A Comparative Study of Direct Investments from France and the United Kingdom in Latvia

Abstract

Topicality of comparative study in Foreign Direct Investments (FDI) is determined by the need to deepen analysis of economic activity challenges and opportunities related to cross-border investments. Research in FDI trends by countries of origin is becoming mainstream globally and regionally. 2024 witnessed a cut in global FDI. In Latvia, where accumulated FDI grew for the fifth year in a row in 2024, the number of enterprises shrank. A detailed understanding of FDI inflows from major European economies such as France and the United Kingdom (UK) is of great importance for securing progress in FDI attraction.

The aim of the study is to investigate the Direct Investments (DI) from France and the UK in Latvia in a comparative study and formulate conclusions on emerging trends, specifically focusing on their industrial structures. The hypothesis is ‘the industrial structure of Direct Investments from France and the UK in Latvia reflects distinct strategic focuses, with UK investments historically being more diversified across a larger number of sectors, while French investments more concentrated in specific sectors, and these structural differences impact their respective resilience and growth trajectories.’

The research methods include both qualitative and quantitative ones. A literature review, case studies, websites content analysis, and interviews, all qualitative methods, are applied together with statistical ones, i.e. quantitative analysis. Yearly data prove insufficient and are supported by monthly data. Detailed structural analysis employs Nomenclature of Economic Activities (NACE) codes. MS EXCEL provides for proof and updates of calculations as well as visualisation of results of analysis.

UK DI in Latvia started in 1991 and reached an all-time peak on the eve of the BREXIT referendum only to shrink three times by 2025. French DI slowly increased and surpassed the UK ones in 2024. From February 2022 to February 2025, French DI grew while the UK ones went on declining. The structure of DI from France, encompassing 107 industries, is more concentrated on monetary services and wholesale while the DI from the UK operate in 155 industries, although dominated by trusts, funds and similar financial entities and monetary services. DI in real estate also matter in both structures. French computer facilities management investments combine with the UK wholesale of computers, computer peripheral equipment and software as well as computer programming activities and data processing, hosting and related activities with DI above EUR 1 million each. Three of French and UK DI industries in Latvia (communications, real estate and software) coincide with Global TOP 10 industries by FDI Intelligence. The hypothesis is proven.

Originality of the research is highlighted by pioneering methodologically sound analysis of trends in FDI in Latvia from France and the UK for the whole period of restored statehood of Latvia, 1991-nowadays, with particular focus on structural diversification patterns. For the first time, an analysis of the DI for the 3-year period of war in the Ukraine is done. The dynamics and NACE codes structure of DI from France and the UK in Latvia is new knowledge for scientific circulation. The research indicates methodology for FDI comparative studies in other states of the EU. Conclusions are addressed to stakeholders in the attraction of FDI in Latvia and academia. All calculations are verifiable and can be extended to the period to come. Further research directions justified.