Business commentary on Brexit has been dominated by fears of an investment slump and an exodus of companies from the UK. And apprehension has risen in Scotland with recent figures showing an inward investment slowdown relative to the rest of the UK. These appeared to contradict an earlier and markedly upbeat assessment on Scotland’s inward investment record released by accountants EY back in May.
Public concern over post Brexit effects on investment has thus been acute. But in recent weeks not all the news has been negative. Far from it.
Last week’s announcement that global fast food giant McDonald’s is to move its non-US tax base from Luxembourg to the UK may have been driven by tax considerations, with its affairs currently the subject of a European Commission investigation.
But why the UK? McDonald’s could just as well have moved its European domicile to Ireland or any other country in which to base its non-US financial affairs. The move will bring tens of millions of pounds of corporate tax revenue to the UK.
UK Corporation Tax – already among the lowest in the EU at 20 per cent (compared with 33 per cent in France) is set to fall to 19 per cent next April and to 17 per cent from April 2020. This has focused attention on a number of UK investment moves by some of the world’s biggest companies – ones that would be considered as particularly sensitive to changes in the UK’s economic outlook. This is particularly the case given the apprehensions that future trade deals with the EU in the wake of Brexit may result in damaging tariffs.
Recent weeks have seen announcements of business and investment commitments in the UK by top flight global companies such as Google, Facebook, Apple, Boeing and Nissan. It’s not quite the business and investment exodus we were led to fear in the immediate aftermath of the Brexit vote. And while we have not even pitched base camp with negotiations with the EU, it does indicate a belief that the UK in terms of tax and investment will be at least as “business friendly” as it was prior to the 23 June vote – and could well prove even more so.
As for domestic businesses, a CBI survey last month of more than 800 businesses showed seven in ten of respondents are planning to increase or maintain their innovation spending following the vote to leave the EU. Only 7 per cent said they planned to reduce their investment.
So how fares Scotland on the inward investment score card? Spirits were buoyed earlier this year by a remarkably upbeat assessment from EY showing Scotland achieving record-breaking levels of inward investment last year with an all-time high registered for the number of Foreign Direct Investment (FDI) projects.
The firm’s Scottish Attractiveness Survey found a total of 119 FDI projects were secured in Scotland, up by 51 per cent from the previous year, and more than double the UK increase of 20 per cent, as Scotland surged past the south-east of England to claim second place behind London in the UK regional league table for inward investment.
The stand-out performance by sector came from software, responsible for the greatest number of FDI projects, representing a 170 per cent increase from the previous year.
This growth rate was only bettered by two sectors: business services had a six-fold increase to 12 while utility supply achieved 10 projects, which was a five-fold increase.
In 2015, Edinburgh experienced almost a three-fold increase in the number of FDI projects (41) while Glasgow’s figure (22) more than doubled in comparison with 2014 and Aberdeen had nine, down from 12 the previous year.
But with 79 per cent of investors citing access to the European Single Market (ESM) as a key feature of the UK’s attractiveness, the survey came with a warning that recent high performance might be threatened by the EU referendum.
Then in August came figures from the Department for International Trade showing that inward investment to Scotland in the year to April (slightly more recent than the EY survey data) had slumped despite a record number of new deals across the UK.
The figures showed that 108 projects were secured in 2015-16, down by 9 per cent from 122 and 119 in the previous two years. This compared with overall foreign investment in the UK reaching 2,213 schemes – up 11 per cent.
The report led to feisty exchanges at Holyrood between Conservative MSP Gordon Lindhurst and Nicola Sturgeon. The First Minister insisted that the EY survey placed Scotland in the top two locations for foreign direct investment outside London for the past six years, reflecting the success of Scottish Development International in attracting inward investment to Scotland.
But new investment wins keep coming. They include Dexcom, a leader in medical technology in the field of diabetes, which recently opened its HQ for Europe, the Middle East and Africa in Edinburgh. This San Diego company will manage all its commercial, operational, technical support and R&D operations in Europe from here.
Another American company is also laying down European roots. Phoenix telesales and marketing solutions specialists, Televerde, chose Glasgow for its European headquarters and contact centre, based on the availability of multilingual talent, as well as its proximity to the US and continental Europe.
Semefab, the Glenrothes semi-conductor manufacturer, is investing in new equipment. The silicon wafer foundry operation’s investment will mean an injection of £1.25 million into the Scottish economy as the organisation looks to create greater cost efficiency in its operations. It is supported by £220,000 of Regional Selective Assistance from Scottish Enterprise.
Spirit AeroSystems, one of the world’s leading aerostructure suppliers to both Airbus and Boeing, has invested £5m at their site in Prestwick. It has recently opened a new paint and finishing centre. The investment will secure 75 jobs.
Meanwhile, Scottish Enterprise’s investment arm, the Scottish Investment Bank, has invested £52.4m into 133 Scottish companies during 2015-16, supporting growth companies at various stages. More than 50 international VCs and corporate investors backed investee companies, as SIB continued to build its investor base both domestically and internationally.
The growing mood over Brexit now seems to be “Let’s just get on with it”.