The United Kingdom received the most direct investment from the United States in 2022, an amount exceeding one trillion U.S. dollars. This measurement was based on a historical-cost basis, meaning that the original cost of investment has been adjusted for inflation.
What is foreign direct investment?
Foreign direct investment (FDI) is the amount that foreign speculators invests in firms in another country. Investors from the United States have trillions of U.S. dollars in FDI invested abroad. This gives firms in those countries access to capital that they might not have otherwise enjoyed, particularly if the firms are in developing regions such as Africa. The United States is also a target country for FDI, with hundreds of billions of U.S. dollars flowing into the United States every year.
Benefits and risks
FDI generally increases the size of both economies. The host country has an inflow in capital, which should lead to a higher number of jobs and increased productivity. The investing company should benefit from the dividends of such investments. However, any investment has default risks. These risks are magnified by the regulatory uncertainty that arises from the fact that two legal systems are involved. This can lead to political pressure, particularly if trade tensions are already high.
