Official Statistics

DBT inward investment results technical annex 2023 to 2024

Updated 24 July 2024

1. Preface

This technical annex has been published to accompany the Department for Business and Trade (DBT) inward investment results 2023 to 2024. It aims to provide technical details to help interpret the statistics.

The results include the number of foreign direct investment (FDI) projects that landed in the UK during the 2023 to 2024 financial year and the estimated numbers of jobs created or safeguarded through these projects landing. These statistics are further broken down by the type of investment, the UK region and Local Enterprise Partnership where the project landed, market of origin and project sector. The amount of capital expenditure invested and an estimate of the economic impact, expressed as gross value added (GVA), of the FDI projects that DBT supported is also included.

The monetary value of the investments supported by DBT’s Capital Investment Team, referred to as capital investment values, are also included.

Detailed breakdowns can be found in the DBT inward investment results tables 2023 to 2024 supporting document.

This annex outlines the definitions, data collection process, eligibility, validation process and comparability that underpin the publication.

2. Changelog

The following changes have been made in the DBT inward investment results 2023 to 2024 publication from the previous year’s publication.

• the amount of capital expenditure invested for DBT supported FDI projects is included
• regional breakdowns are shown for the type of project and the type of investor
• new jobs created for multi sited projects have been redistributed across regions where possible
• projects and new jobs have been shown at International Territorial Level 2 (ITL2)
• investment relating to freeports has been included

3. Definitions

This section outlines what FDI is, its benefits to the UK economy, the 3 main measures of FDI and types of FDI projects. Definitions of capital investment, non-FDI, commitment to invest projects, venture capital and large capital are also covered.

3.1 What is FDI?

From a UK perspective, inward FDI is an investment from a foreign investor into a UK enterprise. The UK entity then becomes an affiliate enterprise, which is either a subsidiary, branch, or an affiliate company of the parent company – the foreign investor. In practical terms, a foreign company can either set up a version of itself in the UK or can acquire/merge with an existing UK company.

The parent company needs to own at least 10% of the shares or voting power in the UK entity for it to classify as FDI. Direct investments include the initial operation establishing the relationship between the 2 units, and all later capital operations between them and between related institutional units, whether incorporated or not.

FDI is considered to deliver economic benefits to the UK by improving economic competitiveness and enabling improvements in productivity for both new and existing firms. FDI can create an important positive contribution to an economy by generating employment, increasing tax revenue, and by providing external resources such as capital, technology and managerial know-how that can substantially aid productivity and economic growth.

3.2 Measures of FDI

There are 3 main measures of FDI:

• FDI flow
• FDI stock
• FDI projects

FDI flow

FDI flows measure the net movement in inward direct investments made during a given reference period. 

FDI flows comprise of:

• acquisitions or disposals of equity capital (which includes mergers and acquisitions)
• reinvested earnings
• inter-company debt

FDI stock

FDI stock measures the total financial value of FDI in the UK at a point in time.

FDI stock has the following main components:

• foreign companies’ share capital and reserves
• net amount due to foreign parents on the inter-company account
• net amount due to foreign parents on the branch head-office account.

FDI stock is a statistical measure that is directly linked with the FDI flow. The annual FDI flow contributes to the change in the inward FDI stock.

FDI projects

Investment promotion agencies, including DBT, are focused on and measure their operational performance based on the number of specific individual investment decisions, or FDI projects. FDI projects can be recorded at any point in their journey, and DBT have various tests to validate that the volume of unique FDI projects which land in a financial year are accurately recorded (see sections 4 and 5).

3.3 Types of FDI projects

FDI can come in different forms depending on the characteristics of the investment project and the nature of actual engagement of the investor in the UK.

For the purposes of DBT definitions and this publication, the 3 types under which FDI projects are categorised are:

• new investments
• expansions on an existing investment (includes retentions)
• mergers and acquisitions (M&As) (includes joint ventures)

New investment projects

A type of FDI where a foreign investor starts a new business by establishing a new entity. This could be setting up new offices, buildings or production/operational facilities in the UK. This type of investment directly contributes to capital formation through new capital expenditures, increases the output and generates employment and other benefits. New investments can be made by either an existing investor or a new investor.

Expansion investment projects

A type of FDI where an existing investor expands the production or operational facilities of an existing UK foreign direct enterprise with additional investments. For the purposes of this publication, retention projects have been grouped together with the expansion category.

