Scotland has attracted a new record of Foreign Direct Investment (FDI) for the third consecutive year and set a new ten-year high, according to EY’s latest Scotland Attractiveness Survey.
In 2017, Scotland experienced a 7% increase in the number of projects it secured, taking the total up to 116 from 108 in 2016. This rate of growth was higher than the UK as a whole, and as a result Scotland’s share of UK FDI projects increased by 0.1%.
Mark Harvey, EY senior partner, Scotland, said: “Scotland has demonstrated an outstanding ability to attract and drive sustained growth of FDI. However, the performance of the UK as a whole within Europe is a signal that competition for FDI projects is intensifying and our previous levels of attractiveness are not guaranteed to continue.
“If Scotland hopes to attract more FDI in the future we must acknowledge and address the challenges that face businesses here.
“Scotland must work increasingly hard, with private and public sectors in partnership, to ensure the pipeline of talent, skills and experience is strong enough to drive business and economic growth in the future.”
Business services was the sector that attracted the greatest number of FDI projects to Scotland in 2017, as in 2016. Digital also performed well and accounted for the second largest number of projects generated, with a 56% increase in project numbers.
The most noteworthy activities in 2017 were manufacturing and R&D, which both achieved significant growth in Scotland. Manufacturing generated 30 investment projects, the second highest number on record in the last decade, as a result of a 25% increase on 2016. For the second consecutive year Scotland emerged as the UK’s premier destination for R&D FDI with 22 projects representing a 70% increase from 2016 and accounting for the lion’s share (24%) of all UK R&D investments.
Scotland is also performing increasingly well in securing headquarters (HQ) projects. In both 2016 and 2017, HQ projects in Scotland were at their highest level for the past decade.
EY’s UK chief economist, Mark Gregory, commented: “The UK’s FDI landscape is changing. The pace of growth of inward investment into London, and the UK as a whole, is slowing, impacted by the decline in Financial and Business Services projects, and the drop in the number of HQ investments into the UK – an indicator of a country’s FDI performance.
“However, Scotland and the English regions of the North West, the East and South East all had a strong FDI performance in 2017 driven in part by an increase in the number of digital projects locating there.”
Mark Harvey, said: “Scotland has a powerful proposition where connectivity, both infrastructure and digital, combined with access to skills and talent continue to make Scotland a leading contender for foreign direct investment into the UK. This is of increasing significance at a time when investor sentiment towards Scotland as an attractive destination remains steady, whilst appeal of the UK weakens, offering Scotland a golden opportunity to consolidate current performance and push harder to win a bigger share of UK inward investment.
“It is particularly important that Scotland exploits this opportunity during the current environment of uncertainty with Brexit nine months away.”
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