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20 January, 2022updated 03 Mar 2022 07:23

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

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

By Glenn Barklie

The overall number of foreign direct investment (FDI) projects into the UK has fallen sharply since the onset of the Covid-19 pandemic, decreasing by 23% from 2019. During the same period, the number of greenfield FDI projects into the US has also fallen, but by a smaller proportion (-11%). In 2020, the UK received 804 greenfield FDI projects, while there were 1,696 projects recorded into the US, according to GlobalData.

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UK outbound FDI into the US

UK-based companies created 278 projects in the US in 2020, the same number as they created in 2019. Nominally, UK-based companies primarily invested in software and IT services, business and professional services, and tourism sectors in the US. Combined, these three sectors accounted for 54% of total UK outbound FDI projects destined for the US.

Proportionally, the US received a larger share of UK outbound FDI in biotechnology (67% of total UK outbound FDI in the sector), beverages (56%) and engines and turbines (50%) sectors.

Top UK-based investors in the US included InterContinental Hotels Group, HSBC and Linde. Combined, these companies accounted for 18% of total project flows.

In terms of total UK outbound FDI projects, the US ranked as the leading recipient country in 2020. It was also the leading recipient in 2019.

UK-based companies primarily established operations in California. In fact, 15% of projects into the US by UK companies were located there in 2020. New York and Texas were the next most popular subnational destinations.

US outbound FDI into the UK

US-based companies created 280 projects in the UK in 2020. The number of projects fell by 30% compared with 2019.

Software and IT services, business and professional services, and communications and media were the top sectors that US companies were investing in within the UK. Combined, these three sectors accounted for 52% of total US outbound FDI projects destined for the UK.

In terms of sector market share, the UK attracted a larger market share of US outbound FDI in aerospace. The UK accounted for 25% of total US aerospace outbound FDI projects. The UK also accounted for significant shares in space and defence (25%) and other transport equipment (20%) sectors.

Top US-based investors in the UK included Amazon, Hilton Worldwide and Aimbridge Hospitality. Combined, these companies accounted for 15% of the total number of US-headquartered projects established in the UK in 2020.

The UK ranked as the leading recipient country of US outbound FDI in 2020. It was also the leading recipient in 2019.

US-based companies primarily established operations in Greater London. In 2020, 51% of all US outbound projects destined for the UK were created in Greater London. North-west England and Scotland were the next most popular subnational destinations.

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