Brexit may lead to dip in investment flows from India to UK

New Delhi:  Assessing the near-term impact of Brexit on Indian business and the country's economy, a survey has observed that it may lead to moderation in investments flows from India to the UK.

Representational image

Representational image

The poll by Ficci, however, noted that India is expected to get continued attention from the investors including investments from the UK, which is the third largest investor in India and accounts for about 8 per cent of the total FDI inflows in the country.

The respondents stated that given the strengths of the economy it may be worthwhile to look at a bilateral free trade agreement (FTA) with the UK and this should focus on goods, services as well as investments.

About 63 per cent of the participants indicated that signing a comprehensive FTA with the UK (on goods, services and investments) may help to mitigate any negative impact of Brexit on India.

"The companies participating in the survey did indicate some concern regarding a dip in export realisations, additional compliance to competition regulations, rise in operating costs of doing business and possible curbs on immigration leading to brain drain from the UK over the near term," Ficci said.

Around 43 per cent of the survey participants anticipated a decrease in intra company transfers/movement of professionals to the UK from India over the medium term (next 3-5 years) whereas 43 per cent respondents cited a decrease in Indian migration to the UK over the medium term (next 3-5 years).

For Indian students studying in the UK, Brexit might result in a more level playing field compared with other EU students who hitherto had an informal edge over the rest of the world in the job market.

Further, the IT companies are expected to face the heat in light of the Brexit. It was pointed out that given the risk of further moderation in growth in the UK and EU, there is an increased probability that the companies lower their IT budgets. This would have an impact on the domestic software companies.

Yet, the participants remain sanguine that the UK will make renewed efforts to strengthen ties with countries of the Commonwealth group and India stands to gain given its own growth performance and a much better regulatory and business environment.

Some of the companies surveyed share deep trade and investment linkages with the UK. Responses were received from about 45 companies covering sectors such as education, information technology, tyres, pharmaceuticals, steel and steel products, automotive, textiles, apparel, financial services etc.

Members of the education fraternity felt that education in UK is expected to become more affordable and we might see UK wooing candidates with more incentives. The respondents felt that the overall economic situation would remain difficult for the next two to three years.

United Kingdom has been the gateway to Europe and the survey participants felt that UK's position as a major investment hub will get impacted over the near term. The increase in uncertainty post Brexit will impact the confidence level of potential investors wanting to invest in the UK.

About half of the respondents reported that they do not intend to set up separate operations in any other EU country over the near term following Brexit.



Updated Date: Jul 06, 2016 08:30 AM

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