Study Claims $10 Billion New FDI Diverted From UK In Other EU Countries Due To Brexit

A research published on Monday claimed that money has been pushed out of UK because of Brexit.

Even as the British government are yet to strike a comprehensive and acceptable deal for UK’s divorce from the European Union (EU), the investments in the other EU countries have been increased by about £8.3 billion or $10.73 billion by British companies, the study claimed.

The aim of the study was to examine the impact on the outward investment by U.K. companies because of the vote to leave the EU and was undertaken by academics from the London School of Economics’ Centre for Economic Performance (CEP).

The study found that new foreign direct investment (FDI) projects in EU countries by U.K. based companies had increased by 12 per cent since the vote by Britain to leave the EU. the report further claimed that if the Brexit vote had not happened, that increase would have been invested by the UK companies in the country itself and therefore can be considered to be a loss of investment for the UK because of Brexit.

At the same w=time while investments have been flowing out of the UK, there has also been a decrease in the investments into the UK from other countries in the EU. The report noted a decline of 11 per cent in new FDI into eth UK since the Brexit vote. That added another loss of £3.5 billion or $4.52 billion in investments for the UK. The report further predicts  that in the case of a no deal Brexit, the chances are that this loss of investment would be significantly more for the UK.

The official date for divorce between the UK and EU is March 29 this year. And there is a scramble among the UK government and UK lawmakers to piece together a deal to allow for an orderly exit from the EU even as there are just 50 or so for the divorce date.

The report however noted that the changes in the amount of FDI flow from the UK to countries outside of the EU were minimal.

There was an expectation among British companies that Brexit would result in increase of barriers to trade and migration which would make the UK a “less attractive place to do business” and that is why British companies were offshoring production to the EU, speculated authors of the report.

“The economic risk of Brexit is larger on the U.K. side of the Channel. British firms feel compelled to invest more in the EU but not the other way around,” said Dennis Novy, one of the report’s authors.

The threat from a no-deal Brexit was “chilling investment and starving growth”, Rain Newton-Smith, chief economist at the Confederation of British Industry, said in a statement last week.

“No-deal would create considerable issues for our world-leading services firms, in most cases only avoidable by moving jobs and investment from the U.K. to EU,” she said.

According to figures released by the Office for National Statistics of UK, the last quarter 2018 growth figures of the economy was the slowest in the last 6 years.

(Adapted from CNBC.com)

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Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized

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