UK tops list for foreign direct investment

The UK received more inward investment than any other country last year as global foreign direct investment reached a four-year high, buoyed by a wave of mergers and acquisitions in the 30 economically advanced nations of the Organisation for Economic Co-operation and Development.

But the Paris-based body warned for the first time that investment and growth were threatened by knee-jerk reactions against takeovers, based on national security concerns and a sense that not all countries and their companies played by the same rules.

Examples included the frustrated bid by CNOOC, the Chinese oil company for US-based Unocal and the resistance met by Gazprom, the Russian energy giant, in its attempts to secure a bigger foothold in gas distribution in Europe.

In the European Union, governments and regulators in some cases have expressed hostility to take-overs even by countries domiciled in other EU countries, the report said. In the area of public utilities, it cited the Spanish government's efforts to block the German group Eon's bid for Endesa and the Suez-Gaz de France merger, promoted by the French government to thwart a possible bid for Suez from Italy's Enel.

The UK was the target of many of the world's largest takeovers last year which helped propel it to the top of the recipients' league table. These included the￡7bn （$12.7bn） acquisition of Allied Domecq, the drinks group, by France''''s Pernod Ricard. The merger between Shell Transport and Trading and Royal Dutch Petroleum into Royal Dutch Shell, with headquarters in the Netherlands, also made a substantial contribution.

The US was the second largest recipient with $110bn, though this was an 18 per cent fall from 2004. US outwards direct investment fell from its usually high level to virtually zero? probably a temporary effect of tax changes to US multinationals' qualifying dividends from abroad.

Outside the OECD, China hit a record as a destination for FDI, with inflows of $72bn, surpassed only by the UK and US.