- The UK attracted one-in-six of all Foreign Direct Investment (FDI) backed ‘cleantech’ projects in Europe in 2020. Cleantech projects include those which involve investment in energy transition, biodiversity, sustainability, or the pursuit of Net Zero targets.
- The UK’s cleantech performance was in-line with the UK’s overall share of European investment. Crucially, cleantech projects are spread much more evenly across the country than other forms of FDI.
- London was Europe’s leading city for cleantech projects in 2020.
- EY’s latest findings are published ahead of the Government’s Global Investment Summit, which takes place on Tuesday 19 October.
The UK was Europe’s second most popular location for Foreign Direct Investment (FDI) backed clean technology projects in 2020, according to new analysis by EY. The research has been published ahead of the Government’s Global Investment Summit, taking place in London today.
The UK attracted 59 cleantech projects in 2020 – 17.1% of all such European projects, and behind only Germany’s 67 projects (19.4% of the European cleantech market). Cleantech accounted for 6.1% of all UK FDI-supported projects in 2020, in line with the equivalent European figure of 6.2% – 346 cleantech projects out of a total of 5,578. Overall, the UK (975 projects) held a 17.5% share of all types of European FDI-backed projects in 2020.
Cleantech projects were deemed to be those which involved investment in energy transition, biodiversity, sustainability or the pursuit of Net Zero targets – such as investments in wind turbine manufacture, electric vehicle charging point roll-outs or the expansion of green-focused companies.
With 11 projects, London was Europe’s single biggest city for cleantech project numbers in 2020.
Alison Kay, EY UK&I Managing Partner for Client Service, says: “The UK is in an encouraging place on green investment, with cleantech project numbers keeping pace with the UK’s overall FDI performance.
“The UK is also performing better on cleantech than perceptions might imply – our regular UK Attractiveness Survey has shown that while investor support for UK cleantech has grown significantly in recent years, Europe is still more likely to be perceived as a leader in this area. With scope to improve investor perceptions, the UK has a solid foundation from which to accelerate its cleantech performance. The Government has the opportunity to set out how it will do this with its forthcoming Net Zero Strategy.
“UK cleantech acceleration is vital. This is a priority area for investors and the UK may struggle to meet its climate commitments without coordinated cleantech investment. Crucially, our research also suggests cleantech investment can help level-up the UK economy.”
Cleantech investment is intertwined with the levelling-up agenda
London and Scotland were the UK’s joint-most important locations for FDI-backed cleantech projects in 2020, securing 11 projects each – equivalent to 19% of all UK cleantech projects apiece. This performance is in stark contrast to the picture for all FDI projects in the UK last year: in 2020, London was the country’s clear overall FDI leader with a 48.5% share of the UK market, followed by Scotland on 11%.
Yorkshire and the Humber was not far behind London and Scotland on cleantech, with nine projects in 2020 and a 15% market share. The South East (six projects and 10% of the market) and the West Midlands (five projects and 8% of the market) round out the top five UK regions and countries for cleantech.
Notably, UK cleantech projects are dispersed across a wide number of city locations, with only London and Aberdeen (four) attracting more than two projects. Birmingham, Coventry, Grimsby, and Scarborough attracted two projects each, while 46 other cities and towns were home to single projects.
London (=7th), Scotland (=7th) and Yorkshire and the Humber (9th) all feature in the top-10 European regions for 2020 cleantech project numbers (with London leading the table of individual cities).
Alison Kay comments: “Cleantech is fundamental to the levelling up agenda, with projects spread across the country far more evenly than the overall mix of overseas investment into the UK. This is driven by the importance of key cleantech activities and sectors – such as manufacturing and utilities – to places outside the capital where, by contrast, investment tends to be dominated by the digital sector. Investment in cleantech means investment in the UK’s industrial heartlands.
“In June, we said that holistic, targeted initiatives were needed to attract FDI in priority areas of the UK. Innovative research and digital technology, levelling-up the UK economy, and cleantech can all form the core of a strategy to build back stronger after COVID-19. These latest numbers underscore the importance of cleantech to such a strategy.”
Manufacturing dominates cleantech activity in Europe and the UK
Manufacturing is the largest generator of cleantech activity in Europe, representing 36% (124 projects) of the total market. The next most common activities were sales and marketing (59 projects, 17% of the market), and research and development (49 projects, 14% of the market).
In the UK, manufacturing was also the dominant activity, with a slightly smaller 27% share of all cleantech FDI projects (16 projects). Notably, manufacturing’s cleantech performance is much-improved relative to its 11.5% share of the overall UK market for FDI-backed projects. Business services (12 projects, 21% of the market), logistics (nine projects, 15% of the market) and research and development (nine projects, 15% of the market) were the other key UK cleantech activities in 2020.
Across Europe, cleantech investment is centred in the utility supply sector (60 projects, 18% of the market), the machinery and equipment sector (34 projects, 10% of the market), and the electronics sector (32 projects, 9% of the market). In the UK, 20% of projects (12) were in the utility supply sector, followed by 15% (nine) in the machinery and equipment sector.
Peter Arnold, an EY UK Economic Advisory Partner, says: “While manufacturing is the key cleantech activity for both Europe and the UK, its bigger share of the European market is notable. In the long term, the key challenge for the UK will be to ensure it is a location for designing and building clean technology, not just deploying it.
“The UK’s strong performance on research and development, revealed in our summer UK Attractiveness Survey, will be a key tool to utilise. Investors also tell us that cleantech investment can be supported by policy and regulatory certainty as well as support to develop green supply chains.
“We’ve revisited our annual UK Attractiveness Survey to analyse these preliminary cleantech data points to try and understand the current landscape and to get a better perspective on the extent of the challenge facing economies looking to transition to a sustainable future.”