Retention investment projects

A type of investment where a foreign investor agrees to make an additional investment in an existing foreign direct enterprise. The purpose is to prevent the enterprise from rationalisation or closure. For the purposes of this publication, retention projects have been grouped together with the expansion category.

M&A projects

A type of FDI made by foreign investors to either merge with or acquire at least 10% of existing equity or assets of an existing UK company. A merger occurs when 2 or more companies agree to merge into a new single company rather than remain separated for creating business synergies. An acquisition is a transaction between 2 companies by which the acquiring company purchases the existing assets and liabilities of the target company.

M&As are a common mechanism for entering a new market and are usually followed by new additional investments. For the purposes of this publication, joint ventures have been grouped together with the M&A category.

Joint ventures

Agreements between a foreign enterprise and an existing UK enterprise to invest in a joint project. These are usually short-term focused. For the purposes of this publication, joint ventures have been grouped together with the M&A category.

3.4 What is capital investment?

Capital investment can broadly be defined as funds invested into a company, enterprise or project for the purposes of furthering commercial objectives and expanding growth.

Examples of capital investors can include sovereign wealth funds, pension funds, corporates, real estate investor-developers, private equity and venture capital funds, specialist sector funds (for example, renewable energy, regeneration), private wealth and family offices.

Inward capital flows that lead to the funding of UK companies, enterprises and projects can take the form of equity or debt and can be instrumental in the delivery and success of such investment opportunities. These investments can create jobs, both directly and indirectly, lead to regional regeneration in targeted areas and provide tax receipts for the Treasury (HMT).

DBT measures capital investment by the capital or foreign equity value of the investment only. Values are recorded in GBP, applying the exchange rate at the time of the investment announcement if necessary. Job creation is not measured, as many capital investment projects are commitments to invest into projects over periods of time.

Capital investments are either classified as FDI or non-FDI, depending on whether a project meets the FDI definitions set out above.

While non-FDI projects have not met the definition to be classified as FDI, the investor has still stated their intention to invest funds into a UK project or company and deploy capital with immediate effect, or at least in the very near future.

Commitments to invest

Commitment to invest projects measure the value of capital investment commitments made by foreign investors at an early stage of long-term project development processes. These commitments are often claimed before start-on-site and primarily involve capital (equity) investments from foreign investors but can also be in the form of long-term debt financing.

In many commercial examples, ‘committed capital’ refers to a contractual agreement between the investor and the fund or developer to contribute money to the fund or project. The investor may deploy all the required capital immediately, or funds invested in phases over time, often over a period of years. For DBT-supported commitment to invest projects, the financial value of the project can only be claimed once.

3.5 Venture capital and large capital

There are 2 types of capital investment which DBT specifically measure and include in the inward investment results:

• Venture capital
• Large capital

Both FDI and non-FDI projects can be examples of either venture capital or large capital investments, depending on whether they meet the definitions outlined below.

Venture capital

Venture capital attracts overseas investment from corporate venture capitalists and venture capital funds into high-value start-ups, growth companies and funds. Only the value of the venture capital investment projects is applicable in the DBT inward investment results; commitments to invest are not applicable.

Large capital

Large capital involves overseas institutional investment into large capital projects in real estate, infrastructure and energy. The value of both the investment projects and the commitments to invest are applicable to large capital.

4. Methodology and production

This section includes methods of data collection, FDI and capital investment project eligibility and DBT’s involvement in foreign investors investing and re-investing in the UK.

4.1 Data collection

As the government department responsible for the promotion and facilitation of inward investment, DBT aims to record and report information on all FDI and non-FDI projects that successfully land in the UK. This includes projects supported by the DBT network teams and those which land without the DBT network’s support. DBT aims to capture all FDI projects which meet the DBT definitions and standards and can be validated as having landed in the given financial year.

The new jobs created and existing jobs safeguarded through FDI are estimates over a 3-year period. Safeguarded jobs include those jobs which were retained through the additional/new inward investment. Job numbers are sourced from interactions with businesses and public announcements, and, in the case of projects which DBT did not support, estimated in external databases as referenced below. For more information see their associated products.

4.2 DBT support for investment projects

One of DBT’s key ambitions is to generate increased international awareness of the benefits of investing in the UK and provide information and advice to investors, both in the UK and overseas. This helps them prosper and succeed in investing and re-investing in the UK. DBT collaborates with the devolved administrations and local partners to achieve this.

