Scotland attracted a larger share of UK foreign direct investment projects last year, despite a renewed push for independence by the Scottish National party government, which pro-union opponents say is a deterrent to international investors.
An annual survey by professional services company EY reported 107 FDI projects in Scotland in 2020, an increase of 6 per cent compared with the previous year that contrasted sharply with declines of 12 per cent for the UK as a whole and 13 per cent across Europe.
A series of polls of voters in Scotland last year suggested that support for independence was outstripping that for staying in the UK, and the devolved SNP government in Edinburgh stepped up pressure for a second referendum on the issue.
Scotland’s share of UK FDI projects fell in 2014, the year of the first independence referendum, before rebounding in 2015 after voters backed staying in the union by 55 to 45 per cent.
EY said Scotland had “bolstered its position as the UK’s most attractive FDI location outside London” last year, accounting for 11 per cent of projects, up from 9 per cent in 2019.
The growth in the number of projects belied the impact of the global coronavirus pandemic. “Amid arguably the most challenging environment for FDI in living memory, it’s clear that Scotland has put in an impressive performance,” said Ally Scott, EY Scotland managing partner.
EY ranked Edinburgh as the UK’s top city outside London for FDI, with 36 projects, while Glasgow was fifth with 23 projects and Aberdeen seventh with 13. The company said the leading sectors for FDI in Scotland were digital technology with 19 projects, agri-food with 14 and business services with 11.
Foreign direct investment is where an investor establishes a substantial and lasting interest in an enterprise based in another country.
Scottish Enterprise, the national economic development agency, said global companies were attracted to Scotland by the quality of the country’s workforce as well as a “competitive cost base, world-class universities and supportive business environment”.
EY said a survey of 570 international business “decision makers” found 15 per cent ranked Scotland as the most attractive part of the UK in which to establish operations — behind London at 25 per cent, but up from the 7 per cent reported in 2019.
“Scotland has now narrowed the gap significantly with London,” Scott said. “The scale of this two-year shift is illustrated by London’s vote as most attractive region almost halving since 2019, while Scotland’s has more than doubled.”
The Scottish government in October unveiled an inward investment strategy that seeks to lure 50 leading global companies to Scotland and prioritises nine “areas of opportunity” ranging from digital services to the exploitation of space.
Billed as a fundamental shift in approach to attracting investment from overseas and other parts of the UK, the plan says businesses will be expected to share Scottish government “core values” such as the fair treatment of employees and reduction of carbon emissions.
The Scottish government said the EY survey showed it had a “strong base from which to build” on FDI. “This supports the approach of the Scottish government’s inward investment plan to further internationalise the economy by focusing efforts on our existing global strengths,” it said.
North-east England, a key focus of Boris Johnson’s programme to “level up” prosperity across the country, reversed a three-year decline in FDI. It attracted 32 projects, up from 30 in 2019, increasing the region’s share of UK projects from 2.7 per cent to 3.3 per cent. Newcastle and Sunderland were among the top 20 destinations nationally.
Additional reporting by Andy Bounds