Britain most popular FDI location in Europe

Date: 18-06-2008
Source: The Financial Times

Britain is the most popular destination in Europe for investment by foreign companies , according to a survey published today - and is likely to remain so for years to come. The KPMG survey of large multinational companies from 15 leading economies found that one in seven expected to make a significant investment in the UK in the next year - with only the US and China more popular as destinations.

When asked about where they would be investing in the next five years, one in six of the companies said they planned to invest in Britain. The UK would remain ahead of its European competitors, but behind Russia and India which would join the US and China at the top of the popularity table.

The outlook in some sectors was even more positive. As a destination for financial services firms, the UK was second only to the US now and would become joint first in five years. In property and transport, Britain led as a destination for investment now and over the next five years. The most influential factors when choosing a country for investment were access to new customers, political stability and the impartial rule of law, the companies said. The tax regime came sixth, after infrastructure and the regulatory climate - and closely followed by the quality of labour.

"Since the UK cannot do anything about giving access to new customers, it must focus on issues such as regulation and tax," said Sue Bonney, head of tax for KPMG in Europe. "Britain has lots of positive factors, but must preserve and enhance the factors investors already value."

Ms Bonney said improving the competitiveness of the UK tax system could produce strong returns. While Britain still ranked highly as an inward investment destination, it was much less attractive as a location for a corporate headquarters.

"Over the last 15 years, the UK tax regime has become less benign for holding companies," she said. "Other countries such as Ireland and Switzerland have been more active in making their tax regimes attractive to holding companies, drawing in other functions such as treasury and finance."

The survey showed that over the next five years, the US would become less attractive to large multinationals, while the Bric countries - Brazil, Russia, India and China - would become more attractive.

Most of the more than 300 corporate investment strategists in the survey thought the problems created by the credit crunch would be relatively short-lived - affecting investment only for the next two or three years.

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