Foreign Owned Firms More Productive According to Research

Written by Robert Moore Marketing Manager 25 July 2018

Figures seen this morning from The Office for National Statistics (ONS) show that British firms owned by international investors are up to 3 times more productive than British firms with only UK investors.

The figures showed that medium-sized firms with foreign investors, when compared to those with just domestic investors, created 85.7% more output per hour. For smaller firms, the figures showed foreign-invested businesses, to be just over twice as productive.

The biggest change in productivity, when comparing with FDI and without, is for the Services, Production and Agriculture industries. For construction, there is little change, but still a relative amount of output per worker.

The ONS cannot explain if these statistics are because foreign investors are buying into productive firms or if firms are becoming more productive due to the foreign investment.

Chief Economist of the Bank of England, Andy Haldane explained the figures because of foreign multinationals implementing their productive ways of working, which they have had for many years because of tough global competition, into their British branches. Due to having to compete globally and being exposed to global supply chains, the exporting firms must be more motivated to be efficient and match international practices, to survive.

Ian Stewart, Deloitte’s Chief Executive suggests that the findings can be explained by ‘footloose capital’, which searches globally for the highest returns, hence ends up finding the most productive businesses.

An additional explanation has been down to applying the best practise techniques from that which worked overseas, to British industries. This has been seen in the British car industry which was turned around by FDI and ideas from Japan in the 1970’s. Kaizen, the application of new ideas, the organisation of work and good management were all introduced.

These figures came as the UK announced a productivity crisis. Overall, output grew slower. The figures were 0.5% for productivity growth for UK owned firms, compared to 0.9% growth for foreign-invested UK firms. 

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