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11 March, 2022

How has Covid-19 impacted the FDI relationship between the UK and India?

Covid-19 caused FDI levels to plummet in 2020 before a recovery in 2021, but did the relationship between the UK and India follow this pattern?

By Glenn Barklie

In 2020, the UK received 804 greenfield foreign direct investment (FDI) projects, while there were 562 projects recorded into India, according to GlobalData’s FDI Projects Database.

The number of projects into the UK fell sharply, decreasing by 23% from 2019. During the same period, the number of greenfield FDI projects into India fell even further, by 33%.

UK outbound FDI into India

UK-based companies created 54 projects in India in 2020. This represented a 3.6% decrease compared with 2019.

Nominally, UK-based companies primarily invested in financial services, software and IT services, and business and professional services sectors in India. Combined, these three sectors accounted for 72% of total UK outbound FDI projects destined for India in 2020.

Proportionally, India received a larger share of UK outbound FDI in financial services (17% of total UK outbound FDI in the sector), coal, oil and gas (11%) and textiles (10%) sectors.

Top UK-based investors in India included Cashaa Technologies, InterContinental Hotels Group and Standard Chartered. Combined, these companies accounted for 25% of total project flows in 2019 and 2020.

In terms of total UK outbound FDI projects, India ranked as the fourth-largest recipient country in 2020. It was the ninth-largest recipient in 2019.

UK-based companies primarily established operations in Rajasthan. In fact, 23% of projects into India by UK companies were located there in 2020. Karnataka and Maharashtra were the next most popular subnational destinations.

Indian outbound FDI into the UK

India-based companies created 16 projects in the UK in 2020. The number of projects fell by 20% compared with 2019.

Software and IT services, automotive, and business and professional services were the top sectors in which Indian companies were investing in the UK. Combined, these three sectors accounted for 63% of total Indian outbound FDI projects destined for the UK in 2020.

Top Indian-based investors in the UK included Cox & Kings, Infosys and Mahindra Group. Combined, these companies accounted for 17% of the total number of India-headquartered projects established in the UK in 2019 and 2020.

The UK ranked as the second-largest recipient country of Indian outbound FDI in 2020. It was also the second-largest recipient in 2019.

India-based companies primarily established operations in Greater London. In 2020, 45% of all Indian outbound projects destined for the UK were created in Greater London. The West Midlands and the North East were the next most popular subnational destinations.

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