For a project to be recorded as supported by DBT, there must be sufficient evidence that the DBT network has provided substantive assistance to the foreign investor in the delivery of the investment project. There must be evidence that the assistance and advice was essential for the delivery of the investment project in the UK. Where no substantive assistance has been provided to land a project into the UK, the project is recorded as a success occurring without DBT support, validated and quality assured.

A subset of DBT-supported FDI projects is related to DBT’s Global Entrepreneur Programme (GEP). This programme attracts and enables high potential, internationally mobile entrepreneurs and their fast growth innovation-rich companies to scale and internationalise from a UK global headquarters.

Process for DBT-supported projects

Data and information related to the projects supported by DBT are self-reported by the DBT network on an internal database. All parties involved in a project are responsible to enter the necessary data on the system following agreed operating principles and eligibility criteria.

Data and information related to capital investment projects (FDI, non-FDI and commitments to invest) are recorded in the same way and are defined within specific investment programmes as detailed in section 3.5. The eligibility criteria for FDI projects and capital investment projects can be found below. The same eligibility criteria is applied to capital investment projects irrespective of whether they are measured using FDI, non-FDI or commitment to invest.

Process for FDI projects which have not been supported

DBT network teams also use the local sources available to them (such as media and events) to identify and record projects emerging from their source markets or in their sectors which have not been supported by DBT. Additionally, DBT centrally compares its internal database with fDi Markets - the Financial Times’ database of cross-border greenfield investments.

Projects which have not previously been supported or recorded by DBT are identified and validation tests are carried out to determine whether they can be classified as FDI.

4.3 FDI project eligibility

Projects that meet the following criteria are validated as an FDI project:

1. There must be a new, additional financial investment in the UK foreign direct enterprise as part of the FDI project. Each FDI project must demonstrate it is bringing in some financial investment into the UK.
2. To qualify as an FDI project, the foreign ownership or voting power in the UK company as a result of the new equity investment must be at least 10%.
3. The business activities supported by the investment project are expected to last at least 3 years. DBT supports those investments that create or expand long term businesses in the UK.
4. New investments or expansions must create one or more new permanent (such as those expected to last for at least 2 years) jobs in the UK. Total jobs expected to be created or safeguarded in the UK cover the first 3 years of each project.
5. (Applicable only for retention and M&A projects claiming safeguarded jobs) There must be sufficient evidence that without new additional investment the UK based company would potentially reduce its production capacity, and/or employment level. This could ultimately result in the closure of the UK business.

Projects that are characterised by any of the following elements are not treated as an FDI project for the purposes of this publication:

• a project that does not involve new (or additional) financial investments or capital expenditure
• a project that has short term business objectives (for example, less than 3 years), which do not make it qualify for the ‘lasting interest’ test of the FDI definition
• contract agreements, collaboration and partnerships (except when they involve research and development (R&D)) that do not involve any financial investment and creation of new businesses for production of goods or services in the UK
• franchise contracts under which a UK company will sell or provide products or services produced by a non-UK entity
• investment in UK residential property (such as purchasing houses or flats in London) without creation of new long-term businesses and associated jobs in the UK

Projects that don’t meet the full definition of FDI are recorded as non-FDI. The underlying principles of capital being invested into the UK remain the same. However, there isn’t a need for job creation or for the capital to be invested directly from the overseas company to the UK entity. Non-FDI projects encompass a wider range of vehicles for capital to be transferred.

4.4 Capital investment project eligibility

DBT validates that projects are capital investments by the following criteria:

1. There must be evidence of a commitment to invest funding into a UK-based company, enterprise or project, originating from overseas organisations.
2. The financing capital may either be deployed immediately, otherwise evidence of a commitment such as a memorandum of understanding (MoU) to invest capital to UK-based companies, enterprises or projects over a period of time should also be obtained.
3. Singular projects can include investment financing commitments into multiple UK-based companies. They may also include joint ventures between 2 different overseas organisations commitment to invest in a UK-based company, enterprise or project.

The timing of capital investment projects is based on the point the investor has confirmed their intention to invest in the project. This will take place either via a public announcement or written confirmation.

