Grant Thornton has launched the 7th edition of its TouYing Tracker, monitoring the latest trends in Chinese investment into the UK.
The 2019 report covers close to 800 Chinese companies, whose investments in the UK have seen them achieve an average of 17% revenue growth over 2019, employ over 70,000 people, and achieve a combined turnover of over £90 billion.
The report covers only a fraction of Chinese businesses invested in the UK. It is estimated that there is close to 130,000 companies that are part of a Chinese corporate group or are majority held by a Chinese national invested there.However, for the purposes of the TouYing Tracker, Grant Thornton only analyses companies with a turnover of £5 million or more in both of their last two financial years.
What is the standout headline?
A standout headline is the fact that the UK remains the preferred destination in Europe for Chinese investment. Despite uncertainty surrounding the UK’s withdrawal from the European Union, the UK received more in in-bound Chinese investment than France and Germany combined, with the UK recording some EUR 4.2 billion of completed transactions, compared with EUR 1.6 billion and EUR 2.1 billion respectively. It should be noted that this was in the context of a dramatic drop in Chinese foreign direct investment into the European Union for the second year in a row.
Why is the UK attractive?
The weak pound makes UK assets attractive. For the first half of 2019, the evidence suggests that a weak pound continued to make investing in the UK a particularly attractive proposition. The weak pound has made UK assets look cheap in recent years, and Chinese investors – both private and state-owned enterprises – have been very active in snapping up bargains, particularly in manufacturing technologies, augmented reality and display systems.
How have Chinese companies been investing in the UK?
Among the 30 fastest growing companies listed in the Tracker, making a direct investment in the UK brought the greatest reward. Among these companies, the highest average growth rate, at 72%, is found among companies who made a direct UK investment. By way of reference, those that made an indirect investment, via a foreign parent acquisition, reported an average growth rate of 64%, and those who grew through organic expansion posted 55%.
Where are Chinese companies invested?
Out of the 800 companies listed in the report, 355 are based in the London. The North and Midlands prove to be the second most popular investment destination among Chinese businesses, providing a home to a further 170 businesses. In a close third place, the South Region attracted 146 business’ investment, while the Midlands was the investment destination of choice for some 100 Chinese companies.
Scotland and Northern Ireland lag behind, attracting only 18 of the Tracker’s 800 companies.
What are Chinese companies investing in?
Hot sectors for 2019 were software and fintech, technologies that can help in China’s ambition to upgrade its manufacturing capability, and education. Out of the 30 fastest growing companies, 20 of them came from the technology, media & telecoms, and manufacturing & industrial sectors. 10 of these companies reported an average growth rate of 81%.
Outlook for 2020?
Chinese companies with plans to operate in Europe are likely to continue to be attracted to the UK’s geopolitical and fiscal policies, even if it becomes necessary to tackle the UK and the EU as two separate market opportunities.
While the outbreak of Covid-19 is currently impacting the ability for businesspeople to travel to and from Mainland China, which may interrupt the ability of Chinese businesses to pursue and complete overseas deals. the evidence and trends suggest that as long as the UK Government and British businesses continue to promote and strengthen the UK-China relationship, business should return to normal once the virus has cleared.
To read the report in full, please follow the link.
