Scotland has retained its position as the UK’s top destination outside of London for foreign direct investment, according to a newly-published survey.
The EY Attractiveness Survey examines the performance of Scotland and the whole of the UK as destinations for foreign direct investment (FDI). This year has included a survey of around 800 international investors exploring the impact of the Covid-19 pandemic on investment.
According to EY, Scotland has “reinforced its position” as the UK’s most attractive location for foreign direct investment outside of London. The announcement marks the seventh consecutive year Scotland has retained this position.
Scotland recorded a 7.4% increase in the number of FDI projects secured, snapping up 101 in 2019 compared to 94 in the year previous.
Meanwhile, growth in Scottish investment also rose at a faster pace than the rest of the UK, with a 5.2% increase taking it to 1,109 projects.
An increased FDI flow also saw Scotland’s share of UK projects rise from 8.9% to 9.1% between 2018 and 2019, the survey shows.
Among the top countries for FDI in Scotland are the United States and France, with Germany, Japan and Norway ranked joint-third. Additionally, the nation’s top-ranked FDI activities are sales & marketing and manufacturing – both of which are ranked in equal first place.
Ally Scott, Managing Partner for EY Scotland, commented: “Scotland has yet again achieved an impressive performance on FDI in 2019.
“The pace and scale of growth achieved is evidence of Scotland being well-placed to tackle the challenges presented by Covid-19 and an uncertain economic environment.”
In terms of job creation, Scotland performed well in 2019 compared to previous years. Last year saw it rise to second-place in this regard, up from its fifth-place ranking in 2018.
The average size of FDI projects in Scotland created around 83.6 jobs, which is the highest recorded since 2011 and places Scotland ahead of the UK average of 51.4.
Scotland’s Cities Performing
Individually, Scotland’s towns and cities performed well in this year’s EY Attractiveness Survey. Aberdeen, Edinburgh and Glasgow all appeared in the top ten most attractive cities for inward investment in the UK, excluding London.
Glasgow overtook Edinburgh as the country’s leading city to sit in third position behind Manchester and Birmingham. Edinburgh retained its position in fourth place while Aberdeen rose up the ranks from tenth to seventh.
Scotland’s two largest cities attracted investment from a “variety of countries” last year – 11 for each city. The nation’s capital proved to be more reliant on US investment, with half of its projects originating from there while Glasgow had around one-third of its projects come from US sources.
In both cities, however, digital, business services and finance account for around half of all foreign direct investment.
Aberdeen also saw a diverse range of foreign direct investment in regards to both the sectors in question and the country of origin. The majority of the city’s projects came from the US, Norway, Netherlands and Japan; with just under half of all projects focused on the energy sector.
The city secured major projects in a range of other areas, however, including business services, machinery and equipment, electronics and transport equipment.
The Impact of Covid-19
When looking beyond the impact of Covid-19, the report highlights a relatively positive outlook among investors and their intentions toward the UK.
Respondents said that 65% of planned projects were still going ahead, and only 3% admitted they had completely cancelled their plans. Across Europe, however, figures reveal a far more cautious approach from investors.
Two-thirds (66%) said they plan to decrease investment, while 23% will pause any investment. In comparison, just 17% said they plan to decrease investment in the UK.
Despite initial positive responses, investors responding to EY’s survey said they still anticipate a decline in UK FDI.
Mark Gregory, Chief Economist for EY UK, said: “Before Covid-19 changed the picture completely, 2020 was set to be a record year for UK FDI. At the start of the year, 31% of investors said they were planning to invest in the UK in 2020 – a significant increase from 23% in last year’s survey.”
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Commenting on the publication of the EY Attractiveness Survey, Economy Secretary Fiona Hyslop said: “As we begin to take steps to ease lockdown, this survey provides us with a welcome reminder of the strength and attractiveness of Scotland as a location for investment and for establishing a business.
“Inward investment will always have a part to play in our economy, so it’s hugely encouraging to see that for the seventh consecutive year Scotland led the way in the UK.”
Hyslop added: “This is also yet another example of our strong global reputation as a fantastic place for businesses to locate in and thrive.”