The South West recorded its highest number of foreign direct investment (FDI) projects in a decade – up 39% compared to the previous year, from 38 to 53. FDI projects in the South West have increased every year since 2012 when the region attracted 15 projects.
Bristol has been ranked as the joint 11th best performing city in the UK for attracting FDI projects, with 13 projects locating in 2017 – 25% of all projects locating in the South West in 2017.
According to EY’s 2018 UK Attractiveness Survey, the main drivers of regional growth in England were the three southernmost regions all posting double digit growth. The South East achieved a 26% increase to 91 projects, the South West grew by 39% to 53 investments and the East outshone the field with 59 projects in 2017 representing a 48% increase over 2016.
Job creation declined in 2017
Despite the region’s outstanding performance in attracting FDI, the South West significantly reduced the number of jobs secured by 51% – from 3,489 to 1,701 – although the level recorded did represent the third highest number for the decade.
The two largest investments into the South West originated from the US – the larger of the two involved 300 jobs and was a business services project in Cheltenham. The other was a pharmaceutical investment in Plymouth creating 200 jobs.
Sectors driving investment in South West
The three leading sectors generating investment in 2017 were transportation manufacture – ranked number 1 and recorded eight projects (up from a single projects); agri-food business – ranked joint 2nd and recorded seven projects (up from two projects); and utility supply – ranked joint 2nd and recorded seven projects (up from three projects).
In the UK as a whole, the sector that generated the largest number of projects was digital. In the South West, digital projects declined by 62% to five projects in 2017, compared to 13 projects in 2016.
Investment is great news for the South West
Andrew Perkins, Managing Partner at EY in the South West, said: “These figures are great news for the South West – not only has the South West region attracted 39% more investment than in 2016, but Bristol has been ranked 11th for inward investment in the UK. Furthermore, Cheltenham and Plymouth both seen sizeable and significant investment, winning projects that have resulted in hundreds of jobs for the local area.
“The region’s outstanding performance in 2017 gives us solid foundations as we continue to work towards rebalancing the UK economy, however, it remains crucial that we find ways to share the benefits of FDI more evenly across the country.”
UK retains its position as the most attractive location in Europe
The UK remains the number one destination for FDI in Europe, ahead of Germany and France, despite a decline in sentiment from foreign investors towards the UK as a place to invest. The UK attracted 1,205 FDI projects in 2017, a 6% increase when compared to 2016 (1,138).
Investors expressed clear concerns surrounding Brexit, which contributed to the UK’s waning attractiveness and a decline in FDI projects in certain sectors, including, financial services, business services and logistics. A 22% increase in digital investments into the UK helped to cushion the hit and push the UK into growth territory.
According to the report, there was a marked increase in UK outbound investment by 35% in 2017 to a new high. 110 of those investments went into Germany and 79 to France, as UK businesses appear to be accelerating their activity to position themselves for a post Brexit environment.
Digital drive to focus future competitiveness post-Brexit
Andrew Perkins concludes: “The UK’s FDI performance shows an economy in transition, influenced by Brexit and the force of technological change. In 2017 a swell of digital projects flowed into Europe, changing the shape of FDI and bringing new dynamic businesses to the continent. Digital projects increased by 33% across Europe – three times the rate of overall market growth and the South West needs to do more to attract this investment into the region.
“At a time when investor sentiment towards the UK as an attractive destination is weakening, opportunity arises in the shape of digital. An urgent digital drive is needed with a renewed focus on digital skills, infrastructure, and investment in research and development will help to shape the UK as an attractive environment, to maintain its competitiveness in a post-Brexit world.”