[A-List] UK eurozone membership: FDI share reduced

["Michael Keaney" <michael.keaney@xxxxxx>]

UK 'has lost investment by staying out of eurozone'
By Scheherazade Daneshkhu, Economics Correspondent
Financial Times: May 27 2004

Investment into Britain will more than double next year but staying outside
the eurozone has lost the nation market share and will cost it one-third of
potential annual inflows, according to a report from the Economist
Intelligence Unit.

The survey of 500 executives published on Thursday forecasts that world
foreign direct investment will rebound this year by 31 per cent after three
years of decline. Britain's share of the total will also increase but its
share will remain well below previous levels.

"The UK's position outside the eurozone is costing the country dearly in
lost FDI," said Daniel Franklin, EIU editorial director. "The survey of
executives also reveals poor perceptions of the country's attractiveness as
a target for investment, making it difficult for the UK to regain its share
of FDI against strong global competition."

The UK's share of European Union investment has fallen each year since the
euro was launched in 1999. Denmark and Sweden, the other EU members not to
have adopted the single currency, have also lost share of EU investment.

The report doubts whether the UK can recapture its lost share of global FDI.
Only Japan was perceived as having higher labour costs, and US investors
ranked the UK below the eurozone for attractiveness on most investment
criteria.

The report concluded that Asian countries would strengthen their position as
the main emerging market recipients of FDI over the next five years while
the US remained the top recipient.

However, Britain increased its share of investment projects in Europe last
year, according to a survey by Ernst & Young, the accountants.

The number of British investment projects in Europe increased by 2 per cent
last year - the first rise since the end of the dotcom boom in 2000. The
upturn was driven by an increase in the number of projects originating
within the European Free Trade Area as investment from North America
continued its downward trend since the 2000 peak.

Unlike the EIU survey, the E&Y report excludes mergers and acquisitions.

Britain's share of inward investment increased from 19 per cent in 2002 to
23 per cent last year, after the number of projects it secured rose by 23
per cent.
Britain, Sweden and Denmark saw an increase in project numbers while those
going to the eurozone were flat.