5. Validation

This section outlines the validation process prior to confirmation as an inward investment success. Information on freeports and the criteria needed to align a project to research and development activities and the objectives of the government’s Ten Point Plan for a Green Industrial Revolution is also included.

5.1 Validation and accuracy

All projects, including those DBT has not supported, undergo an independent validation process prior to confirmation as a success for official reporting in the DBT inward investment publication.

Along with confirming the eligibility of projects, additional objectives of the validation process are to ensure that investment projects are genuine. The robustness, accuracy and consistency of the project data reported by the DBT network is also assessed.

The tests applied on each project in the main validation stage are mapped out below. FDI and capital investment validation tests are detailed separately. The same validation tests are applied to capital investment projects irrespective of whether they are measured using FDI, non-FDI or commitment to invest.

FDI project validation tests

1. The UK foreign direct enterprise must be occupying or legally committed themselves to taking premises in a specific physical business address. This is sourced through confirmation of the UK business address on the company’s website or through official documentation.
2. There must be evidence that the investment funds have been secured, that at least one person is working, or is in the process of being recruited to work. The activities planned as a result of the investment should have commenced. Evidence is sourced from public announcements, investor confirmation, or through a note from the DBT officials’ visit to the UK company site.

Capital investment project validation tests

1. Evidence must be obtained to validate that the source of the capital investment funding commitment originates from overseas.
2. The UK-based recipient company or project must be registered in the UK.
3. Evidence must be obtained to confirm the value of the investor funding. This can be provided either in writing from the investor, or via a public announcement. Should this information be withheld by the investor for reasons of commercial confidentiality, DBT calculates the investment commitment value to be 80% of the gross development value (GDV) of the project.

In addition to the main validation process, prior to publication, an end-of-year quality assurance exercise takes place whereby checks are performed to ensure consistency, accuracy, and to identify any irregularities within the data set.

5.2 Freeports

A subset of FDI is investments into freeports tax or customs sites. These sites are designated and recognised in law as geographical areas where businesses can benefit from customs and tax reliefs to bring investment, trade and jobs to regenerate regions across the country that need it most.

More information is available at Freeports in the UK and the geographical boundaries of the sites are detailed at Maps of Freeports, Freeport customs sites and Freeport tax sites.

5.3 Net zero

A subset of both FDI and non-FDI is investments with net zero commitments. For the projects included in the net zero statistics, the company has expressed an intention with the investment that is aligned with the objectives of the government’s Ten Point Plan for a Green Industrial Revolution (10PP). This is in addition to other criteria described in this methodology.

Below is a list of the 10 points, with a short description of characteristics necessary to align. This is tested through the existing validation process applied to all DBT recorded investment projects.

Advancing offshore wind

Projects directly contributing to the establishing of offshore wind energy capture installations; or developing or deploying technologies that are advancing offshore wind energy capture capabilities.

Driving the growth of low carbon hydrogen

Projects that directly invest in the advancement of low carbon hydrogen installations and technologies, including where it replaces existing carbon-based facilities.

Delivering new and advanced nuclear power

Projects directly contributing to the improvement, expansion or installation of nuclear power facilities.

Accelerating the shift to zero emissions vehicles

Projects directly contributing to the distribution, deployment, development or manufacture of technologies and vehicles with zero emissions.

Green public transport, cycling and walking

Projects directly contributing to the deployment, facilitation, distribution, development or manufacture of technologies and individual vehicles that increases the access to and use of green modes of transport.

Jet zero and green ships

Projects containing or advancing technologies, machinery or vessels that directly serve to reduce carbon emissions from aerospace and maritime transport.

Greener buildings

Projects directly introducing new energy-efficient buildings, or technologies that significantly transform existing buildings making them more energy efficient.

Investing in carbon capture, usage and storage (CCUS)

Projects directly facilitating the development, design and installations necessary to advance CCUS technologies and practices.

Protecting our natural environment

Projects directly improving flood defences, land management, as well as planting trees to capture carbon; or sustaining natural conservation through alternatives to using wood, peat; deforestation and sustainable agriculture.

Green finance and innovation

Projects that directly:

• support innovation and accelerating the commercialisation of innovation low-carbon technologies
• mobilise financial sector as an enabler to finance across the 10PP

5.4 Research and development (R&D)

Another subset of both FDI and non-FDI is investments with R&D activities. R&D is an activity undertaken for the purpose of discovering or developing new knowledge and/or technologies, products and services. For DBT to record investment projects within R&D, there must be evidence of a dedicated R&D budget but also a demonstration of new technology being developed in the UK.

