Scotland secures 3rd best year on record for Foreign Direct Investment with best ever performance from US

27 May 2015

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  • 80 projects in 2014 with scientific research, financial services and manufacturing flying the flag
  • 2014 was Scotland’s most successful year in attracting investments from US but higher profile needed in Asia
  • Investor perception study confirms Scotland’s brand boosted globally

Scotland cemented its position as the UK’s biggest foreign direct investment (FDI) region outside London in 2014, and enjoyed a boost to its global profile following last year’s high profile events.

According to professional services firm EY’s annual Attractiveness Survey, the total number of investments secured by Scotland in 2014 fell slightly to 80 projects last year from 82 in 2013. This marginal decline is put into perspective by the fact that 2013 was Scotland’s best year for FDI since 1997, with the performance in 2014 representing Scotland’s third highest annual total on record.

Mark Harvey, EY Partner and Scotland Market Leader, commented: “Overall, the outcome for the year shows that Scotland has succeeded in sustaining its number of projects at the improved level seen since 2012, when investments into Scotland surged by almost 50%.”

Scientific research, financial services and manufacturing flying the flag

During the past year, Scotland secured more scientific research FDI projects than at any time in the past decade. It also saw financial services sector investments bounce back – the five FDI projects from the financial sector represented the highest level Scotland has secured from that industry since 2006.

In 2014 manufacturing projects were the most important type of FDI in Scotland, increasing the number secured from 15 to 31. This growth was led by machinery and equipment projects – 15 projects in 2014, more than double the level in 2013.

Mixed job trends

The shift in the type of investments, with the encouraging rise in scientific research projects - which are potentially high value but generate fewer jobs than other sectors – could be behind the mixed outlook on job trends relating to FDI.

Where project successes are recorded in terms of jobs created, the employment secured from FDI in Scotland in 2014 fell by 15% from its level in 2013, to 3,532. This outcome for 2014 is the lowest figure for Scottish FDI jobs since 2009, and represents the third consecutive annual decline, from a peak of 5,926 jobs in 2011.

On the other hand a comparison of employment from FDI over the past decade shows that Scotland is still the second most successful UK location for job creation from inward investment projects. Scotland’s total of over 37,000 jobs during the ten years since 2005 puts it only narrowly behind top-placed London, and significantly ahead of the West Midlands in third place among UK regions.

Scotland’s special relationship with US

2014 was Scotland’s most successful year in the past decade for attracting US investments, with 37 investments originating from the US, well above the historical trend.

The long-term trend is that Scotland secures two out of every five projects from US investors, with Scotland’s share of US investments running at a ten-year average of 40.4%.

Scotland also gains a higher proportion of its investments from France and Norway than the UK as a whole, but secures a lower proportion of its projects from Germany and India compared to the rest of the UK.

“While this is a positive achievement, there’s a continuing need to build relationships with growth territories like Asia to secure a bigger share of their projects”, said Harvey.

China is the fifth-biggest source of projects for the UK as a whole in 2014 but does not even rank in the top ten origins for FDI into Scotland.

Scotland on the world stage

EY, as part of its annual Attractiveness Survey, conducts an annual Perception Survey. This year’s study involved interviews with 406 decision-makers across the world in companies that have invested — or could invest — in the UK and Scotland in particular, to gauge their perceptions of the merits and attractiveness of different FDI locations.

Asked which region of the UK they perceive as the most attractive in which to locate operations, 6% of investors worldwide picked Scotland – a dramatic increase from just 2% in the previous year’s survey. Scotland scored high with investors not yet established in the UK.

“While perception figures can be somewhat volatile by nature, the scale of the increase is a very encouraging sign for future FDI in Scotland – and suggests that the ‘halo effect’ from Scotland’s high-profile events in 2014 have indeed boosted global perceptions of Scotland as an FDI destination”, said Harvey.

Leading the pack but competition hot on Scotland’s heels

Harvey concluded: “In an uncertain world, Scotland is punching above its weight in securing global FDI but challenges remain. The world economy continues to struggle for growth and FDI values globally fell in 2014. Scotland faces fierce competition for projects from locations not just across the UK, but also worldwide.

“The challenge now for Scotland is to build further on the achievements to date and tackle the areas where it can do better, making Scotland the most successful place it can be.”