India's impact on UK FDI and M&A activity
India has consistently been a significant source of foreign direct investment (FDI) for the UK, contributing to the strong economic partnership between the two nations. Although, over the last couple of years world events, particularly the Covid pandemic, have presented challenges, there are some positive signs relating to future FDI from India to the UK.
According to our latest FDI report, the Indian position in the UK stood at £9 billion in 2021, accounting for 0.5% of the overall FDI level in the UK. This figure is lower than the levels seen in 2020 and 2018 when the FDI position measured £12 billion. Despite this decline, the report suggests that economic partnerships and efforts by the UK and Indian governments to seek closer ties are likely to lead to increased investment flowing from India to the UK in the future.
Positive signs are also evident in the performance of Indian companies in the UK, as indicated by this year's India meets Britain Tracker produced by Grant Thornton.
According to their tracker, out of 954 Indian-owned companies covered by the research, 79 are growing at a rate of 10% or more. Together, these companies report total revenues of £25 billion, the highest ever recorded since the tracker began in 2014. This substantial growth stands in contrast to the 2022 tracker, where only 37 companies reported growth of 10% or more, and combined total revenues amounted to just £1.6 billion. The comparison underscores the severe impact of the COVID-19 pandemic and highlights the ongoing post-pandemic recovery that is now underway.
Despite the challenges posed by the pandemic and currency fluctuations, M&A activity between India and the UK has shown signs of revival in recent years. According to Grant Thornton, four significant deals took place in 2022, offering a glimmer of hope for increased collaboration.
The largest deal occurred in January 2022 when Reliance New Energy Solar Ltd acquired Faradion, a renowned global battery technology company, for $136m. This acquisition demonstrated the continued interest in innovative energy solutions despite prevailing uncertainties.
In October 2022, Safex Chemicals India Ltd made a significant move by acquiring Briar Chemicals Limited, the UK's leading agrochemicals Contract Development and Manufacturing Organisation (CDMO), for $80.8m. This deal exemplified confidence in the agricultural sector and highlighted the potential for growth through collaboration between the two countries.
Two additional deals worth $5m each were completed in 2022, albeit on a smaller scale. Evenflow, a company specialising in the acquisition and scaling of third-party brands, acquired Yogarise, a prominent London-based yoga studio. Similarly, Medi Assist Healthcare Services Ltd acquired Mayfair We Care UK Ltd, a company known for designing health packages to cater to clients' global needs.
2023 began with two more deals indicating further potential for M&A activity in the coming months. Leadership Boulevard Private Ltd acquired Pearson India Education Service, demonstrating interest in the education sector, while Mankind Pharma Ltd secured a minority stake in Actimed Therapeutics Ltd.
The UK’S attractiveness
The attractiveness of the UK as an investment destination for Indian investors can be attributed to several factors. Firstly, the UK's strong economy, stable legal framework, and attractive business environment make it an appealing choice. Additionally, the historical and cultural ties between the two nations have played a significant role in fostering this partnership.
Technology and IT have been key sectors attracting Indian investment. London, with its thriving start-up ecosystem, has become a global hub for technology companies, attracting Indian businesses seeking expansion opportunities. The UK's pharmaceutical sector, with its strong research and development capabilities, has also magnetised Indian investors. Collaborations and partnerships in the pharmaceutical and healthcare industries have flourished, contributing to the growth of both nations.
The UK's well-established financial services sector has not gone unnoticed by Indian investors either, with opportunities in banking, insurance, and fintech. The UK's reputation as a global financial hub has further solidified its appeal.
While London naturally emerges as the primary destination for Indian businesses seeking entry into the UK market, other regions have also witnessed a significant influx of Indian investment. The Midlands, with cities such as Birmingham and Nottingham, have attracted Indian companies due to their strong manufacturing and automotive sectors, offering strategic partnerships and growth opportunities. Similarly, cities like Manchester and Leeds, has experienced a rise in Indian investment, driven by its thriving tech and digital industries and renowned academic institutions.
As we navigate the evolving landscape of India-UK economic relations, the recent trends in FDI and M&A activity provide optimism for future growth and collaboration. Both countries stand to benefit from this continued partnership, fostering economic development, job creation, and technological advancements.
How we can help
Irwin Mitchell’s international team offers advice and representation for overseas businesses that are active in the UK market, and those that want to be. It recently published its latest report about foreign direct investment into the UK which looks at which countries are investing the most in the UK, which sectors are most attractive, and where the UK hotspots are currently. Download the report here
