London has been the primary beneficiary but Bristol, Edinburgh, Leeds, Manchester and Newcastle all more than doubled the number of projects they attracted between 1997 and 2017. Nevertheless, London’s 5,875 projects in the period dwarfs the 419 secured by second-placed Manchester.
… with smaller places struggling to retain share …
To an extent, the UK’s leading performance in Europe in attracting FDI since 1997 has masked the wide differences in performance between its Core Cities and other areas. FDI in the Core Cities has increased four-fold since 1997 but declined everywhere else. Over the past two decades, large towns have seen their share of FDI fall from 26% at the start of the period to 17% last year, and all place types except Core Cities attracted fewer projects in 2018 than in 1997. The evidence suggests there may have been an insufficient focus on place in UK FDI activity in recent times.
… and the market is challenging and dynamic …
When we look at place characteristics using the Centre For Towns’ classification, the performance of university towns stands out. The number of FDI projects these attracted annually increased from 73 to 180 between 2013 and 2017. However, in 2018, their project numbers almost halved to 97, with the fall in research and development (R&D) and manufacturing projects the major factors in this decline.
Ex-industrial towns saw a major decline in project numbers from 69 in 1997 to 18 in 2013, but then experienced a significant revival through to 2017. However, this rally came to an end in 2018 with only 35 projects attracted, a fall of half in one year. Underlying this was the fall in the number of manufacturing projects the UK attracted in 2018, because the ex-industrial towns rely disproportionately on this sector.
… with geographic opportunities varying by sector …
Sales and marketing accounts for the largest share of FDI projects in the UK, having increased from less than a quarter of UK FDI 20 years ago to 56% of 2018’s total. Most of this growth has come since 2004, driven to a significant extent by the UK economy’s increasing openness . But the digital revolution has also played a role, with many software businesses covered by this grouping. This activity has been heavily concentrated in Core Cities (74% of all projects since 1997) and large towns (15% in the same period). Headquarters projects demonstrate very similar characteristics, with 80% over the past two decades destined for Core Cities or large towns.
By contrast, manufacturing projects are spread across different place types, with only 13% of these projects having gone to Core Cities and 30% to large towns in the past two decades.
Logistics and R&D-related projects are also more geographically dispersed, with over 30% and 40% respectively of investments going outside Core Cities and large towns. There are also linkages between these groups of projects, with investments in manufacturing facilities often leading to a demand for logistics or creating the opportunity to attract R&D activity.