Scotland ‘bucked the trend’ to attract more foreign investment, survey shows

Foreign investment in Scotland grew last year despite falling across the UK and Europe, according to a new survey of investors.

Scotland also remained the most appealing part of the UK outside of London for foreign direct investment (FDI) projects, according to the latest attractiveness survey by EY.

It found that Scotland recorded a 6% increase in FDI projects between 2019 and 2020, while investment dropped by 12% for the UK and 13% across Europe.

The findings show there were 107 FDI projects in Scotland during 2020 compared with 101 in 2019.

In the UK, that figure dropped from 1,109 to 975 and Europe’s figures fell from 6,412 to 5,578 over the same period.

The sectors responsible for most FDI projects in Scotland were digital technology (19 projects), agri-food (14) and business services (11).

More than a third of Scotland’s FDI projects (35.5%) came from the United States with 38, followed by Ireland with 10 and the Netherlands with eight.

Of the investors surveyed by EY, 15% said that Scotland was the most attractive part of the UK in which to invest – more than double the proportion saying the same in 2019 (7%).

Compared with the rest of the UK, Scotland was behind only London, which polled 25%.

Edinburgh also overtook Manchester to top the list of most attractive FDI cities outside London, with Glasgow and Aberdeen also making the top 10.

Ally Scott, managing partner at EY Scotland, said: “Amid arguably the most challenging environment for FDI 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.

“With investment intentions into the UK overall also at a record high, there’s every prospect of Scotland winning a healthy proportion of a resilient pipeline of investments in the coming months and years.”

He added: “But this is no time for Scotland to rest on its laurels. As we look to the economic recovery from Covid-19, constructive, practical engagement between business and both the UK and Scottish governments remains key to shaping the right policies, business environment and incentives to give investors continued confidence to invest.

“While our findings suggest Scotland is getting a lot right, the global market for FDI will only become more competitive, making it vital to keep listening and responding to what investors want.

“Our report shows that this includes the availability and skills of the local workforce, the strength of business networks locally, and access to regional grants and incentives for investment and R&D.

“There is also a rising focus on sustainability and cleantech – areas where Scotland’s strength is exemplified by Cop26 taking place in Glasgow later this year.

“Whatever the challenges, there’s no denying the good news in this report.

“Scotland bucked the trend and, in doing so, laid down a strong base for future FDI.

“Now it’s time to build on that and to capitalise on the attractiveness of our country as a place to do business.”

Scottish Enterprise’s interim chief executive, Linda Hanna, said the report showed “exceptional results for Scotland and provides real cause for optimism”.

She continued: “I am privileged to speak to international businesses on a regular basis to highlight just why Scotland is a perfect place to invest.

“Encouraging investment from overseas is a critical part of the role that Scottish Enterprise plays to accelerate Scotland’s economic recovery and help create many more good, green jobs.

“Scotland is very much open for business. Scottish Enterprise and our dedicated colleagues based around the world will continue to bang the drum for Scotland, delivering more economic opportunities for our communities.”

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.”

A Scottish Government spokesman said: “This outstanding performance provides a strong base from which to build as we continue our national endeavour to transform Scotland’s economy and create high quality, secure and sustainable jobs across the country.”