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'Resilient pipeline'

Scotland’s rise in foreign projects bucks EU fall

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Scotland attracted more foreign projects last year than in 2019, bucking a fall across the UK and in Europe.

New research has revealed that Scotland secured 6% more FDI (foreign direct investment) projects in 2020 (107) against 101 in the previous year, with the US accounting for more than a third.

This contrasted with FDI projects across the UK falling 12% (from 1,109 to 975) and European FDI projects also sliding by 13% (from 6,412 to 5,578).

The UK lost out to France as the most popular European destination for foreign investors for the second year in a row, amid disruption from Brexit and the coronavirus pandemic. During 2020 the UK secured 975 inward investment projects compared with France’s 985 projects.

Scotland has also bolstered its position as the UK’s most attractive location outside London for inward investment.

Scotland’s share of all UK projects increased from 9.1% in 2019 to 11% in 2020.

This proportion has been exceeded only once – in 2015 – in the past decade. Scotland has been the UK location with the second highest number of overseas-backed projects – after London – in every year since 2014. 

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The number of new projects (61) in Scotland – as opposed to reinvestments – has bounced back to its highest level for five years, after three consecutive years of decline.

This performance ensured Scotland increased its market share of all new projects coming into the UK from 5.9% in 2019 to 8.4% in 2020.

Scotland’s ‘big three’ cities (Edinburgh, Glasgow and Aberdeen) were all ranked in the UK’s top ten cities for FDI projects outside London, with Edinburgh placed first, while digital tech and agri-food topped the sector leader-board.

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Fifteen per cent of investors said that Scotland was the most attractive part of the UK in which to invest – double the proportion saying the same in 2019 (7%) and, compared to the rest of the UK, behind only London (25%).

The data emerged in EY’s 2021 Scotland Attractiveness Survey.

Ally Scott, EY Scotland managing partner, said: “Amid arguably the most challenging environment for FDI in living memory, it’s clear that Scotland has put in an impressive performance over the past year.

“With investment intentions into the UK overall also at a record high, there’s every prospect of Scotland winning a healthy proportion of a resilient pipeline of investments in the coming months and years.

“Scotland has now narrowed the gap significantly with London, which continues to lead as the most attractive region to establish operations.

“The scale of this two-year shift is illustrated by London’s vote as most attractive region almost halving since 2019, while Scotland’s has more than doubled.

“As well as being firmly established as the UK’s second biggest recipient of FDI projects behind London, Scotland is now also in clear second place in terms of attractiveness, well ahead of third-placed South-East England.

“While our findings suggest Scotland is getting a lot right, the global market for FDI will only become more competitive, making it vital to keep listening and responding to what investors want.



“Our report shows that this includes the availability and skills of the local workforce, the strength of business networks locally, and access to regional grants and incentives for investment and R&D.

There is also a rising focus on sustainability and cleantech – areas where Scotland’s strength is exemplified by COP26 taking place in Glasgow later this year.”

Figures indicate Scottish jobs generated by FDI projects in 2020 was 4,499, slightly below a decade-long average of 4,650 jobs a year. This represents a decline of 30.1% from 2019 (with the UK falling 31% in the same period).

While our findings suggest Scotland is getting a lot right, the global market for FDI will only become more competitive

– Ally Scott, EY

However, 2019 was the high point of the decade for FDI generated employment in Scotland. As a result, Scotland’s total UK employment share generated by FDI fell from 17.5% in 2019 to 16.1% in 2020 – but remains Scotland’s third-highest proportion of UK FDI employment over the ten years.

Linda Hanna, interim chief executive at Scottish Enterprise, said: “Scotland’s incredible workforce, competitive cost base, world-class universities and supportive business environment is what makes global companies want to locate here. 

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“Not only does inward investment deliver high-quality, well-paid jobs, it also provides wider benefits such as supply chain opportunities and increased R&D spending that impacts across Scotland’s economy.

“As well as these key economic strengths, Scotland is known for our successful partnership approach, what we call ‘Team Scotland’, to achieving inward investment that sees public bodies, academia and industry working together to promote the very best Scotland has to offer and secure economic investment.”

A Scottish Government spokesperson said: “This outstanding performance provides a strong base from which to build as we continue our national endeavour to transform Scotland’s economy and create high quality, secure and sustainable jobs across the country.”

2020 top sectors and originators

The three leading sectors generating inward investments into Scotland in 2020 were digital technology (19 projects), agri-food (14 projects) and business services (11). These diverse sectors overtook the previous year’s top sector – machinery and equipment – which fell out of the top five (with four projects).

Oil and gas ranked fourth (nine projects), with utility supply fifth (eight projects) – underlining the continued importance of energy projects to Scotland in 2020.

Sales and service projects (49 projects) were the leading activity for Scottish FDI, followed by research and development (R&D) (23 projects) in second place.

Manufacturing projects slipped to third with 17 projects, from 32 projects in 2019. The biggest percentage increase was in logistics projects, which more than trebled from three projects in 2019 to ten in 2020, taking fourth place.

The US remained the single biggest originator of FDI projects into Scotland, accounting for 35.5% (38 projects) – slightly above the US proportion of the overall UK market. Ireland was the second biggest source of projects into Scotland with ten projects, followed by the Netherlands with eight.

Scotland’s ‘big three’ cities were all ranked in the UK’s top 10 cities for FDI projects outside of London in 2020. 

Combined, these three cities accounted for 70 of the 107 projects secured by Scotland in 2020: Edinburgh – 1st place, (36 projects); Glasgow – 5th place, (23 projects); and, Aberdeen – 7th place, (13 projects). Edinburgh overtook Manchester (34 projects) to record the highest number of projects outside London (383).

UK records ‘resilient’ performance

Scotland’s strong performance is set against a backdrop of resilience for the UK’s attractiveness as an investment destination, with the country ranking second in Europe for total inbound FDI projects in 2020 and expanding its share of the European FDI market.

While the UK again missed out on Europe’s top spot for FDI – for only the second year in the survey’s two-decade history – the gap was closed on 2019’s first-time leader France.

In 2020, the UK secured 975 projects (down 12% from 2019’s 1,109 projects); France hosted 985 projects (down 18% from 2019’s 1,197 projects). Germany ranked third with 930 projects (down 4% from 2019’s 971).

Overall, Europe saw a 13% fall in projects, which helped the UK expand its market share of FDI for the second successive year, from 16.6% in 2018 and 17.3% in 2019, to 17.5% in 2020.

Meanwhile, London reclaimed its status as Europe’s most attractive city for investment, overtaking Paris.

This latest survey found the UK is now perceived to be Europe’s most attractive destination for investment, while 41% of survey respondents plan to invest in the UK in the next 12 months – the UK’s highest ever score on this question, up from 31% in spring 2020 and 23% in 2019.



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