(10.1.1) Net International Investment Position United Kingdom


Net international investment position to GDP United Kingdom UK

We discuss the net international investment position of the United Kingdom - Click to enlarge

The NIIP is heavily driven by valuation effects: British foreign portfolio investment are apparently rather risk-on investments, while possessions of foreigners in the UK are rather risk-off. Consequently the NIIP swings with stock markets.
Via FT Alphaville:  “While the UK NIIP is down from the lows in 2006/07 and 2010, 10% is a high number as it creates a structural drag on the current account in the form of a negative income balance. However, this is only in theory and the UK is a good example of having a strong (positive) income balance even in the face a negative NIIP.



Income United Kingdom Balance of Payments

We discuss the net international investment position of the United Kingdom - Click to enlarge

“The size is less important that the fact that it is positive even in the face of a negative NIIP. This suggests that the return foreigners earn on capital in the UK is substantially less than what UK investors (corporate and private) earn abroad. This could be a result of UK investors being more shrewd and adept than their foreign counterparts, but this is an unlikely explanation.”

Read on the next page about the Swiss net international investment position and the one of Italy

George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
See more for 4.) FX Theory

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