Foreign Direct Investment (FDI) After Brexit

The inflow of foreign direct investment (FDI) is typically associated with a range of economic benefits, ranging from enhanced technological and innovation spillovers, which may in turn have positive productivity and employment effects, to offsetting the immediate balance of payments effects caused by the UK’s large trade deficit. The chapter examines the theoretical determinants of FDI flows and seeks to place the impact of Brexit into context. It notes the FDI performance of the UK, both prior to the 2016 referendum, and in the short time period thereafter, before assessing the evidence presented concerning the possible effect that Brexit may have upon future FDI. Evidence is gleaned from economic studies but also attitude surveys conducted with international investors. The policy response to international investor concerns is considered, and since the UK car industry has been identified as having particular exposure to Brexit, this industry is discussed in a little more detail.