Why Britain is a lucrative location for German FDI
German FDI was the tenth largest source of the UK’s stock of FDI in 2021, when the German investment position stood at £40bn, roughly in line with the 2020 position.
The biggest sectors of investment from German companies are retail (£7bn) and financial services (£5bn). Some of the largest German companies investing in Britain include Siemens, Deutsche Bank and Lidl.
In 2021-22, Germany was the third largest source for investment projects, supporting 100 projects and creating 7,339 jobs. These are up on 2020-21 numbers, as shown on the chart.
For Irwin Mitchell’s Foreign Direct Investment Report, that was just published, Ilka Hartmann outlines reasons why German FDI is directed at the UK market.
At the British Chamber of Commerce in Germany (BCCG), we see opportunities for German companies in the growing offshore wind energy sector, in the private health market and infrastructure projects.
Consequently, the UK’s globally leading university landscape and its strength in research and development of cutting-edge technologies is of interest to German companies. Together, they provide a flood of highly- educated talent in all economic sectors of the labour market. Companies are reacting to this and opening appropriate locations in the UK to make use of these skilled workers. Combined with a business-friendly approach to bureaucracy and appropriate support, the UK is building a strong position in future-relevant industries such as AI, renewable energy, and life sciences. BioNTech, a German company, has relocated its cancer research to the United Kingdom as evidence of this. A strategic partnership between the company and the UK government has also been established, to provide up to 10,000 UK cancer patients with newly developed mRNA vaccines.
There’s also great potential from wind power in Scotland. These will, however, be surpassed by the Dogger Bank Wind Offshore Wind Farm, scheduled for completion in 2026 and set to become the largest plant in the world. This will mean a locational advantage for companies having to comply with even more stringent climate standards in the future, or produce sustainably in order to find enough customers in the market.
It’s interesting to note that Scottish wind power can already be used for the production of green hydrogen and will be used to a much greater extent in the future. Exported to Germany, among other countries, this will then give local industry the possibility of managing to achieve their climate targets at all.
Prime Minister Sunak has recently announced that the UK intends to become the international leader in the development, as well as the economic deployment of AI. The UK wants to avoid “overly stringent legislation that could hinder innovation” and “instead take an adaptive approach to regulating AI”. Using the new freedom from EU-level regulation will positively attract new businesses to the UK, and is also expected to be adopted in other sectors of the economy. This will allow the UK to position itself between the regulated market in continental Europe and the free market in the US, facilitating innovation without disregarding European standards and being able to produce in close proximity to this central market.
The Windsor Framework also creates political stability, which will be reflected in the medium term by increased confidence in the British market.
You can read the full FDI Report of our member Irwin Mitchell here: Welcome – FDI Report – Foreign Direct Investment Index (irwinmitchell.com)
Managing Director, British Chamber of Commerce in Germany (BCCG)