Uk Economy

The strength of the UK economy is drawing covetous and occasionally envious glances from the eurozone as investors from around the world size up the opportunity presented by Britain’s recovery.

The UK economic revival has taken almost everyone by surprise, confounding domestic and international forecasting groups. Having failed to predict the turn, most explain the sudden resurgence as a rebounding of confidence linked to the removal of previous impediments to growth, such as weak banks and fears of a eurozone crisis.

Some economists believe the UK will be the world’s fastest growing developed economy over the next five years. This is a tempting prospect for foreign corporates and investors, but they are weighing up potential opportunities against the political uncertainty of an EU referendum, as the coalition government staggers from one populist measure to another.

In France, traditionally the third biggest source of foreign direct investment for the UK, Britain is regarded as a success story that casts an unflattering light on French malaise.

Eric Chaney, chief economist at Axa, the French-based insurer, says he and his team think the British economy is more likely to surprise on the upside next year, partly due to more robust credit growth and a flexible labour market.

He says “investors do not seem to be seriously concerned” about the possibility that the UK might vote to exit the EU in a possible referendum in 2017. Axa sees foreign investors “playing the domestic side of the economy” as stronger growth, access to credit and a stronger pound fuel consumption.

“By contrast they are not interested in UK companies producing or trading commodities because the global outlook for commodities is bleak,” he said, adding that Gilts were also not attractive, given a likely rise in yields, especially if the Bank of England “remains too dovish for too long”.

For Spain’s largest companies, the UK has continued to be their main focus of overseas investment after...