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The full report can be found here.

One of the most important drivers of long-term economic growth and prosperity is investment. In the UK, the government has set out a clear ambition to deliver an investment-led growth model, seeking to address a persistently low national investment rate relative to international peers. 

In a fiscally constrained environment, foreign investment is a practical and powerful channel through which the UK can finance productive assets, fund real-economy infrastructure—from housing to energy-support jobs and ultimately raise living standards. 

The UK starts from a position of strength. It combines deep markets, strong institutions, leading human capital and global connectivity, helping it host over £12 trillion of foreign capital - making it the world’s second - largest destination for foreign investment. But in today’s world, these strengths alone are not enough. Competition for global capital is fiercer than ever, and the UK’s share of global foreign capital has fallen from 8.6% in 2015 to 7.0% in 2025.

This points to a critical challenge: while the UK continues to attract large volumes of capital in absolute terms, it is losing ground relative to peers.

A central finding of our work is that foreign investment is far broader than commonly assumed. Policy debate has traditionally focused on foreign direct investment (FDI) - the long-term investment that drives jobs and productivity. But FDI accounts for only around one-fifth of total foreign capital in the UK. 

The remaining 80% - primarily foreign portfolio investment and cross-border deposits - plays a critical role in financing firms and government, supporting lending capacity, sustaining financial services exports and reinforcing the UK’s attractiveness as an investment destination. 

Taken together, these flows form an interlinked capital ecosystem that help drive growth. Cross-border deposits provide liquidity for firms and financial institutions; deep equity and bond markets lower the cost of capital; and FDI anchors long - term investment. Strength or weakness in one channel can amplify outcomes in others.

Seen through this wider lens, the UK’s recent performance is more nuanced than some narratives suggest. Foreign capital has remained resilient, growing to around four times GDP and continuing to expand across all major categories. But growth has been slower than in competing jurisdictions, and some more mobile forms of capital - notably portfolio flows - have lagged behind. 

This reflects a broader shift in how global capital operates. Investors today are more deliberate, more selective, and more sensitive to policy signals. Capital no longer arrives by default.

Delivering an investment-led growth model therefore requires a more comprehensive and intentional approach.

First, the UK must broaden its understanding of foreign investment beyond FDI, explicitly incorporating portfolio investment and cross-border deposits into a single, data - driven strategy.

Second, it needs a clearer and more confident global narrative - positioning itself not just as open, but as a purposeful hub for the capital, expertise and partnerships needed to finance growth.

Third, policy must prioritise certainty and stability. Strong profitability among foreign firms shows that the UK remains an attractive place to do business, but weaker reinvestment highlights the importance of confidence in the medium - term outlook.

Finally, a more targeted approach across investor types - from portfolio investors to corporate treasury centres - will better reflect the diversity of modern capital flows.

Across all four areas, the common requirement is greater intentionality. In today’s environment, capital no longer arrives by default. Jurisdictions that succeed are those that understand their capital mix, target different investors with precision, and align policy, narrative and delivery behind a coherent proposition. The UK retains the foundations to do this better than almost any other major economy. The task now is to adapt its strategy accordingly.

Disclaimer: This report was produced by Barclays’ Group Policy Development team which creates public policy thought leadership content on behalf of Barclays.  Our work draws on the bank’s expertise, data and insights, and is intended to inform the design and application of public policy solutions in response to pressing economic and societal challenges. The report is general in nature and provided for information/educational purposes only. For further queries, please contact Ravi Prasad, Director, Head of Economic and Trade Policy, Group Policy Development at Barclays and the report’s author (ravi.prasad@barclays.com).