South East: 20% decline in foreign direct investment in the region, finds EY survey

The EY 2015 UK Attractiveness Survey shows that the UK saw a 20% growth in the number of foreign direct investment (FDI) projects in 2015, with 1,065 such projects attracted to the country, the largest number ever since the survey began in 1997. Another positive indicator is that the UK took a 20.9% share of the total number of projects locating in Europe (5,083). In stark contrast, however, the South East, with only 72 FDI projects saw a decline of 21.7% on 2014 when the region attracted 92 projects. Only the South East, Northern Ireland and Wales registered a fall.

Nevertheless, when employment secured from FDI is considered, the South East recorded 2,573 jobs in 2015 – up 6% on 2014 employment figures when 2,423 jobs were created in the region. Then again, strong growth was reported in the South East for projects from the manufacturing sector, with 23 projects attracted to the region from this sector. Manufacturing investment into the region equated to nearly a third of the region’s total projects and 17% of the total jobs created in the South East.

Commenting on these anomalous figures, Richard Baker, managing partner at EY for the Thames Valley and South Coast, said: “The root causes of the region’s declining FDI performance remain unclear. It could be that southern regions are failing to compete because the devolved regions of the northern powerhouse are dominating FDI in the UK. Alternatively, the South East may have under-invested in inward investment promotion, or could be suffering the effects of an “investment shadow” from London. The South East also doesn’t have any dominant centre to focus inward investment, with the region’s larger cities and towns attracting relatively modest numbers of investment in 2015 (five in Oxford, six in Milton Keynes, and four in Reading).

He added: “The fragmented nature of the South East, the region’s problems in respect of skills and infrastructure and the high-price of commercial property in the region mean that the South East’s inward investment attractiveness is somewhat diluted. The region needs to find a way to counteract these problems if we are to compete with the rest of the UK at a time when devolution beyond London and the South East is starting to work, and foreign investors are helping rebalance economic activity more evenly across the country.”