The number of multinational companies who are considering leaving or cutting down their operations in Britain as a result of Brexit is large, including firms such as JP Morgan Chase, Ford and Philips. Jobs, factories and headquarters are being shifted out to Europe in order to retain access to European markets and avoid taxation issues. Reports on income in Britain showed that as a result of slowed business investment, consumer spending above its means was what drove the small amount of GDP growth seen in 2018¹. Consumers, the government and businesses were all borrowers in the last quarter of 2018, which meant a heavy reliance on inflows of foreign investment. The growth of this reliance will be particularly troubling in the face of falling FDI into Britain out of Brexit concerns, especially in the situation of growing debt levels.

An article published by the Economist² sheds light on what will be the emergence of an interesting dilemma. Despite the aforementioned number of firms moving operations out of Britain, foreign investment into the country was shown to grow 7% last year; the benefits of investing in Britain are not lost on some investors, including low corporate tax rates and the widespread availability of high human capital. This is simultaneous to the implementation of policy in Britain that presents a far more selective attitude towards foreign investment than in the past, with higher controls on the types and sources of foreign investment³.

While current demand for investment into Britain does exist, it is unlikely the nation will have the opportunity to turn their nose up at select foreign investment for much longer, given a growing dependence on foreign capital, a soon to be much smaller network and a thinning pool of investors. What is in store for Britain appears to be a role reversal, from a highly desirable host country with control over its foreign investment policy to a host that is forced to bend to the will of prospective investors.  It remains to be seen how Britain will choose to operate between its growing desire to place itself, the state, at the forefront of its economy, and its need for foreign investment, side effects included, to avoid crippling its growth.

Sources

1. “British consumers keep economy growing amid business caution.” (2019). The Financial Times. https://www.ft.com/content/9de0ec52-5205-11e9-9c76-bf4a0ce37d49
2. “Why foreign investment into Britain remains so strong.” (2018). The Economist. https://www.economist.com/britain/2018/04/07/why-foreign-investment-into-britain-remains-so-strong
3. UK cracks down on foreign investment to protect national security(2018). CNN. https://money.cnn.com/2018/07/24/investing/foreign-investment-rules-uk/index.html