Profits from UK Foreign Direct Investment ‐ A view from the micro‐data

Summary

This article uses the Annual Foreign Direct Investment survey to investigate the changing patterns and the determinants of profits from the foreign subsidiaries of UK‐based multinational enterprises. The results show that these profits are greatest in countries which are closely related to the UK historically, linguistically and geographically ‐particularly the USA and the Netherlands. However, low tax economies and the BRICs (Brazil, Russia, India and China) are also becoming more significant. Econometric analysis shows that factors such as openness to trade, GDP per capita, population, human capital and unit labour costs help to explain the level of these profits.