16 Jun 2021
By Stuart Patrick, Chief Executive of Glasgow Chamber of Commerce
The publication of this year’s EY investment attractiveness surveys for Scotland and the UK offer both good news for Scottish cities and an opportunity to begin thinking beyond the pandemic.
There are some interesting messages worth absorbing but with two caveats in mind. EY emphasises that 2020 has to be regarded as a very unusual year for obvious reasons so it may take a year or two to see whether any notable changes in trends are sustained.
Secondly, the reports focus mostly on the number of investment projects secured and clearly projects vary in size and impact. There is some helpful information on jobs in the Scottish report but EY does acknowledge that announcements on employment intentions may not turn out as originally planned during project delivery.
There is positive news for Scotland’s cities with Edinburgh, Glasgow and Aberdeen all in the UK’s top 10 in 2020 for attracting FDI projects, with all attracting more projects last year than the 10-year average from 2011. Together the three cities brought in two-thirds of Scotland’s total projects.
The suggestion that Covid-19 would make cities less central to foreign direct investment was an important result in last year’s review, with 61% of respondents in October saying that the changing role of city centres would affect their investment strategies. That dropped to a third in the most recent assessment. The natural strengths of city centre locations could be re-emerging as more thinking is done about the downsides of remote working.
The drop in London’s traditional dominance of FDI was substantial with 25% considering it the most attractive region compared to 46% in 2019. Scotland was the biggest gainer from that change doubling its result to 15%. London also saw a 29% drop in projects in 2020 whilst projects in other regions including Scotland and North West England increased.
Manchester with 35 projects was not the leading city outside London for the first time since 2014, just pipped by Edinburgh’s 36. Edinburgh’s result was well ahead of its 10-year average of 22. Glasgow came in fifth with 23 projects also ahead of its ten-year average of 18. London’s decline may be short-lived however as investors considered it would be the most attractive European location over the next three years.
In positioning Scotland’s cities for inward investment, the availability of skills has for many years been the primary criterion and we have competed well with a higher percentage of the workforce qualified to degree level. Skills is still at the top of the list but is now matched by strength of local business networks and access to investment incentives. EY believes that may be because the UK government’s levelling up agenda is raising expectations of the support on offer. The importance of telecommunications infrastructure has also unsurprisingly increased markedly.
Previous reports saw clear evidence of a negative Brexit impact but that has, for now, been overtaken by pandemic effects. The UK is now perceived to have the most credible recovery plans in Europe – a reversal of perceptions last year and almost certainly due to the vaccination programme.
With COP26 on the horizon there is one other point worth making. Digital technology was the leading sector for FDI projects in Scotland and investors see that as the main sector for growth in the future. But cleantech and renewables is seen as the second most important and despite all the investment directed towards renewables by the Scottish Government, it barely featured in Scotland’s performance last year. We must surely use COP26 to change that.
This article was first published in The Herald on Wednesday 16 June 2021
