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FDI falls

Foreign investors halt plans amid Covid uncertainty

Ally Scott

Ally Scott: ‘the UK’s attractiveness remains’

Fewer companies are planning to invest in the UK in the next 12 months as coronavirus creates uncertainty around business investment and investor priorities.

The number intending to invest has fallen to 25% from a ten-year high of 31% in April, according to EY’s latest UK Attractiveness Survey.

The survey of 220 overseas investment decision makers also found the number going ahead with the investments they planned before the pandemic has halved from 72% to 43%.

According to EY’s analysis, these figures would mean 30-45% fewer FDI projects in 2020 than the 1,109 projects recorded in 2019 – equivalent to a fall of between 333 and 499 projects.

More than a third of respondents (35%) said they had scaled back their UK FDI plans and 17% have paused them.

However, just 5% have cancelled UK plans entirely and 21% said they had increased UK investment in light of COVID-19 (up from 5% in April).

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Positively for the UK, 32% of manufacturers surveyed said they planned to ‘reshore’ activity to the UK given the disruption to global supply chains caused by COVID-19.

Meanwhile, the UK’s longer-term outlook has improved, with 53% of respondents saying UK attractiveness will increase over the next three years compared to 34% in April and 26% in 2019.

Although the UK’s long-term growth prospects have improved, the prospects for Europe have improved faster and further. Fifty-nine per cent of investors think Europe will become more attractive over the next three years, compared to just 9% in the summer (the UK is up to 53% from 34%).

Ally Scott, EY Scotland managing partner, said: “The UK’s attractiveness – and Scotland’s place within that – as an FDI destination remains comparatively strong despite COVID-19. Overall, the outlook appears stronger than that for Europe.

“With strengths in areas like digital technology, Research & Development, Healthtech and manufacturing … there is more than a solid base for the country to build a future strategy on.

“These factors, combined with a growing interest in ‘reshoring’, present post-pandemic opportunities to meet investor needs and accelerate its levelling-up agenda.”



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