Foreign Investment Up All Round: Mergers Put UK Top of FDI Table For First Time Since 1977

Provisional figures from the United Nations Conference on Trade and Development show that the UK received more inward investment than any other nation last year. This puts the UK at the top of the foreign direct investment (FDI) table for the first time since 1977, with a large part of this FDI coming from merger and acquisition activity.

The Royal Dutch Shell merger alone more than doubled investment inflows for the UK last year, with this single deal contributing $100bn. In total for 2014, the UK attracted $219bn in FDI, the highest figure ever recorded for a European country and twice the $106bn invested in the US. China received the third-highest levels of FDI, with $60bn invested.

Although the FDI ‘leader board’ may have shifted due to a number of sizeable deals taking place, foreign investment was shown in the UN figures to be up across the board, with a 38% overall increase in FDI to rich nations last year  ̶  ending a four-year slump  ̶  and a 13% increase in FDI to developing countries.

One of the most significant increases took place in the Middle East, with FDI up 50%, largely due to higher investment in the oil sector, as well as in telecommunications and real estate. This investment trend in the oil sector also benefited FDI levels in Russia and Africa, with FDI doubling in Russia and hitting a record high across Africa.

The surge in investment inflows was boosted by a general trend of rising profits, levels of corporate cash and share prices that created an environment which encouraged international M&A activity, as published data by Deloitte (Figure 1) shows.

Figure 1: Global deal values by region of acquirer ($bn), Q1-3 2013 vs. Q1-3 2014

In its analysis, Deloitte goes one step further, using this record-breaking 2014 data to predict 2015/16 activity, tipping continued buoyancy in M&A activity across all major sectors thanks to a particularly active EU-North American corridor, with increasing numbers of deals taking place in both directions.

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