6. Technical notes for publication

This covers disclosure and suppression rules, interpreting changes and methodology for estimating an FDI project’s GVA.

6.1 Disclosure and suppression

To protect the identity of foreign investors and UK companies, disclosure rules have been applied to the figures in this publication. These rules have been put in place to minimise risk of disclosure, and the financial, reputational, and operational damage that could occur should exposure happen.

Where figures are deemed to be disclosive, the numbers have been suppressed and a letter ‘c’ denotes where this has occurred.

The general disclosure rules are:

• where the number of projects is 10 or fewer
• where 5 or fewer individual projects underpin the figures for new or safeguarded jobs
• where 5 or fewer unique companies underpin the figures for investments or new or safeguarded jobs
• where the number of jobs is 30 or fewer

Secondary suppression has also been applied to avoid the possibility of deriving withheld numbers through simple calculations.

6.2 Interpreting changes

The number of jobs and amount of capital expenditure related to each investment project varies greatly with some outliers having a large impact on aggregate figures. This can result in large percentage changes between years which should be interpreted with caution.

6.3 Capital expenditure and estimates for GVA

Using DBT’s analysis into the economic impact of FDI, DBT has developed estimates for the GVA associated with the DBT-supported FDI projects. This allows us to demonstrate a broader understanding of the economic value of projects supported by DBT, to contribute to wider government initiatives and DBT’s overall objective for stimulating economic wealth creation.

Estimates are made by applying the sector specific multipliers detailed in DBT’s research report to either the number of new jobs generated from FDI projects or the capital expenditure invested by the FDI projects. This is determined by whether a sector is deemed as labour intensive or capital intensive. Full detail is available in the research report.

There is complete coverage with the number of jobs recorded for FDI projects as it is a requirement for project eligibility. However, data on capital expenditure is not complete due to some foreign investors withholding the information. The capital expenditure figure shown for 2023 to 2024 covers 77% of projects which DBT supported. As GVA calculations are based on a mixture of new jobs and capital expenditure the coverage is higher. It was possible to estimate the economic impact for around 91% of projects in both 2021 to 2022 and 2022 to 2023, and 92% of projects in 2023 to 2024. This means the estimated impacts published are the minimum level of GVA expected over 3 years.

A capital expenditure figure is also provided for the net zero and R&D investments. These cover both FDI and non-FDI projects with the relevant characteristics (see section 5). Values reported are based on a coverage of 85% for net zero investments and 80% of R&D investments for 2023 to 2024.

Other breakdowns across the publication have not been provided due to the inconsistent level of coverage. An approach for imputing missing capital expenditure values remains subject to review based on further investigation and feedback.

7. Comparability and limitations

This section includes comparability with other UK FDI publications and amendments and limitations of DBT investment data.

7.1 Comparability with other UK FDI publications

Similar to DBT’s inward investment results publication, the Financial Times and Ernst & Young both report the annual amount of FDI projects landing into the UK. However, each have their methodological differences that explain the variation in reported projects compared to the DBT publication.

The DBT publication reports on new investment, expansion, and mergers & acquisition FDI projects into the UK over the financial year. Projects that have been publicly announced and those that have not both feature in the data set. On the other hand, both the Financial Times and Ernst & Young report on new investment and expansion FDI projects over the calendar year. While the Financial Times report on publicly announced projects, Ernst & Young report on both publicly announced projects and projects sourced from external databases.

Whereas these sources record the number of FDI projects, the Office for National Statistics (ONS) is the official source for the value of FDI flows on stocks and earnings at the UK level. For more information, see the ONS website.

7.2 Amendments and limitations of DBT investment data

DBT relies on data recorded by its operational staff, and data originating from third party sources. This data is verified according to international definitions for FDI projects used by the Organisation for Economic Co-operation and Development (OECD) and United Nations Conference on Trade and Development (UNCTAD), with some additional DBT criteria (as set out in earlier sections) before they are included in released results. This primarily involves data that describes the parent company, the UK company, the numbers of jobs created and the sector the project supports.

DBT also records data of other characteristics relating to the investment projects such as salary levels and export orientation. DBT are exploring ways to expand the level of detail we include in our inward investment results.