THE IMPACT OF FOREIGN DIRECT-INVESTMENT ON UK MANUFACTURING - IS THERE A PROFIT SQUEEZE IN DOMESTIC FIRMS

This paper examines the extent to which foreign direct investment (FDI ) in selected UK manufacturing sectors has an impact on reported profi ts in domestic firms. Foreign manufacturing firms are characterized by relatively high labour productivity and low wage shares. Entry by for eign firms not only impacts on domestic market shares, but also on dom estic cost conditions. As a result, profitability in the indigenous se ctor may be reduced. There are a number of policy implications of this analysis which are explored.