Scotland bucks UK and European trend with surge in foreign investment

Scotland bucked a UK and European trend by attracting a surge of foreign direct investment last year, with the nation cementing its status as one of the most desirable parts of the UK for investors, according to a new report.

EY, the accounting and consultancy firm, said Scotland secured 107 FDI projects in 2020, a six per cent increase on the previous year, with 61 new projects - a five year high.

It comes as the number of UK FDI projects fell by 12 per cent from 1,109 to 974 over the same period. The same downturn saw projects across Europe drop by 13 per cent from 6,412 to 5,578.

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The three leading sectors generating inward investments into Scotland in 2020 were digital technology (19 projects), agri-food (14 projects) and business services.

The top performing sector in 2019 – machinery and equipment – fell out of the top five, with four projects. Oil and gas ranked fourth with nine projects), with utility supply in fifth place with eight projects, underlining the continued importance of energy projects to the Scottish economy.

Edinburgh, Glasgow, and Aberdeen were all ranked in the UK’s top ten cities for FDI projects outside London, with Edinburgh placed first.

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The US remained the single biggest originator of overseas investment into Scotland, accounting for more than a third (35.5 per cent) of projects, followed by Ireland and the Netherlands.

EY said Scotland had narrowed the gap with London in terms of attracting inward investments. Picture: Andy Buchanan/AFP/GettyEY said Scotland had narrowed the gap with London in terms of attracting inward investments. Picture: Andy Buchanan/AFP/Getty
EY said Scotland had narrowed the gap with London in terms of attracting inward investments. Picture: Andy Buchanan/AFP/Getty

However, the figures indicate that the number of Scottish jobs generated by the projects in 2020 was 4,499, down 30.1 per cent on the previous year.

Welcoming the research, Scottish secretary Alister Jack said: “It is great that overseas investment in Scotland has increased, and that Edinburgh, Glasgow and Aberdeen are faring so well.

"This is encouraging news, much needed in these challenging economic times, but we know real challenges lie ahead.

"The UK government's sole focus is on our recovery from Covid, and boosting economic growth, jobs and prosperity across Scotland. We will accelerate investment in Scotland's infrastructure, building on our £1.5 billion city deals programme."

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EY’s Scotland Attractiveness Survey found that the increase in projects into Scotland within a shrinking UK marketplace saw Scotland’s share of all UK projects increase from 9.1 per cent in 2019 to 11 per cent in 2020, a proportion exceeded only once in the past decade.

Scotland has been the UK location with the second highest number of overseas-backed projects – after London – in every year since 2014.

Fifteen per cent of investors surveyed by EY as part of the research said that Scotland was the most attractive part of the UK in which to invest – double the proportion saying the same in 2019.

Ally Scott, managing director of EY Scotland, said: “Amid arguably the most challenging environment for foreign direct investment in living memory, it’s clear that Scotland has put in an impressive performance over the past year.

“Beneath the headline figures, there are further reasons for optimism almost everywhere you look - the one-third rise in ‘new’ projects, the diverse spread of sectors attracting FDI - with digital tech leading the way - or, compared to last year, the fact that more than twice as many investors cited Scotland as the UK’s leading FDI destination.”

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