Levelling Up questioned
Scotland ‘only fifth’ for inward investment – CEBR
New data has challenged Scotland’s claim to be the most popular destination for foreign direct investment (FDI) outside London.
A report produced by the Centre for Economics and Business Research (CEBR) indicates that in 2020/21 Scotland secured 92 projects, behind London with 492, the south east (163), the West Midlands (145) and North West England (139).
Scotland also suffered the second biggest percentage fall (24%) on the previous year, only marginally better than Northern Ireland (28%).
Law firm Irwin Mitchell’s UK Powerhouse report comes as First Minister Nicola Sturgeon is in the US to promote trade links with Scotland and just a week after the World Forum for FDI was held in Edinburgh.
The report also reveals that eight of the top 10 fastest growing city economies by the end of next year will be in the South or East of England.
It states that the Government’s levelling up agenda will fail to take off unless more is done to help local economies outside of the South East attract Foreign Direct Investment (FDI) and diversify towards faster growing sectors.
The report says that out of the 50 locations included in the study, over half of the slowest growing economies are expected to be in the North of England. Warrington is expected to be the fastest growing city in the North by the end of next year, but it only comes in 20th place.
The study highlights Milton Keynes’ advantageous location within the Oxford-Cambridge Arc – a region identified as being of global importance for innovation and business activity. It adds that the city’s growth is boosted by its high productivity levels and prevalence of business start-ups.
Future investment in the region will not only boost Milton Keynes – the report predicts Cambridge and Oxford’s 2.5% year-on-year growth in employment by the end of 2023 will be the fastest in the UK.
It adds that Milton Keynes as well as Oxford, Peterborough, Reading, Brighton and Inner London are home to a cluster of tech businesses, a sector that has been a key driver of the UK’s growth in recent years.
At the other end of the scale, the slower growing cities are all home to declining industries. Aberdeen’s oil-based economy is set to grow by just 1.3% in Q4 2023, while the former industry hotbed of Wolverhampton and port cities of Belfast, Hull, and Plymouth are each expected to grow by just 1.4%.
Although both London and the South East have saw a 23% annual dip in the number of FDI projects in 2020/21, the vast majority of investment was in these locations.
The report says the dominance of London and the South East when it comes to FDI levels contributes to the continued contrast in economic outcomes between the South and North.
|Number of FDI projects in 2020/21||Annual change|
|Yorkshire and The Humber||86||-17%|
|East of England||72||-1%|
Source: UK Powerhouse
Bryan Bletso, partner and hHead of international at Irwin Mitchell, said: “FDI brings potential for higher productivity and improved economic output for many years into the future. There are signs that despite a fall in the number of projects last year compared to the previous 12 months, more recent data from the United Nations points to a strong recent recovery.
“We are certainly seeing some encouraging signs with an increase in enquiries from organisations looking to invest here and as a national firm we seeing FDI activities spread across much of our national footprint.
“I’m optimistic that levels of FDI into the UK will increase and from a levelling up point of view, it is important that it doesn’t become concentrated in locations which are already growing quickly.
“The whole of the UK has a lot to offer and the regions which benefit most from investment from abroad are likely to see more growth and job creation in the coming years.
“According to our report, the West Midlands and North West are third and fourth for regional FDI. There is therefore hope that these regions may level up to see the investments that their southern counterparts currently attract.”
Josie Dent, managing economist at CEBR and one of the report’s authors, said: “The economy is still expected to face some turbulence between now and the end of next year, notably through volatility in commodity prices, supply chain pressures, and the emerging cost-of-living crisis domestically.
“All of these factors are set to impact growth both at the aggregate level and, to a varying extent, within individual cities.
“This report highlights that much of the fastest growth during next year will be concentrated in the South. Locations such as Milton Keyes, Cambridge and Oxford have economies which are dominated by fast-growth sectors and they have also been hot spots for overseas’ investment.
“If economic levelling up is to be tackled effectively, these two issues must be recognised and quickly addressed.”
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