A record number of Foreign Direct Investment (FDI) projects were secured in Scotland last year, according to the latest EY Annual Attractiveness Survey.

The country outpaced both the UK and Europe for the second year in a row, maintaining its position as the top performing area of the UK outside of London for the eighth year.

Inward investment projects grew by 3.3% in 2022 (126 projects against 122 in 2021), compared to 1.4% growth across Europe and a 6.4% fall across the UK.

Scotland’s share of UK FDI projects reached a record high of 13.6% – up from 12.3% the previous year – while a record 19.2% of investors responding to the EY survey said they were planning to establish or expand operations in Scotland, indicating strong investor sentiment.  

Edinburgh and Glasgow ranked as the first and second cities outside London for planned investment over the next year, with one third of investors aiming to back projects in Edinburgh, Glasgow or Aberdeen.

Trade Minister Richard Lochhead said: “These results show Scotland once again outpacing the UK and Europe when it comes to the pace of growth in securing Foreign Direct Investment.

“This is in spite of the significant challenges in the economy caused by Brexit, Covid and the geopolitical instability which triggered the current cost of living crisis.”

UK Minister for Investment, Lord Johnson, said:  “Year after year we’re seeing growth in the number of FDI projects and Scotland’s major cities are still attracting a huge amount of planned investment.

“The UK Government will continue its work to promote Scotland around the world as a place to invest in order to sustain this growth in future years.”

EY Scotland managing partner, Ally Scott, said: “Against an unsettled UK and Europe economic backdrop, Scotland recorded its fourth successive annual increase and has now been second only to London in nine of the past ten years.”

Survey highlights

• Scotland has three of the top 10 cities for FDI projects outside London (Edinburgh 2nd, Glasgow 4th Aberdeen joint-5th), with the majority of projects involving digital technology alongside utility supply, including renewables.
• Digital tech has been the leading sector for Scottish FDI in each of the past three years, although the number of digital tech projects recorded in Scotland in 2022 was 29, down by 12% from 33 in 2021, while total UK digital tech projects were down by 32%. 
• While the finance sector is not among Scotland’s five largest FDI sectors over the past five years, finance projects in Scotland more-than doubled in 2022, rising to eight projects compared to just three in 2021. This was the strongest showing by the sector in Scotland since 2016, when Scotland secured nine finance projects.
•  As with the rest of the UK, sales and business services were the most common FDI activity in Scotland in 2022, with 51 projects (two-fifths of all Scottish projects), down from 59 in 2021. Scottish manufacturing continued its recent renaissance, with a joint decade-high 35 projects in 2022 matching last year’s project total.
• Equally encouraging is the rise in R&D project activity in 2022, with Scotland securing 27 projects – its highest number of R&D investments since 2015, when it recorded 28, and up from 20 in 2021.
• The US (responsible for 40 projects) remains the biggest contributor of Scottish inward investment projects, with continued strong performance across Europe including Germany with 10 projects, the highest contribution in a decade.
• Scottish manufacturing continued its recent success, with a joint decade-high 35 projects in 2022 matching last year’s project total.