The balance on portfolio investment showed a deficit of £1.7 billion in 2007, £0.1 billion lower than in the previous year, with a fall in the deficit on equity securities just outweighing a fall in the surplus on debt securities. UK earnings on foreign equity securities rose by £2.6 billion, to £18.1 billion, while UK earnings on debt securities rose by £6.6 billion, to £46.2 billion. Foreign earnings on UK equity securities rose by £1.5 billion, to £22.5 billion, while foreign earnings on UK debt securities grew by £7.6 billion, to £43.5 billion.

The deficit on other investment rose from £22.7 billion in 2006 to £30.5 billion in 2007. Earnings on other investment abroad rose by 38 per cent from 2006, to £130.1 billion, whilst earnings on other investment in the UK also rose by 38 per cent, to £160.7 billion. These significant increases are as a result of sustained investment and increases in Euro and Sterling interest rates. Income on reserve assets in 2007 was £0.6 billion, little changed from 2006.

Current transfers

The deficit on current transfers increased by £1.6 billion in the fourth quarter to a record £4.6 billion. This was as a result of a rise in contributions to the EU budget. Net payments to EU
Institutions were £2.5 billion in the fourth quarter, also the highest on record. It should be noted that the quarterly path of net contributions to EU institutions can be erratic. The annual deficit on current transfers was £13.9 billion in 2007, compared with a deficit of £12.0 billion in 2006. The increase in the deficit was mainly due to increased aid payments by the government and increased net payments to the EU by other sectors.

Capital Account

The capital account recorded a surplus of £1.0 billion in the fourth quarter, up from £0.6 billion in the previous quarter as a result of increased receipts from the European Regional Development Fund. The surplus on the capital account rose from £0.9 billion in 2006 to £2.5 billion in 2007. This reflected a decrease in ''other sectors'' debits as there were no large debt write-offs to Nigeria in 2007, as there had been in 2006.

Financial Account

The financial account showed a net inflow (i.e. inward investment) of £7.5 billion in the fourth quarter, compared with a net inflow of £28.2 billion in the previous quarter. There was net investment abroad of £171.8 billion in the latest quarter, £17.3 billion higher than in the third quarter. Net investment in the UK was £179.3 billion in the fourth quarter, £3.4 billion lower than in the previous quarter.

Direct investment abroad showed net investment of £64.3 billion in the fourth quarter, compared with net investment of £22.7 billion in the previous quarter. The increase in net investment in the latest quarter largely reflects increased investment in other capital transactions and equity capital. Transactions in equity capital increased from £6.0 billion in the third quarter to £19.0 billion in the latest period, while other capital flows showed investment of £33.5 billion in the fourth quarter following investment of £3.5 billion during the previous period. Non-financial corporations dominated investment in the latest quarter and increased investment by other sectors more than offset lower investment by the banking sector.

Direct investment into the UK showed net investment of £22.5 billion in the fourth quarter, compared with net investment of £15.6 billion in the third quarter. Lower investment in equity
capital and reinvested earnings was more than offset by increased investment in other capital transactions, which went from net disinvestment of £5.0 billion in the third quarter to net investment of £4.4 billion in the latest period. Increased investment in the financial sector more than offset lower investment in the non-financial sector.


Available at:

http://www.statistics.gov.uk/pdfdir/bop0308.pdf