The market for inward investment is increasingly competitive, with more nations and regions seeing foreign direct investment (FDI) as a key way to grow their economies.
So the latest EY Scotland Attractiveness survey provides a useful insight on how Scotland is performing.
Inward investment can bring a range of direct and wider benefits to our economy
Published this week, the survey highlights a record year for Scotland in attracting FDI projects and for the fifth consecutive year Scotland is named as the top performing location in the UK outside London for FDI in 2016.
The survey also notes that Scotland is now winning over one in 50 FDI projects into Europe – a clear indication that Scotland is firmly established as a location of choice for global investors.
With total FDI projects up by 2.5 per cent, representing Scotland’s greatest share of UK FDI projects since the survey started in 1997, this is certainly great news for the Scottish economy.
Inward investment can bring a range of direct and wider benefits to our economy, from jobs and supply chain opportunities to the positioning of Scotland internationally as a place the world can engage with. Inward investors also tend to pay higher wages, be active exporters and invest more in innovation, all of which helps to boost productivity.
While the survey indicates that the number of jobs created by FDI projects in Scotland was down 47 per cent in 2016, when jobs created by intra-UK and tourism investment projects (both highly significant and both excluded by EY) are added back in, the true jobs figure is significantly higher.
And, while the initial scale of projects is important, the number of new investors and how they help strengthen our growth sectors and improve their international competitiveness is arguably a better indicator of long-term growth and sustainability.
Frequently this investment is built around the skills of Scotland’s workforce and the quality of our research and innovation, and 2016 was another strong year for Scotland in attracting R&D inward investment, with 21 individual projects, the second highest number to date. This type of investment plays an important role in supporting greater innovation and higher productivity in Scotland’s economy and builds on the strengths of Scotland’s universities.
Much of this success is built from Scotland’s position in sectors that can support sustainable economic growth, such as technology, energy and business services; sectors where Scotland is internationally competitive and where there is global demand. It also reflects the significant collaboration across our public, private and academic sectors to project a truly connected Scotland to the world at large, something that is an important source of competitive advantage.
This matters because evidence shows inward investment brings significant returns to our economy. Scottish Enterprise’s evaluation evidence indicates that our support for FDI in Scotland has a gross value added impact ratio of 1:11, which in simple terms means that for every £1 we spend on attracting inward investment to Scotland, a further £11 is generated for the Scottish economy.
We have an opportunity to build on the international reach and connections that exist across many parts of our economy, to attract even more new inward investment to the country – through our universities, via governments and with businesses.
If we can work together to achieve this, not only will we strengthen Scotland’s investment proposition, but as a nation we will be better placed to take advantage of the FDI opportunities coming into the UK from some of the newer, emerging economies.
By uniting our voices and our networks, we can reinforce the key message from the EY Scotland Attractiveness survey; that “Scotland’s attractions are still shining out brightly in an uncertain world” and this bodes well for the future flow of FDI into Scotland.
• Paul Lewis is managing director of Scottish Development International