This paper examines intra-industry productivity spillovers from foreign direct investment (FDI) in the UK manufacturing sector. The empirical analysis uses panel data for 48 UK industries over the period 1991-1995. A major contribution is empirical evidence on spillover effects in situations where the host country is developed. The results indicate that the very presence of FDI has a positive spillover impact on the productivity of UK-owned firms. The analysis also shows that the extent to which local firms benefit from the introduction of advanced technology depends largely on their own technological capabilities.