Britain hit the hardest by dive in cross border capital flows

Tim Wallace
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INVESTMENT across borders plunged during the financial crisis and shows few signs of recovery, McKinsey warned yesterday.

The UK led the fall – cross border capital flows are down 82 per cent from their 2007 levels, a fall from $3.3 trillion to just $0.6 trillion.

Meanwhile western Europe’s are down 67 per cent and the US’s 60 per cent. For the world as a whole flows have fallen 61 per cent from $11.8 trillion to just $4.6 trillion.

If flows do not pick up soon, McKinsey warns it could hurt those who rely on the sector.

“We could be entering a period in which banks and investors are less likely to venture beyond their home markets, creating a more balkanized financial system with constrained access to credit and higher costs of borrowing,” said the report. “Or – given the right policy actions – we may simply be witnessing the start of a new phase in the ongoing development of financial globalization.”