Report says Brexit fails to deter Chinese investment

Study: UK remains more attractive to investors than its neighbors

Chinese investment in the United Kingdom will continue to flourish despite challenges posed by its scheduled departure from the European Union at the end of next March, according to a new report.

Dutch professional services company TMF Group said that the weak pound — along with a liberal economic environment and the positioning of London as an international financial hub — are all helping to keep the UK attractive to Chinese investors despite the uncertainty caused by Brexit.

TMF conducted an analysis of the UK-China investment relationship in a white paper published in cooperation with the China-Britain Business Council, or CBBC.

The company found that Chinese investment in the UK doubled in 2017 compared with the previous year, and that this year the UK had received more Chinese investment than both France and Germany.

“As a mature, services-oriented economy, the UK offers a range of investment opportunities that correspond to China’s strategic priorities,” said Wincy Wong, director of consultancy solutions at TMF Hong Kong.

“This alignment is set to drive further investment and partnerships in sectors like education, healthcare, energy, logistics and transport.”

In the first half of 2018, the UK attracted $1.6 billion in investment from China, making it the most popular European destination after Sweden, according to research by US law firm Baker McKenzie.

The industrial composition of Chinese investment in Europe also shifted in the first half of this year, the research indicated. “Real economy” sectors including automotive, health and biotech, consumer products and services became the largest recipients of Chinese investment in Europe, with real estate and hospitality losing its top position.

The UK is currently experiencing a period of political and economic uncertainty as it navigates its way out of the EU, as a consequence of a referendum on membership in 2016.

Last weekend, the EU approved the Brexit deal negotiated by British Prime Minister Theresa May’s government. The deal will now go before the UK Parliament in a vote expected in the second week of December. Many legislators are expected to vote against the deal.

Despite this uncertainty, Ma Weifeng, director for China outbound at the CBBC, said that Chinese investors are unlikely to be deterred in the long term.

“Uncertainties surrounding Brexit could temporarily impact investment activity, but in the long run CBBC is confident that the UK’s investment environment will prove attractive to Chinese investors,” Ma said.

“As the UK creates new trade and investment relationships after leaving the European Union, China will become an even more important partner.”

However, Brexit may add further confusion to an already complex regulatory environment in the UK, according to Felix Ndeloa, director of consultancy solutions at TMF UK.

“Despite the broadly positive picture there are several forces that could impact future investment trends negatively,” Ndeloa said.

“Chinese companies may overlook the regulatory and compliance complications of investing in the country. These include an intricate tax regime and stringent rules around employment and data protection.”

Ndeloa said that Brexit seems likely to “rapidly shift the picture” in areas like taxation, accounting, employment and data policy.