Estimating the economic impact of FDI to support DIT’s promotion strategy: analytical report – August 2018

Practice area: Finance | International trade & investment
Client: Department for International Trade
Published: 06 August, 2018
Keywords: qualitative analysis quantitative analysis

London Economics were commissioned by the Department for International Trade (DIT) to estimate the economic impacts of FDI on the UK economy. The results will be used by the DIT to support their value-based investment promotion strategy.

The analysis was undertaken in partnership with the DIT and academics at the University of Nottingham. It explored the economic impact of inward FDI for a number of measures, including gross value added, employment, average wages, apparent labour productivity, and research and development.

Based on firm-level data for Great Britain between 1998 and 2014, the analysis estimated the net impact of a 1% increase in FDI stock in Great Britain. Applied to the GB-wide increase in FDI between 2010 and 2014, the estimation results correspond to a net increase of, approximately:

  • £19 billion in GVA;
  • 355,000 jobs;
  • £280 in average annual wages;
  • £510 in apparent labour productivity; and,
  • £448 million in overall R&D expenditure.