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Edexcel GCSE Geography B · 1GB0
Edexcel 1GB0 · Global links Check the specification (PDF) (opens in a new tab)
The UK economy is connected to other countries through trade, finance and the activities of businesses. Globalisation is the process by which these connections become stronger. Money can move across borders to fund businesses, while goods, services and ideas move between countries.
One important connection is foreign direct investment (FDI). This is investment that gives an overseas investor a lasting interest and influence in a business in another country. An overseas company establishing a UK factory or buying a UK business can therefore bring FDI into the UK. Simply buying goods from a UK shop is trade, not FDI: it does not give the buyer a lasting interest in the business.
Direction matters. Inward FDI comes into the UK from overseas; outward FDI is investment by UK-based investors in businesses abroad. A transnational corporation (TNC) operates in more than one country and can make both kinds of investment.
As businesses become more internationally connected, they can organise activities across national borders rather than operate only in their home country. A TNC might invest in a UK operation to serve customers here or make it part of a wider international business network.
This creates a link between globalisation and inward FDI: businesses operating internationally need premises, equipment and business interests in other countries. Investment in these operations brings capital into the UK. However, globalisation also allows companies to move activities elsewhere. Stronger international connections do not guarantee that every investment or job will remain in the UK.
A tariff is a tax on traded goods. Trade barriers can make it more expensive or difficult for a business to sell across borders. Free-trade policies remove or reduce these barriers.
For a company considering a UK factory, easier trade can reduce the cost of bringing in components and selling finished products overseas. Lower costs and access to a larger market can make the investment more attractive. The chain is:
Fewer trade barriers → easier or cheaper cross-border trade → a more attractive business location → greater incentive for inward FDI.
UK trade policies and agreements influence these opportunities. During UK membership of the EU, access to trade within the EU also helped make the UK attractive as a base for companies serving European markets. Historical investment patterns must therefore be interpreted in the policy context of their period, rather than assuming that trading arrangements have always been the same.
Free trade and FDI are connected, but they are not identical. A company can export goods to the UK without owning a UK operation. Free-trade policies encourage investment by improving business opportunities; they do not automatically turn every trading relationship into FDI.
Privatisation transfers businesses from government ownership to private ownership. It opens up opportunities for private investors to buy businesses or stakes in them that were previously state-owned.
If an overseas investor acquires a lasting interest in a privatised UK business, this is inward FDI. Privatisation can therefore increase FDI by making more businesses available for foreign investment. A purchase by a UK investor alone, however, is not foreign direct investment.
New owners may invest in the business, but they may also reorganise it to reduce costs. Workers can face lower job security or redundancies. The transfer of ownership and its consequences for workers should be considered separately.
TNCs can provide capital that businesses need to operate or expand. Their investment can create jobs, and spending by a UK operation can support other businesses that supply it. These benefits explain why inward FDI is important to the UK economy.
There are also risks. A company operating internationally can relocate activities to another country, and globalisation has contributed to manufacturing jobs moving abroad. Changes in ownership or business restructuring can also lead to redundancies.
A balanced judgement is that TNCs and FDI can make a substantial contribution through investment and employment, but benefits depend on what the company does with its UK operation. An investment that expands production has different employment effects from a takeover followed by cost-cutting. Neither foreign ownership alone nor the size of an investment tells us its full impact.
Eurostat, the statistical office of the European Union, publishes secondary data that can be used to investigate international links. Its figures allow you to compare changes over time, but you first need to identify exactly what each series measures.
For an FDI investigation, select the UK as the reporting country and choose inward investment if the question concerns investment entering the UK. Decide whether you need an annual flow or an end-of-year stock, also called a position. A flow measures transactions during a period; a stock measures the value held at a particular date. Record the currency, scale, years and partner-country coverage. For example, values in millions cannot be compared directly with values in billions.
For immigration, select the UK and the relevant years, then choose either total immigration or a particular breakdown. Eurostat provides breakdowns by age, sex, citizenship, country of birth and country of previous residence. These categories answer different questions: citizenship is a legal status, whereas previous residence identifies where a person lived before moving. Immigration figures count arrivals establishing usual residence for at least 12 months, or intending to do so; they are not a count of tourists or of everyone already living in the UK who was born abroad.
