4 minute read 28 May 2020
Woman looking up at office building

Why using its strengths will help the UK build back better post COVID-19

Authors
Steve Varley

EY Global Vice Chair - Sustainability

Passionate about sustainability, diversity and entrepreneurship. Husband and father of two. Triathlete.

Mark Gregory

EY UK Chief Economist

Committed to using economics to drive informed decision-making in the public and private sectors. Helping rebalance the UK economy. LinkedIn Top Voice. Sports mad. Loyal supporter of Stoke City FC.

4 minute read 28 May 2020

The 2020 EY UK Attractiveness Survey shows that the UK performed strongly on foreign direct investment (FDI) in 2019, and is well-placed to face the challenges presented by COVID-19 and an uncertain economic environment.

This report maintains EY's long track record of sponsoring research into FDI, reflecting our desire to encourage an open exchange of information and insight between business leaders, investors and policymakers on how to enhance the UK’s economic performance.

For the full findings, download the EY Attractiveness Survey UK, May 2020

For the regional performance in more detail, download our supplement report Trends in foreign direct investment in Great Britain’s towns (developed in collaboration with the Centre For Towns)

For the latest ‘pulse check’ survey, download the EY Attractiveness Survey UK, November 2020

Mark Gregory discusses the UK findings in our on-demand webcast

We launched the Attractiveness Programme in 1997, believing the long-term horizons of cross-border investors mean that FDI provides a unique window on economic trends at the international, national, local and sector levels. Never has this long-term perspective been more important.

The short-term challenges facing economies and societies around the world as they respond to the COVID-19 pandemic are all too apparent but, if we are to build a better future, then we need to begin to look toward the longer term and to start to develop recovery strategies. To play our part in this process, we have adapted our regular investor survey to provide more insight into the impact of COVID-19 on the perceptions and aspirations of investors.

A strong year as the UK economy modernises

The UK performed well in attracting FDI in 2019. Project numbers were up 5% in a relatively flat European market and the UK surged ahead in digital tech, attracting 432 projects, 30% of the European market. A 38% increase in research and development (R&D) projects and a rise to first place in Europe for the number of new projects secured were further signs of a transforming economy.

Additional evidence of change comes from the shift in the geographic balance, as the US and new origins of FDI help to compensate for a slowing of European investment. However, while London’s stellar year is to be celebrated, the 2019 results (analysed in more detail in our supplementary research with Centre For Towns) demonstrate very clearly that more needs to be done to rebalance the UK economy geographically. A nationwide approach to ensuring everyone can benefit from the potential of digital tech is the number one priority.

The UK is resilient and well-positioned to exploit future opportunities

Our survey findings provide a bright spot at a difficult time. Investors were planning significant investment in the UK in 2020 before the pandemic struck and they remain relatively optimistic about the UK’s resilience and future potential. Digital tech, climate change and health were cited as high potential opportunity sectors over the long term. Investors also provided a clear steer on what future policy should focus on. The availability of finance and government support and the quality of infrastructure and skills were identified as key factors to driving future investment.

The challenge is to design the appropriate policies and incentives to build back better

Notwithstanding the current challenges, we believe these findings provide the UK with the opportunity to build on its proven strengths by implementing responses aimed at securing its long-term attractiveness to investors. In this report, we suggest a set of policy steps to help achieve this, as the UK develops its new post-EU economic identity. We at EY look forward to supporting and participating in that renewal.

Key findings:

  • UK achieved a 5% increase in inbound FDI projects compared to 2018, ending three years of declining European market share since the EU Referendum, but France’s 17% growth saw it rank in first place in Europe
  • UK surged ahead in digital tech attracting 432 projects (36% increase), representing a 30% share of all European FDI projects, more than France and Germany combined
  • R&D projects increased to a decade high, evidencing the UK’s ongoing economic transformation
  • London had its best-ever year, but there were no signs of ‘levelling up’ across the UK with project numbers down in most English regions
  • Investors perceive the UK to be resilient compared to European peers as Brexit fades as an influence on investment decisions
  • UK’s COVID-19 recovery plan should be built around digital, cleantech and advanced manufacturing, and must achieve a better geographic balance

Summary

Although COVID-19 presents an uncertain economic environment, the UK is well placed to face its challenges. EY’s UK Attractiveness Survey explores the level of foreign direct investment in the UK, and the perceptions and aspirations of investors amidst the global pandemic.

About this article

Authors
Steve Varley

EY Global Vice Chair - Sustainability

Passionate about sustainability, diversity and entrepreneurship. Husband and father of two. Triathlete.

Mark Gregory

EY UK Chief Economist

Committed to using economics to drive informed decision-making in the public and private sectors. Helping rebalance the UK economy. LinkedIn Top Voice. Sports mad. Loyal supporter of Stoke City FC.