London still attracts more foreign investment than any other city across the world, according to a report.
Consulting firm KPMG and Greater Paris Investment Agency’s findings emphasise how important the capital is to the global economy.
Dr Stephen Bence, founder of UKFunders, revealed there are a number of reasons why London has been so attractive to foreign investors – especially with the Olympics on the horizon.
“I think there are three reasons: there’s access to the capital markets, access to a great international workforce and I think it’s a great city to live in,” he said.
“The Olympics is going to be a great showcase for Britain and it will be a good thing that international travellers, such as sponsors, see what London has to offer.
“I would hope that we will see the effects of that during the Games and beyond.”
Shanghai and Hong Kong are the next two cities on the list just behind London, while Brazil’s Sao Paulo had the biggest leap, climbing to fourth after foreign investment grew 160 per cent over the past two years.
In London, Bence explained that this kind of cashflow is particularly beneficial for mid-sized firms and larger companies, while the smallest businesses are better off sourcing finance locally.
However, a recent study by UKFunders showed that London is a great location for this as well, with the capital attracting just under £170m of venture capital investment in 2011 – by far the highest grossing region in Britain.
“By the time you get to medium and large companies, foreign investment is a very good source of getting funding, but if you’re looking at the smallest companies the primary place for them to look is the local market,” Bence said.
However, with other cities growing at a rapid rate, some might start to question how long London can last without being dethroned at the top of the foreign investment tables.
The KPMG report highlights how Brazil, Russia, China and India have all grown, while Europe has been hard-hit by a sovereign debt crisis.
Brazil recently became the sixth-biggest economy in the world, overtaking Britain.
Meanwhile, KPMG has pointed out that China and India now cover 25 per cent of investments.
If London is to retain its place at the top of the list, Bence has highlighted a number of things that should be looked at in the long term.
He said: “Corporation tax is still far too high and it’s not an attractive trading environment and although it’s not been very popular, financial regulation is very tight at the moment and those things could make it less attractive to do business here compared to other places.”