Brexit fears weigh as overseas perception of UK plummets

Follows 'outstanding' 2015

Jayna Rana
clock • 2 min read

The EU referendum has caused a huge decline in overseas sentiment towards the UK, according to a survey by Ernst & Young.

In its annual Attractiveness Survey, Ernst & Young, which monitors foreign direct investment (FDI) into the UK, reported just 36% of the 440 international companies interviewed now felt the UK would become more attractive as an investment destination over the next three years, sharply down from 54% a year ago.

This is the lowest level seen since 2010, the start of the Greek debt crisis.

Additionally, the number of investors expecting the UK's attractiveness as an FDI destination to deteriorate over the next three years has tripled from 5% to 16%, according to the Financial Times.

When asked how likely they were to invest in the UK next year, 23% of participants responded positively, compared to 27% last year.

However, the UK attracted "outstanding" levels of foreign direct investment  last year. The survey found 20% growth in FDI projects in the UK in 2015 compared to the previous year.

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The European market grew 14%, meaning the UK's market share increased from 19.9% to 20.9%, securing its place as Europe's "clear FDI leader" last year.

The survey said: "The UK gave an outstanding performance attracting foreign direct investment in 2015, bringing in a record 1,065 FDI projects and creating over 42,000 jobs, the most in any year since the programme's launch in 1997."

The UK also saw a 172% increase in key strategic investments - such as headquarters - giving the UK a 53% share of the European market, while research and development (R&D) project numbers increased by 37% last year.

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Steve Varley, chairman and regional managing partner, UK and Ireland and Mark Gregory, chief economist, said: "The reasons for this decline are hard to discern: there has been a slight decrease across many of the UK's key attributes but not to an extent that would explain the decline in future perceptions.

"It does seem possible the upcoming referendum on the UK's membership of the EU is also weighing on investors' minds. It is certainly the case that our research demonstrates that any deterioration in the terms on which UK-based businesses can access the European Single Market would be a concern for investors."

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