The seventh edition of the Grant Thornton UK LLP Tou Ying Tracker, which identifies the largest and the fastest-growing Chinese companies in the UK, shows that they continue to make an important contribution to the UK economy.
The report, developed in collaboration with China Daily, identifies 800 Chinese-owned UK companies that filed an audited revenue figure in at least one of the last two financial years. This is an increase on the 750 companies identified in 2018 using the same criteria.
Total revenues for the 2019 group of largest companies is £91 billion (up from £68 billion in 2018). Annual revenue growth also increased to 17% in 2019, up from 12% in 2018.
Two sectors dominate the Tracker. In terms of number of companies, 222 of the 800 largest Chinese companies operate in the consumer sector. In terms of total revenues, companies in the manufacturing & industrial sector account for 70% of the 800’s total revenues (£63.2 billion out of total revenues of £90.8 billion).
Simon Bevan, Head of China Britain Services Group at Grant Thornton UK LLP, commented:
“These 800 companies represent only a fraction of the Chinese companies doing business in the UK. In total, we identified over 13,000 companies that are part of a China-owned corporate group or are majority held by a Chinese national. It is clear that the UK remains a preferred destination for Chinese investors, recording £3.6 billion of completed transactions in 2019.*
“This was in the context of a dramatic drop in Chinese foreign direct investment (FDI) into the European Union (EU) for the second year in a row. The drop was largely a consequence of controls on capital outflows imposed by the Chinese government in November 2016.
“There are signs that the pro-Brexit government elected in December 2019 is likely to build trade and investment channels with countries like China as an antidote to greater friction in UK-EU trade. Chinese companies with plans to operate in Europe are likely to continue to be attracted by the UK’s geopolitical and fiscal policies, even if it becomes necessary to tackle the UK and the EU as two separate market opportunities.”
The Tracker also identifies the 30 fastest growing Chinese-owned UK companies (TY30), as measured by percentage revenue growth in the last year. The TY30 continue to grow at an impressive rate, reporting an average increase in annual revenues of 62%. They also make a significant contribution to the UK economy, employing over 5,500 people and with a combined annual turnover of £16 billion. Companies from the TMT and manufacturing & industrial sectors account for 20 of the TY30 fastest-growing companies in 2019.
For the first time, the report investigates how growth rate varies according to how the original investment was made. Among the TY30, the highest average growth rate, at 72%, is found among companies that were a direct UK investment. Those that were an indirect investment via a foreign parent acquisition report average growth of 64%, while average growth through organic expansion is 55%.
Simon Bevan concludes:
“It will be interesting to see how the new government led by Boris Johnson will balance its security stance with its desire to forge closer economic ties with China following Brexit. For now, the mood music is positive. In July 2019, in an interview with the Hong Kong-based broadcaster, Phoenix TV, Johnson said his government would be very “pro-China”. The prime minister also vowed to keep Britain “the most open economy in Europe” for Chinese investments and voiced his enthusiasm for the Belt and Road initiatives.
“While the outbreak of coronavirus is currently impacting travel to and from mainland China, which may interrupt the ability of Chinese businesses to pursue and complete overseas deals and visit their existing international operations, one thing is clear – the UK is committed to strengthening its relationship with China. But a wide range of international events and trends will continue to shape trade and investment patterns between the UK and China for some time to come.”