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Investment opportunities in UK for foreigners

by Jonathan Adams
Investment opportunities

The UK is an investment hot spot for investors from all over the globe as there are a wide variety of investment opportunities in UK for foreigners and many investors have chosen to invest in the UK for decades. The UK investment market is often referred to as HQ UK – the headquarters of many different types of blue chip and other investment options that drive investment into the UK from all corners of the world.

Data shows that UK trade investment comes from hundreds of other countries and areas where investors have decided that UK-bound FDI would be favourable for their portfolios. UK private and public companies have been collecting FDI UK data since 1958 when it became evident that many foreigners were willing to avail the investment opportunities in UK for foreigners and increasingly saw investing in the UK as a feasible option.

UK has several different FDI UK-qualifying rules, but not many are so arduous or unfair that they have noticeably impacted the choice of foreigners to out their investment to the UK. However, some data does show that foreign direct investment in the UK and the propensity of foreigners to invest in the UK did undergo a slump due to FDI definitions that were released in 1995 and affected the sentiment of some foreigners intending to invest in the UK. The surveys showed that the worst moves the UK trade investment figureheads could have chosen was to move the FDI qualifying threshold – which in turn caused some FDI UK hopefuls to consider alternatives to investing in the UK or consider the UK as a constructive investment environment.

However, more recent UK FDI earnings show that not only are current investors who are recovering from the global financial crisis happy to consider UK-bound investment, but they are also researching UK more than ever in a bid to invest in the UK in the long term. The UK investment environment offers plenty of opportunities for investors in the foreign market and the UK trade investment scene is considered as one of the most fruitful in the world.

The United Kingdom (UK) may be the sixth largest national economy in the world, but it houses the world’s largest financial centre alongside New York. In fact, London is one of the largest cities in the world and with the highest city gross domestic product (GDP) in Europe. This makes the UK a very important financial hub for international investors.

The London Stock Exchange has a market capitalization of over $6 trillion, making it the third largest stock exchange in the world. There are around 3,000 companies from over 60 countries listed on the exchange, including those from Africa, China, Latin America, Europe, and Asia.

Investing in the UK may be safer than many emerging and frontier markets, but there are still many risks that investors should take into account. Some benefits of investing in the UK include:

Financial Hub: London has one of the most advanced financial markets in the world next to New York, which makes the securities market a very stable and liquid one for investors looking for exposure outside of the United States.

Blue Chip Stocks: The UK houses many of the largest blue chip companies in the world, ranging from Rio Tinto to BP to GlaxoSmithKline, which makes investing in the region less risky than other financial markets around the world.

Some risks to investing in the UK include:

Service Economy: The UK’s economy is made up of over 70% services, which is common among developed countries. While this can mean more stability, changes in consumer credit and commodity prices can quickly cause problems.

Political Risks: Britain threatened to leave the European Union in 2016, which introduced a high-level of political risk to its economy. Scotland has made similar threats to leave the United Kingdom. These kinds of threats could lead to economic volatility.

Invest in the UK with ETF & ADRs

The easiest way to invest in the UK is through exchange-traded funds (ETFs), which provide investors with diversified exposure in a single security that can be traded just like a stock. The most popular ETF in the market is the MSCI United Kingdom Index Fund (EWU), but there are several other funds that also have exposure to the region.

Some popular ETFs to invest in the UK include:

  • MSCI United Kingdom Index Fund
  • BLDRS Europe 100 ADR Index Fund
  • SPDR DJ STOXX 50 ETF
  • STOXX European Select Dividend Index Fund
  • BLDRS Developed Markets 100 ADR Index

But those looking for a more hands-on approach can also purchase American Depository Receipts (ADRs), which are U.S.-listed securities that mimic the movement of a foreign stock. These securities can give investors a way to invest in only certain companies or industries rather than a whole basket that spans many sectors. Some popular ADRs to invest in the UK are:

  • Barclays plc
  • BP plc
  • GlaxoSmithKline plc
  • Rio Tinto plc
  • BHP Billiton plc

How to invest in UK directly?

Investors looking to take a more direct approach can also purchase stocks on the London Stock Exchange (LSE). While some U.S. brokerage accounts offer international trading capabilities, some investors may have to open foreign brokerage accounts. And all investors should carefully consider the tax implications of investing in the UK directly.

U.S. brokerages offering access to the London Stock Exchange, including companies like eTrade Financial Corporation and Interactive Brokers. Alternatively, popular UK stock brokerages include companies like Banco Santander’s Abbey Sharedealing and Barclays Stockbrokers. But before investing, investors should be aware of any tax or legal implications.

Key points to invest in the UK

The UK is one of the world’s oldest and largest financial centres with many large companies operating within its economy. These factors make it an attractive investment destination for international investors.

Despite its size, the UK does face some key risks that merit careful consideration. For instance, its economy is highly dependent on consumers and therefore can be deeply affected by changes to consumer credit or commodity prices.

Investors can invest in the UK using a variety of different methods, ranging from easy-to-use ETFs and ADRs to more complex direct investment in the London Stock Exchange.

Important
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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