South East, South West, and West Midlands deliver stand-out Foreign Direct Investment performance in 2021, new EY report reveals

The South West has outperformed its pre-pandemic levels of Foreign Direct Investment (FDI) in 2021, while the South East and West Midlands saw their number of FDI-backed projects growing at a faster rate than the rest of the UK, according to a new report from Big Four accountancy firm EY.

South West projects were up by 31 per cent in 2021 with the region seeing its number of FDI-backed projects growing at a faster rate than the rest of the UK, according to EY's UK Attractiveness Survey.

Overall, UK project numbers grew just 1.8 per cent from 975 in 2020 and 993 in 2021. The South West had the UK’s fastest rate of project growth between 2020 and 2021 and had a 4.2 per cent share of all UK projects in 2021, compared to 3.3 per cent in 2020 and 2.7 per cent in 2019.

Bristol was the highest ranked location in the South West of England with 19 projects (up from 12 in 2020 – an increase of 58.3 per cent) and ahead of its decade-long average.

Bristol ranked fifth in the leading cities outside of London for investment after Edinburgh (31), Manchester (31), Belfast (24) and Glasgow (19).

Swindon (five) also represented the South West in the top-20 non-London locations for FDI projects.

Across the South West, the leading sectors for investment into region in 2021 were digital technology (22) – the highest number of projects recorded in the decade, and more than double the number of projects recorded from the transportation manufacturers and suppliers sector (10).

Business services (16 projects) and manufacturing (nine) were the two leading activities in the region, with manufacturing seeing its first project rise since 2017.

Karen Kirkwood, office managing partner at EY in the South West, says: “The South West has a diverse regional economy and has been a UK FDI success story in 2021. The region has continued to be resilient despite the impact of the pandemic and has delivered a strong performance in high-value sectors like manufacturing and digital technology– which is set to lead the way for future UK FDI growth.

“One thing which is consistently very clear from investors is that the strength of local business networks matters when they’re choosing where to site their projects within a country. Local skills and infrastructure, support from regional development bodies and access to regional grants are also part of the mix too, reinforcing the importance of devolving power and fostering local ecosystems. Building a unique sense of place from in its economy will help the Southwest build their attractiveness to investors.”

The South East hosted 82 FDI projects in 2021, up 13.9 per cent from the 72 projects located in the region in 2020.

The South East fell just one project short on its immediate pre-pandemic performance, with 83 projects delivered in 2019. By comparison, UK project numbers only grew 1.8 per cent from 975 in 2020 to 993 in 2021, and were still 10.5 per cent down on 2019’s 1,109 projects.

The South East secured the third highest number of projects in the UK in 2020, behind only Greater London (394) and Scotland (122). The region had an 8.3 per cent share of all UK projects, which is an increase on the 2020 share (7.4 per cent) and the pre-pandemic 2019 share (7.5 per cent).

Across the region, the strong performance was driven by success in key sectors, including digital technology (28 projects), transport manufacturers and suppliers (14) and agri-food (six).

Projects in the South East were most likely to involve business services (24 projects, up from 14 in 2020), sales and marketing (23 projects, down from 30) and R&D (17 projects, up from nine in 2020) – R&D projects reached their highest recorded level.

Richard Baker, managing partner at EY in the South East (pictured), said: “The South East has been a UK FDI success story in 2021, bouncing back from the impact of the pandemic on inward investment and delivering a strong performance in high value sectors like Research & Development and digital technology.

"The region remains attractive to investors and, with the digital sector set to lead the way for future UK FDI growth, the South East is well positioned.

“One thing which is consistently very clear from investors is that the strength of local business networks matters when they’re choosing where to site their projects within a country. Local skills and infrastructure, support from regional development bodies and access to regional grants are also part of the mix too, reinforcing the importance of devolving power and fostering local ecosystems.

"Building a unique sense of place from in its economy will help the South East build its attractiveness to investors.”

Among the region’s towns and cities, Oxford was the leading location for FDI, securing 12 projects (up from four) and listed joint 10th (with Warwick) for the UK’s leading locations for investment outside of London.

Milton Keynes (12th largest non-London city) was also a stand-out location in the region, hosting nine projects in 2020, up from four.

Reading saw its FDI projects increase from six in 2020 to eight in 2021. By comparison, London attracted the most projects in the UK with 394, up from 383 in 2020.

The West Midlands hosted 78 FDI projects in 2021, up 27.9 per cent from the 61 projects located in the region in 2020.

The region even improved on its immediate pre-pandemic performance, with only 64 projects taking place in 2019.

The West Midlands’ performance means the region has overtaken the North West as the home of the most FDI projects outside London, the South East and Scotland.

The region has a 7.9 per cent share of all UK projects – up from 5.8 per cent in 2019 – while the East Midlands has 3.9 per cent of all projects, up from 3.5 per cent in 2019.

In the West Midlands, the key sectors were digital technology (21 projects), machinery and equipment (13), and business services (eight) – with digital projects almost doubling from the 11 projects last year.

Business services (22 projects) were the key activity in the West Midlands, followed by manufacturing (15), which saw its first increase in project numbers since 2017.

The leading location for FDI in the Midlands was Birmingham (17 projects – sixth largest non-London city), while Warwick was a stand-out location in the country, with growth in the digital sector boosting projects from two in 2020 to 12 in 2021.

Coventry, with six projects, was the third Midlands location in the UK top-20.

Simon O’Neill, office managing partner at EY in the Midlands, said: “The Midlands has been a UK FDI success story in 2021, with both the West and East Midlands bouncing back from the impact of the pandemic on inward investment – or, in the case of the West Midlands, charging ahead of where things were before the pandemic started.

"The regions’ successes have been built on a diverse mix of sectors, whether it’s digital technology in the West Midlands or logistics in the East Midlands.

“Looking ahead, there are reasons for optimism. Across Europe, there is a swing towards investment in manufacturing, a sector in which the Midlands has historically excelled.

"Combined with the growing importance of ‘cleantech’, the Midlands has an opportunity to establish itself as a European centre for developing and building the green technologies needed for the UK to reach its Net Zero targets.

"Notably, manufacturing projects tend to bring investment to towns rather than cities, which means they can help levelling-up within regions, not just between them.

“One thing which is consistently very clear from investors is that the strength of local business networks matters when they’re choosing where to site their projects within a country.

"Local skills and infrastructure, support from regional development bodies and access to regional grants are also part of the mix too, reinforcing the importance of devolving power and fostering local ecosystems.

"Building a unique sense of place from in its economy will help the West and East Midlands build their attractiveness to investors.”