TheImpactofBrexit onFDI:Implications

February9,2017,Toronto,Canada

PresentationatEDCObyChrisKnight,GlobalCommercialDirector,fDi

Intelligence,FinancialTimesUS

Aboutthepresentation

Ø Brexit wasoneofthemajoreventsof2016ØMypresentationwillprovidethelatestevidenceonitsimpactforFDI

Ø IwilllookathowBrexit hasimpactedFDIintotheUK– veryrelevantre.currentNAFTAuncertainty

Ø IwillalsolookathowBrexit hasimpactedoutwardFDIfromtheUKandhowthismayimpactFDIinCanadawithUKthe2nd largestforeigninvestorinthecountry

2

MonthlyInwardFDIProjectstoUK

0

20

40

60

80

100

120

140

160

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2015

2016

2015

2016

VotetoleaveEU HardBrexit looksinevitable

LatestdataforJanuary2017:FDIinUKdown30%onJan.2016comparedtoJan.2015levels

Source:fDiMarkets,aservicefromfDiIntelligence

InwardFDIprojectstoUKbyTopSectors

0

50

100

150

200

250

300

2015 2016

SectorsservingthefastgrowingUKeconomyhaveincreased.SectorsservingEUmarkethavedeclined

Source:fDiMarkets,aservicefromfDiIntelligence

InwardFDIjobcreationinUKbyTopSectors

0

2000

4000

6000

8000

10000

12000

14000

16000

2015 2016 MajordeclineinautomotiveFDI–exportstoEUaccountforabout70%ofUKautomotiveproduction!SimilartoCanada-NAFTA….

Source:fDiMarkets,aservicefromfDiIntelligence

MonthlyOutwardFDIprojectsfromUKtotheworld

0

20

40

60

80

100

120

140

160

180

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

VotetoleaveEU HardBrexit looksinevitable

2015

20162015

2016UKoutwardFDIhasdeclinedsinceBrexit vote.UKcompaniesheldbackinvestmentsandfocusedonfastergrowingUKmarket

Source:fDiMarkets,aservicefromfDiIntelligence

FDIjobcreationoverseasbyUKcompaniesbyTopSectors

02000400060008000

100001200014000160001800020000

2015 2016 Software&IT,RealEstateandConsumerProductsfastestgrowingoutwardFDIsectorsin2016

Source:fDiMarkets,aservicefromfDiIntelligence

UKMarketshareofFDIJobswithintheEU

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

0

20,000

40,000

60,000

80,000

100,000

120,000

2010 2011 2012 2013 2014 2015 2016

NumberofJobsandUKmarketshare

UK %share

UKmarketshareofFDIinEUisdecliningtolevelsmoreinlinewiththerelativesizeoftheUKeconomy

Source:fDiMarkets,aservicefromfDiIntelligence

UKMarketshareofoutwardFDIJobsfromEU

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2010 2011 2012 2013 2014 2015 2016

NumberofJobsandUKmarketshare

UK %share

UKcompaniesaremassivenetjobcreatorsoverseas– despitedeclineinFDI,theUKisoneofthemostimportantcountriestotarget

Source:fDiMarkets,aservicefromfDiIntelligence

UKcompaniessearchingforaccesstoregionalmarketsfollowingBrexit &technologyforITprojects

10

00% 10% 20% 30% 40% 50%

Infrastructureandlogistics

IndustryCluster/CriticalMass

Attractiveness/QualityofLife

TechnologyorInnovation

Regulationsorbusinessclimate

Skilledworkforceavailability

DomesticMarketGrowthPotential

Proximitytomarketsorcustomers

H22016

H22015

LocationmotivesforUKFDIoverseas

Source:fDiMarkets,aservicefromfDiIntelligence

SourcemarketpredictionsØ FDIfromEurope– expectedtodeclineonlymoderatelyastheyare

primarilyinvestingintheUKtoaccesstheUKmarketandcustomers.SMEsinparticulararelikelytocontinuetoinvestastheyaredrivenbycustomeraccess

Ø FDIfromChina– likelytoremainstrong,asitismainlydomesticmarketdrivenandasassetpricesinUKdeclines.

Ø FDIfromIndia– alsolikelytoberesilientforasset-seekingFDIbutislikelytodeclinemoderatelyforknowledge-basedoperationsservingtheEUmarket,iftheUKdoesnotjointhesinglemarket

11

SourcemarketpredictionsØ FDIfromJapan– isprimarilyaboutretentionandre-investmentof

existingUKoperations.AfreetradeagreementwiththeEUmaybesufficienttoretainandexpandmanufacturinginvestment,althoughnotjoiningthesinglemarketwillhaveanegativeimpactonmostJapaneseinvestors.JapaneseinvestorsintheUKarealsoconcernedaboutaccesstonon-EUmarkets.Turkey,forexample,isakeyexportmarketforJapanesemanufacturersbasedintheUKwhocancurrentlyexporttariff-freeduetothecustomsunionbetweentheEUandTurkey

Ø FDIfromKorea– isatseriousrisk,withmajorKoreancompaniesalreadyrelocatingoperationsoutoftheUKandnewinvestmentsbeingpostponedoreliminatingUKasalocationoptionAstheEUalsohasaFTAwithKorea,Koreaninvestorsareparticularlyconcerned

12

Recommendationsforinvestmentpromotion

Ø Re-alignsectorandmarketstrategytofocusonthesectorsandsourcecountriesthatarelikelytocontinuetoofferthestrongestFDIprospects

Ø Strengtheninvestorintelligence-gatheringactivitiestoensureIPAsareawareofcompaniesthathavecontinuedplanstoinvestandtoensuretheyarerealised

Ø Developa“multiplierstrategy”togenerateFDIreferralsfromtheinvestmentadvisorycommunity– acost-effectivemethodofinvestmentattraction

Ø Focusoninvestorenquiryhandlingtoimproveconversionratesandidentifykeypolicyoptionsforstrengtheninginvestmentfacilitationservices,especiallyaroundtalentattraction,immigrationandinvestmentincentives

13

Recommendationsforinvestmentpromotion

Ø Developaworldclassinwardinvestmentwebsitetogenerateinboundenquiries

Ø EnsuretheexistinginvestmentpipelineisfullyengagedtoensurethatIPAswintheFDIoncecompaniesmakethedecisiontoinvest

Ø Focusmoreresourcesonaccountmanagement“aftercare”activitiesforexistinginvestors

14

Conclusions

Ø Membershipofasinglemarket/FTAisveryimportantforFDI–lookslikeFDIinUKwillpermanentlydeclinebyaround20-30%duetoBrexit

Ø Theimpactofleavingaregionalagreementvariesbysector–domesticmarketseekingsectorsmoreresilientwhileexport-orientedmanufacturingFDIathighrisk

Ø Facedwithamajordeclineinenquiriesbyforeigninvestors,EDOsinUKarere-focusingtheirLeadGenerationonthedomesticmarketandtargetingintermediaries

Ø TheUKremainsakeyglobaloverseasinvestor,creatingastaggering120,000newjobsoverseasin2016– UKisakeymarketforCanadianEDOstotarget.UKSoftwaresectorespeciallystronginoverseasFDIasareconsumerfocusedsectors

15

16

ReadordownloadourfreeBrexitreport:http://www.wavteq.com/brexit