Incoming: The UK ranks second for FDI in Europe
Discover key economic and financial metrics, and what to look out for in the week ahead
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UK REMAINS ATTRACTIVE FOR FDI
The UK was Europe's second most targeted Foreign Direct Investment (FDI) location in 2022, with 929 FDI projects, but this was down by -6.4% y-y. However, the UK performed well on project value, delivering the highest jobs total in Europe at 47k, ahead of Spain (39k) and France (38k). The UK also had the most jobs per project (59) for the third year running and Europe's most 'new' projects for the second consecutive year. Furthermore, the UK landed 76 projects for financial services in 2022, equating to 26% of all European FDI financial services projects and up +17% y-y. This rise was driven by increased American investment, with the UK securing 21 US-backed projects, up +25% y-y. This will likely continue, with 69% of investors planning to establish or extend financial services operations in the UK in 2023. This will be aided by the unveiling of the UK-US Atlantic Declaration, outlined by Rishi Sunak and Joe Biden last week. With overseas US capital accounting for nearly half of all UK CRE cross-border investment in 2023 YTD, this closer collaboration and further investment will be welcomed.
IS ‘OFFICE FIRST’ THE NEW WFH?
The UK’s labour market was relatively robust in April, with unemployment rising by just 0.1ppts to 3.8%, below expectations of 4.0%. Meanwhile, the number of people in employment lifted by +250k over the three months to April, the economic inactivity rate decreased by 0.4ppts to 21.0%, and UK private sector wage growth (excl bonuses) increased by +7.2%. Despite the strength in the labour market, homeworking appears to be less popular with businesses. The latest BIC survey found 47% of companies surveyed were not using or intending to use increased home working as a permanent business model, its highest level since September 2021 and above the 20% who were using or planning to use it. Reduced communication, negative impact on working culture and reduced productivity are some reasons provided for the absence of homeworking. This aligns with our (Y) our space research, which found that 31% of occupiers surveyed described their future working styles as ‘office first’ or ‘office only’, while just 3.4% responded with ‘remote first’.
FOCUS SHIFTS TO BIODIVERSITY
A new European Central Bank report found that 75% of European bank loans are exposed to biodiversity loss. Similarly, the Bank of England found that 72% of UK loans were to companies reliant on "ecosystem services". To try to alleviate some of this pressure, Biodiversity Net Gain will become mandatory for most building developments in England in November 2023, with a 10% net gain in biodiversity required after development.
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