The following table is a constructed illustration, not observed UK or Eurostat data. It demonstrates how to compare two annual series after selecting consistent definitions and units.
| Measure | Year A | Year B |
|---|---|---|
| Annual inward FDI flow, £ million | 200 | 300 |
| Annual immigration, people | 100,000 | 120,000 |
The FDI flow rises by £100 million, from £200 million to £300 million. Immigration rises by 20,000 people. To compare their relative changes, use:
FDI increases by , while immigration increases by . Both rise, but FDI has the larger proportional increase. Their absolute increases cannot be compared meaningfully because one measures money and the other people.
Apply this method to available UK Eurostat figures: extract a consistently defined series, calculate changes, and describe the overall pattern and any unusual years. Keep FDI and immigration on separate graphs or use percentage changes to compare them. A rise in both series does not establish that immigration caused investment, or that investment caused immigration.
Eurostat checks its statistics and uses international definitions, which helps comparisons. Nevertheless, read the metadata—the explanations of definitions, collection methods and coverage—before drawing conclusions.
Eurostat's annual FDI series has a methodological break between data before 2013 and data from 2013 onwards. Treat comparisons across that break cautiously. Figures can also be revised, and some detailed values are withheld for confidentiality. A missing value is not zero.
FDI partner-country figures generally identify the immediate investor, which may not be the country of the ultimate owner if investment passes through another country. This limits conclusions about where investment really originates.
Eurostat's UK immigration statistics are available only up to UK withdrawal from the EU, and the length of available series varies between breakdowns. Choose years with usable coverage rather than assuming every category has a complete record. These checks help turn a description of numbers into a defensible investigation.
Build a causal chain: explain how a policy changes costs or investment opportunities, then why this encourages inward FDI.
Include privatisation as well as globalisation and UK/EU free-trade policies.
Distinguish inward FDI from outward FDI, and annual investment flows from investment stocks.
Support data descriptions with figures and units. Two trends rising together do not prove that one caused the other.
When evaluating TNCs, weigh investment and employment benefits against risks such as job relocation and redundancies.
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Last updated
Globalisation
The increasing connections between countries through movements of goods, services, money, people and ideas.
Foreign direct investment (FDI)
Cross-border investment that gives an investor a lasting interest and control or significant influence in a business operating in another country.
Transnational corporation (TNC)
A company that operates in more than one country.
Free trade
Trade between countries with tariffs and other trade barriers removed or reduced through agreements.
Tariff
A tax charged on goods traded across a national border, usually imports.
Privatisation
The transfer of a business or industry from government ownership to private ownership.
FDI flow
The net value of direct investment transactions during a period, such as a calendar year.
FDI stock
The value of direct investment held at a particular point in time, usually the end of a year; also called an FDI position.
Secondary data
Information collected by another organisation or researcher, rather than collected first-hand by the person using it.
Immigration
Moving to establish usual residence in another country for at least 12 months, or with the intention of staying for at least 12 months, under Eurostat's definition.
Put your knowledge into practice — try past paper questions for Geography B
Globalisation
The increasing connections between countries through movements of goods, services, money, people and ideas.
Foreign direct investment (FDI)
Cross-border investment that gives an investor a lasting interest and control or significant influence in a business operating in another country.
Transnational corporation (TNC)
A company that operates in more than one country.
Free trade
Trade between countries with tariffs and other trade barriers removed or reduced through agreements.
Tariff
A tax charged on goods traded across a national border, usually imports.
Privatisation
The transfer of a business or industry from government ownership to private ownership.
FDI flow
The net value of direct investment transactions during a period, such as a calendar year.
FDI stock
The value of direct investment held at a particular point in time, usually the end of a year; also called an FDI position.
Secondary data
Information collected by another organisation or researcher, rather than collected first-hand by the person using it.
Immigration
Moving to establish usual residence in another country for at least 12 months, or with the intention of staying for at least 12 months, under Eurostat's definition.