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26.03.2025

UK retention of top three position for ‘Soft Power’ is good news for FDI

I have for a long time been interested in the concept of soft power and its significant role in foreign direct investment (FDI). 

Coined by Joseph Nye, ‘soft power’ refers to a country's ability to influence and attract others through non-coercive means such as culture, values, policies, and diplomacy. It encompasses a nation's ability to shape the preferences and behaviour of other countries by appealing to their shared values, cultural attractiveness, and the legitimacy of its policies and institutions.

Soft power is crucial for a country's brand profile and its ability to attract investment. A positive reputation, cultural appeal, political stability, and effective diplomacy enhance a country's soft power. It allows countries to shape their image, build influential networks, and establish a favourable environment for economic cooperation, ultimately driving investment and contributing to long-term economic growth.

Reflecting on the latest Brand Finance Soft Power Index report, I'm encouraged by the UK's retention of its top three position with a score of 71.8, improving from 67.3 in the previous year.

Based on the criteria used to judge each country, here are the highlights for the UK.

Strengths:

  • Education: The UK excels in education, with its strong educational system being a significant driver of its soft power.
  • Media and Communications: The UK is highly influential in media and communications, which helps shape global perceptions.
  • Diplomacy: The UK's diplomatic networks and international relations are robust, contributing to its high ranking.
  • Culture and Heritage: The UK is renowned for its rich cultural heritage and appealing lifestyle.

Challenges:

  • Business and Trade: The UK has seen a slight decline in perceptions related to business and trade, now ranked 6th globally.
  • Governance: While still strong, the UK's governance pillar has seen a slight drop, now ranked 3rd.

Importance for Foreign Direct Investment (FDI):

  • Economic Stability: The UK's strong and stable economy is a key factor in attracting FDI.
  • Innovation: The UK's advancements in technology and innovation make it an attractive destination for investors.
  • Global Influence: The UK's influence in international relations and its ability to shape global narratives enhance its attractiveness for FDI.
  • Educational Excellence: The UK's educational institutions attract talent from around the world, which is beneficial for businesses looking to invest in skilled labour.

It’s an interesting report which raises lots of questions in relation to other countries also.  China is clearly taking its perception on the international stage very seriously, with the report supporting this. China has a soft power strategy within its five-year plan, which is constantly revised and is closing the gap on the US.

The US remains at number 1, and therefore like the UK, has seen a similar increase in overall rating. It’s worth pointing out that the report seems to have been released around 20 February and are so much of the high-profile news around the US approach to tariffs, Gaza, and Ukraine/Russia will not be represented in this report – nor will the reactions from various countries around the world, including the UK.

One of my other takeaways from the report in relation to FDI is that we should not only be promoting the UK's rich cultural heritage more, but we should continue to invest in our educational system and technological advancements, leveraging our strengths in education and innovation. 

 

Irwin Mitchell recently published its latest FDI report The in-depth study includes an introduction from Baroness Gustafsson, insights on the UK’s advanced manufacturing sector by Simon Collingwood, a case study on Freeports by Calum Macpherson, and expertise from legal professionals on how FDI projects can create jobs and drive innovation.

You can hear more about how the UK is attracting FDI in the new season of our Business But Better podcast. We’re joined by industry experts to explore the unique advantages available to overseas investors, how the government is prioritising FDI, and the help available when entering the UK market.