The Political Economy Review 2017

Furthermore, whilst noting that it is premature to draw concrete conclusions, one could highlight that some major investors have remained resilient despite the projected 1.7% Real GDP growth in 2017 by the Bank of England, and have planned major investments. Amazon has set aside $346.8 million to build a new warehouse employing 1500 people in Tilbury Essex and IKEA plans to create 1300 jobs by opening 3 new stores by the end of 2018. In the past 18 month’s particularly, UK fixed assets have looked cheap to foreign investors. One could further argue that, in the short run, Brexit has improved FDI, by attracting investment into land and property. The sudden drop in sterling immediately after the Brexit vote made UK land and property about 20% cheaper in dollar terms. This prompted investors from the US, China and even continental Europe to invest $9.9bn (more than 35% of total FDI) in the next 10 months, up from $7.9bn (18.6% of total FDI) in the same period 12 months earlier. However, one could argue that as Theresa May proceeds with Brexit discussions in Brussels, that at any one point in time sensitive information could be released causing the pound to either rise or fall. Should it appear that the UK is nearing an unfavourable deal or more uncertainty arises as a result of the negotiations, the pound is likely to fall and as a consequence, FDI too could fall as the UK becomes less attractive of a location for investment; the consequence of the prospect of uncertainty and low business confidence in the longer term. Investors and businesses may delay or defer investment decisions with the prospect of a further weakening of sterling. For some property there is also the possibility that the weaker pound may continue to attract high levels of FDI (these assets being cheaper - incentivising overseas investors). Yet, if clarity is achieved as to the outcome of UK’s Brexit negotiations, this may renew business confidence and will underpin the pound’s recovery and permit it to stabilize. Once stability is achieved the pound will be less attractive for these investors in land and property: a factor that has bolstered FDI in a period of great uncertainty. In the medium to long run the terms of the UK’s Brexit deal will be determined and uncertainty will no longer persist, and eventually, the UK should see a recovery in the pound and a consequent decline in FDI in property and land (it now being expensive relative to the dollar). The prosperity currently enjoyed in the UK, the result of significant foreign investment in property and land should only continue as a short run phenomenon. It is


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