Scotland’s growth rate of 51% has outpaced the UK at 20% with software paving the way as the top performing sector
Scotland achieved record-breaking levels of inward investment in 2015 with an all-time high for the number of Foreign Direct Investment (FDI) projects, the latest EY Scotland Attractiveness Survey has revealed.
A total of 119 FDI projects were secured in Scotland last year representing a significant increase of 51% from the previous year, a growth rate more than double the UK increase (20%).
On the UK regional league table Scotland surged past the South East to claim second place behind London.
Mark Harvey, EY senior partner, Scotland, said: “Scotland had a truly spectacular year for FDI in 2015, making some significant strides in key areas, resulting in a major step change in performance.
“Importantly, the majority of FDI projects for Scotland in 2015 were new rather than expansions. This ability to attract a higher proportion of new, first-time investors signals a positive future for Scotland.
“The challenge now is to not only maintain performance, but also take it to the next level and excel against the competition. Scotland must look to build on its success and deliver the improvements in skills and infrastructure investors require.”
Boost in FDI employment
Scotland’s impressive 2015 record of attracting inward investment was also reflected by a considerable increase (52%) in the number of jobs created by FDI. A total of 5,385 were secured in 2015, the second highest figure for the decade behind 2011 when 5,926 jobs were recorded.
In 2015 Scotland had a 12.7% market share of overall UK FDI employment, which is slightly below the ten year average of 14.3%.
Software sector surges
The stand-out performance by sector came from software, which was responsible for the greatest number of FDI projects (19), representing a 170% 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.
Strong performances in increasing inward investment for sectors led to a jobs boost with business services responsible for the largest growth in employment followed by software, food and scientific research.
Scottish cities hold their own against UK counterparts
Scotland’s three most successful cities in terms of inward investment appear in the UK top ten. Edinburgh landed the third spot behind London in first, and Manchester in second while Glasgow reached sixth and Aberdeen was in 10th position joint with Bristol and Cambridge.
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 to 2014 and Aberdeen had nine, down from 12 the previous year.
Harvey said: “Edinburgh and Glasgow have consistently been at the forefront of attracting inward investment to Scotland and have outdone themselves this time with a combined increase in projects of 40 in one year. Despite the volatile oil price, Aberdeen has weathered the storm in 2015, securing only three fewer FDI projects in 2015 than in 2014.
“While Scotland’s central belt has the greatest concentration of FDI projects, the steady and continual growth of the economy in the Highlands and Islands appears to be attracting more interest from overseas, with Caithness, Inverness and Dunoon all securing two projects each in 2015.”
Change to the make-up of Scotland’s top investors
The US continues to be Scotland’s primary investor, but China and India are not in Scotland’s top five, while Norway and Canada are. In fact, neither China nor India are in the top ten origins for investment in Scotland, despite being the third and fifth biggest sources of investment respectively for the UK as a whole.
Harvey added: “With volatility in the Chinese economy the country it is actively looking to invest internationally. However, at present China is favouring other parts of the UK to Scotland, but the fostering of relationships between Scotland and China, including recent trade visits by the Scottish Government, has the potential to deliver greater inward investment in the next few years.”
The UK picture
The UK saw a 20% growth in the number of projects, with 1,065 FDI projects attracted to the UK last year, the largest number of projects ever since the survey began in 2006. The UK took a 20.9% share of the total number of projects locating in Europe (5,083).
Its growth was driven by significant gains in the regions and cities outside of London and the South East. The North West recorded an increase in projects of 118%, contributing to a 127% growth in FDI levels across the Northern Powerhouse, since the term was coined two years ago.
Only three regions saw a decline in projects secured during the year – The South East of England (22% fall), Northern Ireland (62% fall) and Wales (2% fall).
Harvey said: “2015 was indeed the year of the UK’s regions and cities, with Scotland leading the pack in terms of the number of projects. The geographic mix of inward investment last year strongly suggests that the UK is using FDI very effectively to help rebalance its economy, with almost 90% of the UK’s total FDI growth coming from the regions outside of London and the South East.
“Investors are voicing solid support for the UK’s agenda to devolve power to a regional level, it now seems devolution is starting to work and foreign investors are helping re-balance economic activity more evenly across the country.”