Northern Powerhouse beats Midlands Engine in foreign investment drive
Birmingham and the West Midlands’ claim to be leading the way in attracting firms from abroad has been put into perspective by figures showing the Northern Powerhouse outstripping the Midlands Engine.
While foreign direct investment (FDI) hit record levels in Birmingham last year, investors poured into the north of England at more than twice the rate.
Ernst Young’s annual UK Attractiveness Survey, which monitors FDI into the UK and across the world, recorded 127 per cent growth in foreign firms setting up in the north-west and north-east of England, compared to a 46 per cent increase in the West Midlands.
A different survey last year claimed Birmingham had beaten London, Manchester, Dublin and Barcelona to become the best-performing city in Western Europe for its competitiveness in attracting inward investment.
The World’s Most Competitive Cities Report 2015 – which ranks urban areas across the world by industry experts – listed Birmingham in eight key sectors judged important to the global economy.
According to Ernst Young (EY), the UK as a whole registered 20 per cent uplift in the number of projects in 2015, the steepest year-on-year growth recorded in the past decade, and a 35 per cent increase in the number of jobs created – to more than 42,000.
The number of manufacturing projects rose by 10.9 per cent, the highest level recorded since 1998, beating Germany for the second year running and contributing a third of the total number of UK FDI projects secured in 2015.
Growth was driven by significant gains in the regions and cities outside of London and the south-east. The north-west led the way out of 12 UK regions, with an increase in projects of 118 per cent, contributing to a 127 per cent growth in FDI levels across the Northern Powerhouse, since the term was coined two years ago.
Scotland had its most successful year ever, recording a 51 per cent rise in projects, while the West Midlands posted a 46 per cent increase. Only three regions saw a decline in projects secured during the year – the south-east of England (22% fall), Northern Ireland (62% fall) and Wales (2% fall).
The UK appears to be extremely well positioned to perform strongly in the future, but the survey – which interviewed over 440 international companies – also identifies a number of issues that could weigh on the UK’s future performance in attracting FDI.
Investors seem much less optimistic about the future attractiveness of the UK than they were 12 months ago. When asked how the UK’s attractiveness for FDI will change in the next three years, only 36 per cent say they expect it to improve compared to 54 per cent last year, which is the lowest score since 2010.
EY’s chief economist Mark Gregory described 2015 as “the year of regions and cities”. He added:
The geographic mix of inward investment last year strongly suggests that the UK is using FDI very effectively to help rebalance its economy, with almost 90 per cent of the UK’s total FDI growth coming from the regions outside of London and the south-east.
Investors are voicing solid support for the UK’s agenda to devolve power to a regional level, it now seems devolution is starting to work and foreign investors are helping rebalance economic activity more evenly across the country.
EY Chairman and UK & Ireland Managing Partner, Steve Varley, commented:
The UK’s performance in attracting foreign direct investment in 2015 was nothing short of stellar. Crucially we saw a huge surge in the number of investors locating their headquarters in the UK, up 172 per cent, and growth in the number of research and development projects, almost to 40 per cent, reflecting the success of the Government’s strategy to target key strategic investments.
Investors rated the quality of life, diversity and culture, education, stability of social climate, telecommunications, and labour skills among the UK’s most attractive attributes.
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