Foreign Direct Investment can also sporadically affect the exchange rates in favour of one country and the detriment of the other. The Foreign Direct Investment can be capital-intensive for the investor as it can be sometimes very risky or economically non-viable. Political situation in the invested country can change instantaneously which can be risky as the government can have control over the investor’s property and assets. Many commonwealth countries are anxious that the Foreign Direct Investment would result in some kind of modern day economic colonisation which would leave the host countries vulnerable to foreign companies’ exploitations. According to Hamroush S. (2017), the value of the UK’s Foreign Direct Investment (FDI) positions abroad (outward investment) increased from £1,084.0 billion in 2015 to £1,212.
8 billion in 2016 and the value of FDI positions held by foreign investors in the UK (inward investment) increased from £1,032.5 billion in 2015 to £1,199.5 billion in 2016, which is mainly explicated by a pickup in inward amalgamations & acquisitions activity.Mostcompanies chose to expand their businesses to the UK because UK has talented and skilful workforce, simple tax rate system and transparent regulatory system which make running the business easier.Foreign ownership is limited in only a few strategically privatized companies, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defence). No individual foreign shareholder can own more than 15 percent of these businesses. Investments in energy and power generation oblige ecological agreements.
Certain service activities (like radio and land-based television broadcasting) require licensing. The UK requires that at least one executive of any company registered in the UK must be ordinarily inhabitant in the UK. But if the UK leaves European Single Market it would lead to UK’s economy taking a hit. The UK FDI might fall if UK leaves the European Union because the uncertainty over the future of trade arrangements between UK and EU would reduce FDI as the security of being in a country committed to Single Market would be elapse and there will also be a possibility of tariffs or obstacles to trade with the rest of Europe and the multinational corporations that have multifaceted supply chains would lose the co-ordination between their headquarters and local offices.
It would be more difficult to manage these affairs if UK left EU (Reenen J, 2015).