The United Arab Emirates (U.A.E.) has committed to invest £10 billion ($13.8 billion) into the U.K. over the next five years, giving a boost to a London government which has seen inward investment steadily erode since the country voted to leave the European Union in 2016.
The commitment was made during a visit by Abu Dhabi Crown Prince Sheikh Mohamed Bin Zayed Al-Nahyan to Prime Minister Boris Johnson in 10 Downing Street, London on 16 September.
The new commitment builds on a £1 billion ‘sovereign investment partnership’ announced in March between the U.K.’s Office for Investment and Abu Dhabi’s Mubadala Investment Company. Under that agreement, Mubadala committed £800 million to U.K. life sciences, alongside the U.K. government’s £200 million Life Sciences Investment Program. The new investments promised over the coming years are due to be made in areas such as energy transition, technology and infrastructure.
Such investment could help to arrest the steady decline in inward foreign direct investment (FDI) since the Brexit vote five years ago. The total commitment represents around 70% of all inward FDI into the U.K. last year.
Following a record $259 billion in inward investment flows into the U.K. in 2016 – largely due to a few very large merger and acquisition deals, including the takeovers of brewer SABMiller and chipmaker ARM – the figure fell to $96 billion in 2017, $65 billion in 2018 and just $45.5 billion in 2019.
The figure fell even further in 2020 amid the Covid-19 pandemic, with the U.N. Conference on Trade and Development (UNCTAD) reporting it had dropped to just $19.7 billion. In contrast, the U.A.E. was one of the few countries to see a rise in inward FDI last year, from $18 billion in 2019 to $19.9 billion in 2020, putting it just ahead of the U.K. for the first time.
FDI flows tend to be volatile. The U.K. has gone from being the largest recipient of FDI inflows in the world in 2005, to as low as 16th in 2014. It is currently somewhere in the middle of that range.
For some of the period since 2016, the U.K.’s decline in FDI has been in line with global trends, but the fall in inward FDI in 2019 came at a time when global inward investment flows increased by 6.5% and inward flows into the 27 E.U. countries increased by 9.5%, according to the UNCTAD.
Despite Brexit, investment ties between the U.K. and the E.U. remain strong. While the U.S. is the largest single investor into the U.K., seven of the following nine largest investors are from the E.U., led by France, the Netherlands, Germany and Belgium, according to a report by the House of Commons Library.