Major Contraction Expected in Foreign Direct Investment Flows to UK - New OCO Global Report Reveals

LONDON -

Global foreign direct investment (FDI) is still prevalent despite economic woes but is undergoing a major transition in response to the global crisis with the UK expected to see a drop of up to 25% in the next twelve months, according to a new report by the foreign investment advisory firm OCO Global (OCO).

OCO’s report entitled, “A New Investment Paradigm” reviews key issues around foreign investment and explores some of the fundamental issues such as:

- the decreasing role of Greenfield investment in favour of lower risk expansion modes such as M&A and Joint Ventures - the growing importance and impact of FDI from Sovereign Wealth Funds, often originating from developing countries in the Middle East and Asia - the rise of co-location and re-location from overheated capital cities in Europe and the UK to Tier 2 cities such as Lyon, Nantes, Antwerp, Bologna, Liverpool, Leeds and Belfast. A similar trend is unfolding in the US.

Whilst analysts disagree on the severity of the impact on global FDI in the short term, the report indicates a consensus that there will be a downturn this year anywhere up to 30% in the worst affected sectors.

Mark O’Connell, CEO of OCO Global commented, “A soft landing this year for the UK could see drops of around 10%-15% overall in FDI flows, with worse case scenarios in the 20-25% range. The UK is fortunate as it has strong propositions across a number of sectors including anti-cyclical ones such as Cleantech and Healthcare which have provided a cushion. OCO forecast that by this time next year, FDI volumes in the UK will be on the increase again so the pain is relatively short term.”

The volumes and value of Greenfield are unlikely to recover to 2007/8 levels for at least 3 years. Cross border M&A was fastest to contract in response to the liquidity crisis; interestingly it is showing early signs of recovery in 2009.

Mark O’Connell, CEO of OCO Global added: “The FDI market, as we have come to understand it, in the last decade has experienced some radical changes in the last 12 months. These changes have altered the leading sectors, source markets, types of projects and the drivers behind investment decisions. For the UK Government, there’s a delicate balance to strike in terms of retaining its leading position as a destination for foreign investment projects in Europe, while trying to reposition the UK sectors and competences further up the value chain.”

In the UK, there’s already been an adjustment by the Regional Development Agencies led by UKTI in the last decade to attracting smaller, knowledge driven type of investment and this has formed the basis of the UK’s resilience. It’s current competitiveness is also due in part to a floating currency making it attractive for US and European investors. The report highlights, that the FDI game continues to change and requires more radical interventions, fresh thinking and flexibility from Government economic development organisations about the role and importance of FDI in their overall strategy.

“Assuming organisations can respond quickly to changes, the benefits of FDI in technology transfer and competitiveness should continue to outweigh some of the often cited disadvantages such as the smaller employment footprints and the risks associated with foreign ownership,” said O’Connell.

Note to Editors

About OCO Global

OCO Global is a leading advisory firm specialising in foreign investment. It has more than 40 staff and offices in Belfast, London, Paris, Brussels and New York. Its range of services includes Outsourced solutions for Economic development agencies globally and it also works to provide Corporate Location Advice to the private sector.

For further information on OCO and to download the report, go to:

www.ocoglobal.com/review/

For media enquiries, please contact:

Chris Johnston, MCE Public Relations, Chris@mcepr.com

Source: OCO Global

Chris Johnston, MCE Public Relations +44-(0)-7746956997, Chris at mcepr.com