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The North West of England and West Midlands overtook the South East as the top destinations for foreign investment outside London last year.
In its annual survey on the UK’s attractiveness for overseas capital, the professional services firm EY found that 2022 was a bumper year for the UK’s regions outside the south. But overall, the country saw a 6 per cent fall in projects funded by foreign investment between 2021 and 2022.
London, which kept its position as the top overall destination for investment projects with 299, lost some of its dominance, as the capital’s total share of projects fell to a third last year, compared with about half before the pandemic in 2019.
The North West recorded 88 new investment projects last year, a rise of 19 per cent from 2021 and up a fifth on pre-pandemic levels recorded in 2019. The region is now second to London as a destination for foreign capital, with the West Midlands third with 74 new projects. The success of the regions is due largely to the performance of Manchester and Birmingham as attractive places to do business, based on their transport links and access to skilled labour.
Outside England, Scotland recorded 199 new projects, an increase of 3 per cent on 2021 and up a quarter from pre-pandemic levels.
Hywel Ball, UK chairman at EY, said overseas investors wanted the government to promote policies that would lead to the “geographic rebalancing of the UK economy”.
“While London’s attractiveness will endure, despite ups and downs, policymakers need to build on the clear interest in investment outside the capital.”
Ball said foreign companies were more likely to invest in the UK’s regions if they can have “access to grants and incentives, skills and infrastructure, local business networks, and support from regional economic development organisations.”
He added: “Investment success stories like Manchester and Edinburgh demonstrate how local decision-making can help create a business-friendly environment that aligns with an area’s specific needs.”
The Conservative government has had a longstanding “levelling up” policy to boost the competitiveness of areas outside London and the southeast. But the strategy has been thrown into doubt as successive prime ministers have had different priorities.
Rishi Sunak’s government has said it will create a dozen “investment zones” which will be given state support and tax and regulatory freedom to boost jobs in specific industries.
EY’s survey found that the bulk of investment from overseas was in digital technology, a sector where overall new projects fell last year compared with 2021. Nonetheless, Scotland and seven of the nine English regions recorded the highest number of projects in the tech and digital sector.