New Delhi: The United Kingdom is emerging as an attractive investment destination for Indian business with the country accounting for 14 percent of overseas direct investment made by Indian entities in April 2022-July 2024 period, up from 8.9 percent in the 2017-19 period, according to the latest data as well as industry bodies.
The latest data on Overseas Direct Investment (ODI), the investments made by Indian entities in a foreign country, published Monday by the Department of Economic Affairs, shows that the UK continues to rank third among the top 10 overseas direct investment countries, after Singapore and the US.
Looked at from the other side, of all the investment projects in the UK, India was the second largest source of FDI projects.
This provides some context for India’s Bharti Enterprises — the parent firm of telco Bharti Airtel — last week announcing the acquisition of a 24.5percent stake in Britain’s largest broadband and mobile company BT Group worth 3.2 billion pounds ($4 billion). Interestingly, BT had held a 21 percent stake in Bharti Airtel between 1997 and 2001.
During April 2022 to July 2024, the latest period for which there is data, the cumulative ODI in the UK stood at $5.6 billion, which is 17 percent of the total $32.9 billion of ODI made during that period. This is compared to ODI of $2.7 billion to the UK in the 2017-19 period, which was 8.9 percent of the total ODI from India during that period.
Indians taking over in the UK
With its latest acquisition, Bharti joins the likes of Tata Group, Reliance Industries, Mahindra & Mahindra, and Welspun in acquiring stake in British firms. In February 2000, the Tata Group pulled off what was then “the biggest acquisition in Indian corporate history” when it acquired popular tea brand Tetley for 271 million pounds.
Other Tata Group companies, too, turned to the UK later, with Tata Steel in 2007 acquiring Corus, then Britain’s largest steelmaker, and Tata Motors announcing the completion of the acquisition of Jaguar Land Rover in 2008.
Other major acquisitions by Indian companies include, Welspun India Ltd acquiring 85 percent share in CHT Holdings Ltd, Mahindra & Mahindra acquisition of two-wheeler maker BSA Company, TVS Motor Company’s acquisition of Norton Motorcycles, Eicher Motors acquisition of Royal Enfield, Wipro’s acquisition of management consultancy firm Capco, Reliance New Energy Solar’s acquisition of battery technology company Faradion, and Reliance Brands’ acquisition of Hamleys.
“In the vast majority of cases, Indian investments into the UK have been a huge success and those investments continue to grow. Some things are cyclical, for instance Tata Motors’ acquisition of JLR. The success of investments also depends on how global markets are and also on the profitability of that business,” UK India Business Council (UKIBC) managing director Kevin McCole told ThePrint.
He added that while Indian companies often prefer the acquisition route in the manufacturing sector, they seem to be setting up their own offices/subsidiaries in the services sector.
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Doing business in the UK
According to a June report by accounting and consulting firm Grant Thornton, a record 971 Indian-owned companies were operating in the UK in 2024, up from 954 in 2023, with combined revenues of 68.09 billion pounds, a strong increase on the 50.5 billion pounds reported in 2023.
The technology, media, and telecommunications (TMT) sector remains the top largest sector in terms of the number of companies (27 percent), followed by manufacturing and engineering (20 percent), pharmaceuticals and chemicals (16 percent), hospitality and leisure (10 percent), and automotive (7 percent).
The report also noted that in 2023, India was the source of 118 FDI projects in the UK, creating 8,384 new jobs, according to figures from The Department for Business and Trade. “This is the second year in a row that India has been the second largest source of FDI projects in the UK after the United States,” it said.
McCole added, “If we were to look at the Government of India’s data of outflows of FDI from 2000 to July 2024, we see that the UK is 6 percent with a cumulative amount of $19,230 million and is the fifth largest recipient of Indian investment overseas.”
For this period, Singapore accounted for 20 percent of the cumulative investment amount, followed by Mauritius (13 percent), the US (12 percent), and the Netherlands (8 percent).
“And for just the last two years, April 2022- July 2024, we see the UK is at 14 percent, only behind Singapore and the US. We see this as a very healthy sign of Indian businesses growing in the UK,” he said.
McCole, however, added that official data only tells part of the story. “Countries ahead of the UK include Singapore, Mauritius and the Netherlands and that is because of the taxation structures in place there,” he explained “So, the investments are going through Mauritius and through Singapore and through the Netherlands, but they don’t stay there. Much of that is also coming to the UK. Official stats do not show that.”
He added that recently it is being seen that there is a lot of investment to and fro between Dubai and India. “But again a lot of investment is flowing from India to Dubai and from there to the UK, or from the UK to Dubai and to India. So official stats only give part of the picture,” he said.
‘People are bridge between two countries’
On the reasons for the UK being an attractive destination for Indian firms, McCole said, in recent years, Indian companies – both big companies as well as start-ups — are looking to the UK for talent and technology.
“Indian companies that want to enter global supply chains or they want to compete globally, need the best of technology and the UK has got that reputation. That has been a big draw factor for major companies as well as Indian start-ups. I think that technology is a major element. One of the sources of UK technology is the university ecosystem. And Indian companies are doing collaborative R&D with UK universities,” he explained.
The Grant Thornton report noted that the Indian diaspora in the UK has been described as a ‘living bridge’ between the two countries and that bridge is the most likely reason both nations will continue to benefit from a mutually supportive and enduring partnership.
Linguistic and political ties and a diaspora embedded in local culture mean the UK continues to hold powerful appeal for Indian investors, it said, adding that the successful conclusion of negotiations on a free trade agreement (FTA) could add a new layer of prosperity for both countries.
Yet, some challenges remain
The report added that despite the continued growth in Indian investment, there are certain concerns, including UK’s stringent KYC requirements that can delay the process of incorporation in the UK and sometimes act as a deterrent to investing in the UK; increase in corporation tax from 19 percent to 25 percent, making doing business more expensive; and the “high” increase in minimum wage for ICT that is making it difficult to bring in talent to address the shortage in tech skills (especially in AI) in the UK.
Intra-Company Transfer visas enable overseas workers to transfer to a branch or subsidiary of their UK employer.
McCole added that for India investments in the UK, the challenge that needs to be overcome is really of perception. “Over the last seven or eight years, because of the Brexit referendum, and the political uncertainty since 2016-17, leading to economic uncertainty, people have been looking at the UK and thinking it’s not so hot anymore. Actually, the reality on the ground is very different. Indian companies revenues growing from 50 billion pound to 68 billion pound over a 12-month period show that,” he said.
“The future direction I really think is in the area of technology with Indian tech hungry companies looking for partners in the UK, whether it is JVs or acquisitions or collaborative R&D. I spoke to technologically advanced companies in Bengaluru during my visit in July and they are looking at the UK to find JV partners or acquisition targets that will embed themselves further into European and North American supply chains,” he added.
(Edited by Tony Rai)
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