Trade Openness, Foreign Direct Investment And Economic Growth In United Kingdom (UK): A Time Series Analysis Approach

Abstract

This study investigates the impact of international trade and foreign direct investment on economic growth in the United Kingdom using updated time-series data from (1990-2025) and current economic realities. Specifically, the study investigates whether trade openness and FDI continue to exert significant positive effects on economic growth amidst Brexit adjustments, global supply chain disruptions, geopolitical uncertainty, inflationary pressures, and structural economic transformation. The findings of the study indicate that international trade represented by export plays a more substantial role in driving economic growth in the United Kingdom than Foreign Direct Investment. Export activities significantly enhance economic growth through increased productivity, market expansion, innovation, and foreign exchange generation. Although FDI was found to be statistically insignificant, policymakers should concentrate on attracting high quality and productivity enhancing investments rather than merely increasing the quantity of inflows. Priority should be given to investments capable of generating technological spill overs, employment opportunities, human capital development, and industrial diversification.