UK foreign investment driven by economic stability and robust technology
The UK's business growth environment is improving according to the Grant Thornton Global Dynamism Index (GDI). The UK ranks 27 out of 60 economies, rising 7 places from the previous iteration of the index. However, key competitors Germany (11), the United States (12) and France (23=) rank higher.
The GDI identified a good sound operating environment (rank 16) as the UK's major strength while it also ranks in the top 20 for technology (19) thanks to strong growth in IT spending and high broadband penetration. The UK is also one of only two European economies (along with Ireland) to rank in the top half of the index for market growth.
Robert Hannah, chief operating officer at Grant Thornton UK LLP, commented: "The UK has historically been an attractive destination in the minds of global investors on account of its relative political and economic stability. What's evident from the research is that the UK risks being overshadowed in competitiveness by higher-growth and more dynamic markets which have opened up in recent years. For the UK to maintain and improve its competitiveness on the global stage, it has to do more to encourage the investments in infrastructure, technology, productivity and other dynamic indicators which ultimately power the economy and instil confidence in its long-term growth prospects."
Globally, Singapore offers the best business growth environment for dynamic businesses according to the GDI as a result of a strong financing and regulatory environment. Israel (rank 2) has also risen six places this year. Australia (rank 3=) drops two places but still ranks in the top five for business operating environment and labour market. Finland (rank 3=) and Sweden (rank 5) have both risen slightly, due to favourable business operating environments and an advanced technology infrastructure.
Perception vs reality
Further analysis shows that UK’s positive aspects are reflected in the views of international investors. According to Grant Thornton’s International Business Report (IBR) survey, just 9% of businesses expanding into the UK are concerned about political uncertainty. And 29% of foreign businesses worry about local legislation – one of the lowest proportions among major economies.
International entrepreneurs are also keen to emphasise the strategic importance of the UK to their businesses. More than two-thirds (70%) of foreign investors operating in the UK or looking to expand there, say they see it as a “key market”, more than for any other major economy covered by the IBR.
Robert Hannah added: “In a globalised world, businesses looking for opportunities in dynamic markets must consider a range of economic, social and political factors when making decisions. They must balance instinct with reason, perception with reality.
“At the moment, the UK is benefiting from this perception bias. Businesses clearly feel that there are numerous advantages to doing business in the UK that might not be captured in official data. However, as advisors to businesses, it’s our job to make sure firms have the full facts at their disposal when making key decisions.
“The business world is always changing, with the realities on the ground often surprising business leaders who take a closer look. In order to maximise growth potential, business leaders need to refresh their perceptions of foreign markets in line with the market insights at their disposal. Once in tandem, better decisions can be made.”