Brexit uncertainty in the UK has boosted foreign investment into the EU’s other 27 countries in the three years since the referendum, according to a Financial Times analysis.

The total amount of capital invested in the EU27 surged 43 per cent in the three years to the first quarter of 2019, compared with the preceding three years, according to fDi Markets, an FT-owned database of cross-border investment. This is in sharp contrast to the UK, which has experienced a 30 per cent drop in investment.

About $340bn of capital has been invested in the 27 remaining EU states in that period, up from $237bn in the previous three years, fDi found. The biggest increase came from European companies spending beyond their national borders, including companies from the UK investing in another EU country.

Over the same period, the capital invested by foreign firms in greenfield projects in the UK dropped by $36bn to $85bn, despite a slight increase in 2018.

Christine McMillan from fDi Markets said it was “clear that neighbouring countries are beginning to reap the benefits of the uncertainty being caused by Brexit”.



The fDi database tracks greenfield investment, in which a company establishes operations in a foreign country. Economists often consider greenfield investments to be the most relevant capital flows when assessing a country’s economic and jobs growth prospects.

“When it comes to greenfield investment, this is the one that really contributes to output growth,” said Ilona Serwicka, a research fellow at the UK Trade Policy Observatory at the University of Sussex.

FDI tended to improve productivity, she added, as there was also a transfer of knowledge and managerial expertise from foreign operated business.

By contrast, official data do not split greenfield investment from other forms of investment, such as mergers and acquisitions and equity investment. So a fall in the official figures “can mean anything”, said Lukas Linsi, a professor of political economy at the University of Groningen in the Netherlands.

Ms Serwicka said that, although some investment in the UK may be only temporarily delayed because of the uncertainty over Brexit, the fDi figures showed that some businesses “couldn’t wait and they invested elsewhere”.

The capital influx has proved positive for the EU’s labour market. More than 1.2m more jobs have been created in the EU27 in the past three years as a result of new FDI, this is 474,000 more than the number of jobs created in the previous three years, according to database estimates. About 53,000 of the rise in jobs was the result of UK companies creating operations in the rest of the EU.

The increase in foreign investment was broad-based across most business sectors, including in information and communications technology and electronics sectors, with about 150,000 jobs created in the EU27 in the three-year period — a 30 per cent increase. By contrast, in the UK there was a 28 per cent drop in job growth in this sector.

Financial services also experienced strong jobs growth. In the past three years an estimated 49,000 jobs were created in the EU27 as a result of investment in financial services, nearly 19,000 more than in the previous three years.

The rise in FDI was seen across most EU countries.

In Spain and Poland, the number of jobs created because of foreign investment more than doubled in both countries over the three-year period, compared with the three previous years.

While its neighbour has been struggling with the fallout from the EU referendum, Ireland “has experienced strong growth in foreign direct investment in recent years”, said a spokesperson from the Irish Department of Business, Enterprise and Innovation.

The spokesperson added that this was partly because of the country’s talented workforce and pro-business environment, but “it’s also clear that Ireland’s membership of the European Union has recently become an even greater selling point”.

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