We are now only six months away from the UK’s exit of the European Union.

While our departure has caused an extensive array of concerns over how it will impact industry and investment within the UK, we have noted a significant increase in foreign direct investments. London remains the number one city in the world for foreign direct investment (FDI) with Manchester, Liverpool and Birmingham also featuring in the top 20, highlighting the fact that the UK contains many geographical regions that have growing industries outside of the capital city.

With the growth of FDI, it is important to think about what this suggests about UK’s position within the global market, about international versus domestic investment and the rise of competition that succeeds opening the gate to international investment opportunities.

Foreign direct investment vs angel investment

Foreign direct investment provides UK SMEs with the financial funding that they need to flourish, however it is imperative to recognise that it isn’t simply financial input that SMEs need to succeed. The beauty of angel investors is that they provide crucial support and industry knowledge to SMEs that mirrors their financial input. There are concerns, however, surrounding foreign direct investment and the risk of it stifling domestic competition.

When considering investment opportunities, it is important to consider what is best for your business and if a more hands-on advisory approach is best. While it is great that the UK attracts such a significant amount of foreign direct investment, it is vital that we continually recognise the importance of domestic investments and the value of angel investors in the UK.

Angel investors are one of the largest sources of funding for high-growth small businesses. These angel investors are individuals who make use of their own personal disposable finance and perform their own due diligence on the companies they invest in.

“There are concerns surrounding foreign direct investment stifling domestic competition”

As I mentioned, angels represent a greater investment to a scale-up than just pure capital. Many business angels are alumni of the sectors they invest into, meaning that they bring crucial knowledge to a scale-up, which can often prove just as valuable as the financial injection which they also provide.

As angel investors are experts within their industries, they have the contacts and experience to guide the invested businesses in the right direction. This has grown ever more important in the run-up to Brexit as SMEs require additional support in negotiating the uncertain political landscape.

Angel investors are able to advise and assist smaller businesses who need to ensure that their enterprises can thrive post-Brexit in every scenario that is currently on the cards. Consequently, angel investors have become crucial in navigating a Brexit-proof private sector and thus their understanding is significantly important for UK SMEs.

I must assert that, regardless of the growth in UK foreign direct investment, angel investing remains the most significant source of venture capital for start-up and early stage businesses that require equity to expand their businesses.

See also: Top UK angel networks for your start-up

I am highly optimistic about British businesses and their ability to continually reach unprecedented heights in the international stage, but we cannot become overly reliant on foreign direct investments and must look at the benefits that angel venture capital can bring.

Jenny Tooth is the CEO of the UK Business Angels Association.