Attracting the BRICs: past trends and future prospects for inward investment into the UK

In 2011, emerging economies contributed around 10% of total global outward investment flows, up from less than 1% in 2000. 

While the BRICs still only make up 3.3% of the total UK inward FDI stock, this share has tripled since 2001. India and China have been the main contributors.

The UK’s key strengths in attracting inward investment include access to a flexible labour force, world class technology and well developed financial markets. But the UK also has some weaknesses, including a relatively high cost of living and poor infrastructure relative to other Western European economies. 

A major opportunity for the UK lies in attracting further investments from fast growing economies like Russia, Mexico, South Africa and the Middle East, as well as China and India. The UK could also exploit the potential of its world class universities in attracting more R&D.

SWOT analysis of the UK as a destination for inward investment

Strengths
  • Labour relations and workforce flexibility
  • World class R&D
  • World class financial centre and capital markets
  • Investor friendly policies
  • Tax regime-low corporate tax rate
  • High quality production and manufacturing facilities
  • Access to high end European markets
  • Quality brands
  • Hub for commercial innovation and creative industries
Weaknesses
  • Low quality infrastructure relative to other Western
  • European economies
  • High cost of living
  • Weak economic outlook relative to emerging economies
  • High cost of labour relative to emerging economies
  • High personal tax and VAT rates
Opportunities
Internal
  • Relative economic and political stability compared to some countries in the Eurozone such as Greece and Spain
  • Education sector
  • Green technology
External
  • Attracting investment from Chinese private equity firms to partner with local equity investors
  • Gulf states, Mexico and South Africa
Threats
  • Developed countries rich in natural resources, notably Australia, Canada and the US, which attract more FDI in oil and gas, particularly for unconventional fossil fuels, shale oil and gas and minerals
  • Emerging countries like China and India as well as other Eastern European countries like Poland who have higher growth potential, lower cost bases and are increasingly offering improved quality
  • Well known engineering capabilities of countries like Germany
  • Greater cultural and social links between some South West African and Latin American countries, and other