Globalisation and foreign direct investment
Investment in the UK by individuals and firms from abroad (known as foreign direct investment) has also impacted upon the population of the UK.
The UK has the second largest amount of foreign direct investment (FDI) in the world after the US, the vast majority of which comes from Europe and the Americas.
Bar chart of UK foreign direct investment over time
Financial services is the most important part of the economy, followed by mining and quarrying, and then ICT.
Pie chart showing the most important aspects of the UK economy
The UK has continued to attract this FDI. This increase in FDI is partly due to:
- Globalisation - London is presently the most important world financial centre and so is responsible for attracting much of the FDI. In 2018-19, London accounted for 35% of all FDI projects. In 2018, foreign-owned trans-national corporations accounted for nearly 40% of UK business turnover.
- Free Trade policies - The UK has several free trade zones. These are places where special rules are put in place to help countries to trade with the UK. They include Liverpool Free Zone, Prestwick Airport Free Zone, Southampton Free Zone and the Port of Tilbury Free Zone. Freeports are special seaports or airports where normal rules about tax and customs do not apply. Many new freeports are planned in places like East Midlands airport. These are part of the UKâs Post-Brexit strategy.
- Privatisation - Privatisation is when publicly owned assets are sold to private investors. Examples of assets that have been privatised in the UK include energy companies, rail companies and The Royal Mail. Privatisation aims to promote competition, innovation and growth. This can help to increase FDI.