Global capital flows become slow trickle, down 60% since 2007

The global flow of capital (money that moves around for the purpose of investment, trade or production) has fallen to $4.6tn from $11.8tn in 2007, with the UK seeing the steepest decline.

by Rebecca Burn-Callander

Global capital flows have fallen to worryingly low levels since the downturn began, according to consultancy group McKinsey. The value of loans and investment deals between countries has dropped by some 60%, down in part to global financial uncertainty but - in the main - because of the ongoing eurozone crisis.

Western Europe accounted for around 56% in the growth between 1980 and 2007, but has been responsible for a 72% slump since then. However, while corporations are holding back on European investment, and shelving loans in and out of the region, capital flows into the emerging markets have remained constant across the last five years.

While the UK is not part of the eurozone, our small island has experienced the biggest decline in capital flows since the start of the downturn. The eurozone is our largest trading partner. Cross-border capital flows are down 82% between 2007 and 2011, mostly due to dwindling inflows and outflows of bank loans.

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