Scotland facing battle for foreign direct investment after bumper year

Experts have warned that the outlook for foreign investment into Scotland looks “challenging” after the country was ranked second in attractiveness outside of London for a seventh consecutive year.

Ally Scott is the managing partner for EY Scotland.

EY’s Scotland Attractiveness Survey, published today, shows that both in terms of attracting foreign direct investment (FDI) and attracting a number of UK projects, Scotland was in a strong position.

The report surveyed 800 international investors, and for the seventh year running, Scotland was the most attractive place for companies to invest outside of London during 2019.

The study showed that there had been a 7.4 per cent increase in the number of projects secured, from 94 in 2018 to 101 in 2019.

Growth in Scottish investment was also at a faster pace than the rest of the UK, with a 5.2 per cent increase (1,109 projects).

Ally Scott, managing partner for EY Scotland, said: “Scotland has yet again achieved an impressive performance on FDI in 2019. The pace and scale of growth achieved is evidence of Scotland being well-placed to tackle the challenges presented by Covid-19 and an uncertain economic environment.

“Importantly, Scotland continues to increase the quality of projects it attracts as demonstrated by the high average number of jobs created, a figure far ahead of the UK in 2019.

“While Scotland has a strong foundation to navigate beyond Covid-19, there is no scope for complacency. Now, more than ever, there must be a strong partnership between government, business and society to formulate a careful, considered and compelling route back to economic growth.”

The report indicates that investor intentions towards the UK as a whole, compared to other FDI destinations in Europe, remain relatively positive when they look beyond the immediate impact of the coronavirus crisis.

EY’s Mark Gregory said: “There is no doubt that the outlook for FDI will be extremely challenging as the world tries to recover from the economic and social impact of Covid-19.

“Asked whether they expected to see an increase or decrease in FDI globally following a period of recovery from the pandemic, a net -71 per cent of investors responding to EY’s survey said they were anticipating a decline in global FDI.

“Asked the same question about investment specifically into the UK, the balance expecting a decline was -44 per cent – still very challenging, but more positive than the overall market outlook.”

The average size of FDI projects in Scotland created 83.6 jobs last year, which is the highest since 2011, when the figure was 116.2, and ahead of the UK average for 2019 of 51.4.

The shift in sectors has seen machinery and equipment investment grow by 58 per cent and agri-food by 78 per cent. This is the first time in a decade that the service sector has not ranked in the top two.

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