At first glance, the UK’s outlook for foreign direct investment (FDI) is pretty dire. Brexit, political chaos and the resulting policy uncertainty have undermined the country’s image as a stable, English-speaking bridge for multinationals targeting the EU single market. 

The government is even projecting this sense of disarray onto the same foreign investors. The country’s FDI governance has been all over the place for years. Not surprisingly, investors are taking their capital and operations elsewhere. 

A simple Google search for ‘UK investment promotion agency’ proves this point. For those not familiar with the FDI ecosystem, investment promotion agencies, or IPAs, are typically public or public/private agencies that carry out a simple, consequential task. They promote their country by being a first port of call for any interested investor. Their role is to facilitate and support an investment before, during and after a final decision is made.

Back to our Google search. The very first result directs any prospective investors to UK Trade & Investment (UKTI). Born as British Trade International in 1999 to promote FDI as well as exports, it merged its two sub-agencies — Trade Partners and InvestUK — in October 2003. 

Our search now leads to its first twist. UKTI was terminated in July 2016 and replaced by the Department for International Trade (DIT), as the landing page promptly highlights, redirecting visitors to the DIT page. In those confused days following the Brexit referendum, FDI was taken for granted and the emphasis fell on exports and addressing the country’s trade balance. 

“The UK is good at attracting inward investment but it does not have a strong brand as an exporter,” Iain Wright MP, chair of the Business, Energy and Industrial Strategy Committee said at the time.

The proof is in the pudding: since the Brexit referendum of 2016, OECD data shows a progressive decline of inward FDI flows to the UK. These have tracked below outflows since 2021.

Once again in our Google search we encounter another twist. The DIT was terminated too and replaced by the Department for Business and Trade, or DBT, in February 2023, as the landing page points out, once again redirecting visitors to a new website. 

At this point, there is good news for the interested investor. The DBT is still active. However, when the government caters to “high-value investments” it directs them to the Office for Investment (OFI). 

The OFI was established by former prime minister Boris Johnson in November 2020 as a joint DIT and Number 10 unit to boost FDI. By then, it was clear that for as much as the UK might have been good at attracting FDI, others across Europe were quickly catching up. 

There is a happy ending, however. For those stubborn investors who are still trying to find their way around this online labyrinth, a link to the OFI online portal is finally available at the very bottom of the DBT website. 

In other words, as a first impression, this is an abysmal experience for any foreign investor. It's the unwitting online legacy of years of FDI governance volatility. 

“If I was advising a business interested in investing in the UK, I would be scratching my head trying to work out who I need to approach first, unlike in other places where a simple search leads to the main IPA,” long-time FDI consultant Sean Duggan tells fDi. 

Economists argue that the UK has become complacent after more than two decades of success in attracting inward investment. 

“We have rested on our laurels,” says Nigel Driffield, professor of international business at the University of Warwick, who contributed to the Harrington Review into attracting FDI.   

Another problem is how to assess what has, and has not, worked. A report by the National Audit Office, the UK’s independent watchdog, argued in January 2023 that while the DIT has had some impact, “it remains difficult to determine how much investment would have happened without government involvement”.

This is echoed by experts. Riccardo Crescenzi, professor of economic geography at the London School of Economics and Political Science, describes central government departments as a “black box”, where there is an “incomplete picture” of FDI promotion into the UK. 

Since Brexit, the number of FDI projects supported by the DIT has been in decline, corresponding to a reduction in overall FDI inflows. Its successor the DBT supported 8% less FDI projects in 2022-23 compared with a year earlier.

A review of the UK government’s FDI governance, led by Conservative peer Lord Harrington, is now expected to inform the Autumn Statement by the chancellor Jeremy Hunt on November 22 and lead to a restructuring of the OFI. Mr Chancellor, clarity and a steady direction of travel is once and for all needed, because the UK’s FDI star is fading fast.