Scotland attracts record numbers of investment projects

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EY Scotland Attractiveness Survey

By Molly Pollock

Outside of London, Scotland remains the UK’s most attractive location for Foreign Direct Investment (FDI), with a higher FDI growth rate than the UK as a whole  and the number of FDI projects increasing. The statistics come from EY’s Attractiveness Survey, Scotland, 2018. Scotland achieved these figures in 2017 for the third year in a row, setting a new 10-year high.

Jobs secured as a result of FDI into Scotland rose by 104% from 3,131 in 2016 to 6,374 in 2017 – the highest number of such jobs created in Scotland in any year in the past decade.

The survey examines the evolving performance and perceptions of Scotland as a destination for foreign investment and underlines a continuing trend – that Scotland remains a prime location for international companies considering foreign expansion, and shows:

Scotland’s increasing share of  UK FDI
The highest number of HQs in Scotland for a decade
A 70% rise in R&D projects, proving Scotland has a leading edge in science and technology
FDI job creation up by a massive 104% – reflecting a shift towards larger scale projects 
Growth of the business services sector, while the UK’s has shrunk
A 56% increase in Digital FDI projects, the second largest sector for Scotland 
Manufacturing FDI projects increased by 25%

Foreign Direct Investment is of significant importance to Scotland, remaining a vital source of capability, economic activity and jobs, and proves Scotland’s assets are continuing to make an impression on a global scale with companies from around the world viewing Scotland as a great place to invest.

Investing in Scotland: US, Norway, France, Ireland and China

The US (with the largest number of FDI projects also increased its number of investments by 16% to 36 in 2017 from 31 the previous year), Norway (the largest FDI project investing into the oil and gas sector, with the creation of 700 jobs), France, along with Ireland and China are the main investors, drawn by Scotland’s well-educated and highly skilled workforce, diverse local businesses and suppliers, along with ready access to technology, transport and telecommunications. Business Services accounted for three projects creating more than 200 jobs.

Scotland has retained its position as the number one place in the UK for R&D projects the survey also indicated, and last year secured a massive 70% year-on-year increase with 24% of all R&D projects coming to the UK.

Mark Harvey, EY’s senior partner in Scotland, described the findings as “hugely encouraging”.

“These areas of success are underpinned by the strength of the universities producing high caliber, talented people who want to build their career in Scotland,” he said. “Scotland’s long-term attractiveness to investors will rely, in part, on the ability to remain a first choice destination for students.”

However he went on to caution that if Scotland hoped to attract more FDI in the future then the challenges that face businesses must be acknowledged and addressed. He cited economic growth that is positive, but sluggish, and access to labour making it more difficult to expand operations.

For the first time since the survey of 450 key business decision-makers began in 2004, Paris overtook London, being named by foreign investors as the most attractive city to invest in.

EY’s UK Chief Economist, Mark Gregory, commented that across the UK there was a correlation between the growth of FDI in university cities, including Edinburgh, with a reputation for digital and R&D, and that in an increasingly digital world the UK will need to focus on transforming into a digital economy or risk losing out on growth opportunities.

Confidence in the UK as a place to invest, according to EY’s report, would improve if the Government articulated a long-term vision for the UK, including how it proposes to drive economic growth, promote a pro-business environment, and encourage people and businesses to come to the UK through a defined immigration policy.*

EY’s recommendation to the UK government is precisely what the Sustainable Growth Commission report: Scotland: The New Case for Optimism has set out to achieve for Scotland by creating a roadmap for discussion on how Scotland drives economic growth, supports businesses as well as inclusive social policies, and lays out a strategy for immigrants – whether at university or working in Scotland – to enable them to remain and contribute to our economy and society. Scotland is already working on how to succeed in the modern world.

UK government ministers have spent two years fighting amongst themselves and have completely failed to articulate any vision for the future. The SNP have come up with a detailed roadmap that does what EY recommends the UK government should follow.

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