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Population and economic activities in the UK - EdexcelGlobalisation and foreign direct investment

The UK has undergone considerable changes to the population structure in terms of both age and ethnic composition. The economy has also changed and has been influenced by globalisation.

Part of GeographyPlaces and people in the UK

Globalisation and foreign direct investment

Investment in the UK by individuals and firms from abroad (known as foreign direct investment) has also impacted upon the population of the UK.

The UK has the second largest amount of foreign direct investment (FDI) in the world after the US, the vast majority of which comes from Europe and the Americas.

Although the USA has received the most FDI since 1945, the UK has received similar levels to Hong Kong, France and China. In 2014 the UK received over $25 million of FDI.
Figure caption,
Bar chart of UK foreign direct investment over time

Financial services is the most important part of the economy, followed by mining and quarrying, and then ICT.

45% Financial services, 15% Other, 9% Mining and quarrying, 8% ICT, 6% Oil, pharmaceuticals and chemicals, 6% Utilities, 4% Food and drink, 4% Professional services, 3% Metals and machinery.
Figure caption,
Pie chart showing the most important aspects of the UK economy

The UK has continued to attract this FDI. This increase in FDI is partly due to:

  • Globalisation - London is presently the most important world financial centre and so is responsible for attracting much of the FDI. In 2018-19, London accounted for 35% of all FDI projects. In 2018, foreign-owned trans-national corporations accounted for nearly 40% of UK business turnover.
  • Free Trade policies - The UK has several free trade zones. These are places where special rules are put in place to help countries to trade with the UK. They include Liverpool Free Zone, Prestwick Airport Free Zone, Southampton Free Zone and the Port of Tilbury Free Zone. Freeports are special seaports or airports where normal rules about tax and customs do not apply. Many new freeports are planned in places like East Midlands airport. These are part of the UK鈥檚 Post-Brexit strategy.
  • Privatisation - Privatisation is when publicly owned assets are sold to private investors. Examples of assets that have been privatised in the UK include energy companies, rail companies and The Royal Mail. Privatisation aims to promote competition, innovation and growth. This can help to increase FDI.