Sterling's weakness means UK becomes net investment creditor for the first time since global financial crisis

 
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Sterling Rates To Fluctuate During Brexit Negotiations
Sterling has plunged in the past 12 months (Source: Getty)

The value of the UK’s foreign assets has outstripped the amount of British assets owned by foreigners for the first time since the financial crisis as the fall in the value of sterling in the past year continues to make its mark on the UK economy.

In 2016 the UK’s net international investment position turned positive for the first time since 2008, according to analysis by the Official Monetary and Financial Institutions Forum (OMFIF), a think tank.

The international investment position rose to 22 per cent of GDP in 2016, according to a detailed survey of the biggest state and private investors, the largest since 1986, when a weaker pound also boosted the value of overseas assets.

Read more: UK still top for foreign investment

The newly recovered status as a creditor to the rest of the world for the UK reflects the big fall in the value of sterling since the EU referendum.

The expectation of a more difficult trading relationship with the EU pushed sterling down by around 17 per cent over the course of 2016, reducing the returns for overseas investors on the £1.3 trillion in foreign direct investment in the UK.

At the same time the massive stock of UK assets overseas became relatively more valuable in sterling terms.

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The effect of the sterling depreciation caused the swing in the UK's international investment position, but in the coming years it could be impacted further by the longer-term effect of Brexit on the UK as a jurisdiction.

Ben Robinson, an economist at the OMFIF, said: “In the event of a ‘no deal’ on the Brexit negotiations, or a deal which left the UK with restrictions on access to the single market, foreign investment into the UK could decline substantially. That would reduce capital inflows and force the UK to adjust its imports accordingly or else risk financial instability.”

"These figures will be watched quite closely by the EU,” said Robinson. “If these inflows start to reduce that could have an impact on the amount we import."

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