Foreign investment into Scotland at highest level in more than a decade

5 June 2013

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Projects hit 15-year high, according to EY report


Wednesday 5 June: Scotland attracted its highest level of global Foreign Direct Investment (FDI) projects for 15 years during 2012, strengthening its competitive positioning within the UK, according to EY’s (EY) latest annual attractiveness survey.

A total of 76 projects were recorded last year, a 49% increase on the 2011 figure of 51. This compares to an increase of 3% in projects coming in to the UK as a whole during the same period and saw Scotland increase its market share of all UK FDI projects by almost 3.5 percentage points, rising from 7.5% to 10.9%.

The only year on record in which the country has attracted a higher proportion of UK projects was 2004, when it secured 11.4% of the total UK figure.

Jim Bishop, EY Scotland senior partner, said: “The figures clearly demonstrate that Scotland continues to punch above its weight in an increasingly competitive global market.”

Projects up, but jobs down

The report again highlights the efforts of Scottish Development International (SDI) and the Scottish Government in making Scotland an attractive proposition among international investors, but does note that the number of reported jobs created by FDI in Scotland during 2012 fell by 18% to 4,867 compared to 2011’s figure of 5,926.

The result was a fall of 4 per cent in the country’s market share of FDI employment across the UK as a whole – 20% in 2011 down to 16% in 2012 – but it remained above the 13.7% average recorded over the past ten years.

Jim Bishop added: “The fall in job numbers took place against the backdrop of a modest increase in FDI-generated jobs in the UK as a whole. Only a large, one-off automotive project in the north west of England prevented Scotland retaining its position as the UK’s top FDI job creator for the third year running.”

Emerging economies need more focus

Scotland maintained its reputation as an attractive base for manufacturing operations. It secured more than 30 per cent of its FDI projects from manufacturing, while the sector accounted for only 17 per cent of projects generated in the UK as a whole, underlining the country’s strength in this area.

The United States remains the largest source of FDI for the Scottish economy, being responsible for 41 per cent of all investment projects into the country. Figures from the past decade show that Scotland has been slightly more reliant on US FDI than the UK as a whole. And while it has also been successful in securing French, Norwegian and Swedish investment, it has not kept pace with the rest of the UK in attracting investment from emerging economies.

This, according to Jim Bishop, is an issue that must be addressed: “There is much to be positive about, but Scotland cannot rest on its laurels. We are still more reliant on the US as a long-standing lead investor than the rest of the UK, but lagging behind in investments from growing economies such as India and China. The country is performing well, but there’s always room for improvement.”

Political debate no obstacle to investment

The report states that Scotland faces wider and long-term challenges to its performance as competitive new locations open up and existing ones improve their appeal. Simultaneously, worldwide financial uncertainty is likely to bring about shifts in the global balance of economic power.

One issue that it identifies as having little or no effect on levels of FDI is the current debate surrounding Scotland’s constitutional future, saying there is no sign of investors being deterred from coming to the country.

Jim Bishop concluded: “As new markets open up and competition for FDI intensifies, securing investment will become more difficult for all countries, including Scotland. However, next year’s referendum hasn’t acted as a barrier to investment so far, although that may change as the discussion intensifies. What we can confidently say is that Scotland’s voice is being heard all the more clearly by investors as things stand.”