a higher proportion in FDI liabilities (81%) than FDI assets (43%) in 2018.
Foreign direct investment (FDI) refers to cross-border investments made by residents and businesses from one country into another, with the aim of establishing a lasting interest in the country receiving investment. FDI is also defined by control relationships, where the direct investor (parent company) controls at least 10% of the voting power (ordinary shares) of the direct investment enterprise. FDI assets capture the investments held by UK companies abroad whereas FDI liabilities cover investments in the UK made by foreign companies.
Statistics used in this analysis are presented using the asset and liability measurement principle, which are consistent with the FDI involving UK companies (asset and liability): 2018 statistical bulletin, the Balance of payments, and Pink Book.
This article is part of our continued research on foreign direct investment (FDI) statistics. It analyses the distribution of UK FDI, which is important to understand how FDI is allocated between companies. This can help to better understand the impact of the largest foreign direct investors involving the UK economy.
Traditionally, a small number of the largest multinational companies have accounted for a large proportion of UK assets and liabilities. These companies are defined as the top 25 by stock of foreign direct investment (FDI). This article will focus on how important these top 25 companies are for FDI positions, compared with the other sized group of companies.
The top 25 companies are the largest 25 companies for each of the years analysed and do not necessarily refer to the same companies. We also look at changes in the composition of the top 25 FDI companies between 2014 and 2018.Back to table of contents
Grouping foreign direct investment (FDI) companies by descending value of FDI positions shows how these investments are distributed across the FDI population. The distribution of FDI assets – the stock of direct investments held abroad by UK companies – shows that the top 25 companies accounted for 44% of the total value of UK assets abroad in 2018. The next 25 companies accounted for a further 12 percentage points, reflecting the importance of these 50 companies on UK FDI abroad.
The additional impact of each group diminishes, despite the number of companies in the latter groups increasing. All firms accounted for 83% of total UK FDI assets, with the remaining 17% controlled by monetary financial institutions (MFIs) and other categories of investment, which are counted separately.
The proportion of assets held by the top 25 companies was seven percentage points lower in 2018 (44%) than 2014 (51%). Meanwhile, the selected company groupings outside the top 200 saw slight increases in their proportion of assets by two to three percentage points. This means that larger companies controlled a slightly lower value of FDI assets in 2018 compared with 2014, with smaller companies accounting for slightly higher proportions.
The distribution of FDI liabilities – the stock of direct investments held in the UK by foreign companies – was less concentrated in the larger companies than that of assets. The 25 companies with the highest inward positions held 39% of all liabilities compared with 44% for assets. The top 100 companies held 62% liabilities compared with 66% of assets, and the top 400 held a similar proportion of assets (80%) and liabilities (82%).
The difference in distributions for FDI assets and liabilities is partly explained by the structure of multinational corporations, and how UK FDI statistics are collected. A parent company in the UK will own controlling shares in many companies in different countries, so FDI assets become concentrated between a handful of multinational corporations.
Multinationals abroad may have many separately registered subsidiaries in the UK in receipt of foreign investment. The UK’s FDI statistics focus on the UK side of the transaction. Each of these subsidiaries is identified on the FDI survey and each is registered as a separate legal entity. This means that FDI liabilities are less concentrated across UK companies, and smaller companies own a higher proportion of liabilities compared with assets.
The distribution of FDI liabilities has been converging with that of FDI assets. The proportion of FDI liabilities controlled by the top 25 inward investors was higher in 2018 (39%) compared with 2014 (34%), but the proportion for FDI assets was lower (44% in 2018 compared with 51% in 2014).Back to table of contents
Author: Aphra Smith.
The author would like to acknowledge the contributions from Laura Garcia Blasco, Andrew Jowett and Lee Mallett.Back to table of contents
|Industry grouping||Industry from FDI bulletin tables|
|Production||Agriculture, forestry and fishing|
|Mining and quarrying|
|Food products, beverages and tobacco products|
|Textiles and wood activities|
|Petroleum, chemicals, pharmaceuticals, rubber and plastic products|
|Metal and machinery products|
|Computer, electronic and optical products|
|Electricity, gas, water and waste|
|Services||Retail and wholesale trade, repair of motor vehicles and motorcycles|
|Transportation and storage|
|Information and communication|
|Professional, scientific and technical services|
|Administrative and support service activities|
Download this table Table 2: Industries included within production and services industries for this article.xls .csv
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