While the headlines may be dominated by bad news, it’s not all doom and gloom, at least as far as the UK economy is concerned. Despite global uncertainty and turmoil surrounding the UK’s withdrawal from the European Union, the country is registering record levels of foreign direct investment (FDI), with investors, companies, and funds pouring billions into the economy.
The tech sector is one of the big winners of the recent investment boom, with British tech startups taking more in foreign investment than Germany and France combined. But what is behind this recent upswing in investment, and who is actually investing? Let’s take a closer look and find out.
1. Post-Election Stability
One factor that has been widely attributed to the recent upswing in investment is the so-called ‘Boris bounce’ that rallied markets in the aftermath of the 2019 General Election. While the concerns over Britain’s EU exit remain outstanding, investors clearly see Johnson’s sizeable political majority as an indication that UK politics will settle into a routine resembling stability and reliability – two things that all investors love. In the few short months since the election, global investors have been on a “shopping spree” in the UK, snapping up billions of pounds worth of assets and shares.
2. Strong International Reputation
The UK also benefits from ranking highly in a number of important and widely-followed international business rankings and indices. The UK currently ranks as the number one country in Europe on the Property Rights Index, a measure of how well different countries protect the assets of individuals and businesses. In addition, the UK ranks 8th globally in the Ease of Doing Business Index, 5th in the Global Innovation Index, 9th globally on the Networked Readiness Index, and 15th on the Human Capital Index. All of these are rankings that international investors follow closely, especially within the tech industry.
3. Growing Consumer Markets
Businesses looking to invest or expand in the UK also benefit from large and fast-growing consumer markets for many different tech products and services. The UK already has some of the largest consumer markets in the world for e-commerce, cybersecurity, streaming services, and gaming. To take just one example, consider the UK’s £14.4 billion a year online gambling market, one of the fastest-growing in the world. With UK customers raising demand for digital real-money casino slot games, global producers of such games, such as the Swedish company NetEnt, are making major inroads in the UK market, with all of their titles now available on the biggest UK slot sites. It is literally that tech-focused entertainment sectors such as online gaming will continue to double down on UK investment in the future.
4. High-Tech Specialization
In addition to a large consumer marketplace for tech products, the UK also has a high degree of manufacturing specialization for certain high-tech niches. The UK already has the largest market for the production of AI services in the world after China and the US. In addition, the UK has Europe’s largest biotechnology sector, as well as the largest aerospace sector in Europe. Other sectors where the UK has a sizeable output include fintech, video gaming, drone production, and green energy technology. Any investors looking to expand in these sectors can, therefore, benefit from the high levels of local expertise and infrastructure that the UK offers.
5. Sweetheart Deals for Foreign Investors
Like many other countries around the world, the UK offers a number of visa incentives to any foreign individual or business entity that is considering investing in the British economy. One example of this is their Tier 1 investment visa which offers anyone in the world unrestricted residency in the UK for at least five years in exchange for a £2 million investment. Although this seems like a hefty chunk of change, hundreds of these visas are given out every single year, representing billions of pounds of investment in the UK. If someone does not have access to that level of funding, they can also receive long-term residence on an ‘Exceptional Talent Visa’. This is basically an application-based scheme that offers free residency to any entrepreneur or graduate that plans to invest or start a business in the UK.
These are just some of the factors that are driving record investment in the UK’s tech sector. Watch this space for more updates on the UK economy in 2020.
