The South East of England has maintained its position in the top three best-performing regions in England for Foreign Direct Investment (FDI) projects outside of London, despite a fall in project numbers, according to the EY 2023 UK Attractiveness Survey.
The South East of England has maintained its position in the top three best-performing regions in England for Foreign Direct Investment (FDI) projects outside of London, despite a fall in project numbers, according to the EY 2023 UK Attractiveness Survey.
The region recorded 67 FDI projects in 2022, a decline of 18% (15 projects) from 2021. This is a greater decline that the 6% in overall UK projects (993 to 929), resulting in a reduction of the South East’s share of all UK projects to its lowest level since 2016. Meanwhile, London’s projects fell 24%, from 394 in 2021 to 299 in 2022.
While the digital technology sector remained the region’s leader for project numbers, the South East did see a significant fall in this sector, with projects falling from 28 to 10.
This reflected a wider national fall in the sector, with digital tech projects down by almost a quarter across the UK. Transportation manufacturing & suppliers (also 10 projects, down from 14) and pharmaceuticals (eight, up from six) were the other leading sectors in the South East.
There were positive results on the employment front, with the South East seeing an average 72 jobs created per project. This placed the region 4th out of all 12 UK regions for employment.
Gareth Anderson, office managing partner for EY in the South East, said: “The South East continues to hold strong as one of the most attractive regions for FDI in England despite challenges in some sectors, particularly digital. This has been a common theme across the South of England, where digital tech has been a real investment success story in recent years.
“But, as we’ve seen in London, while project numbers are down in the sector, value remains solid – supported by a strong employment performance in the South East – and it’s smaller projects being de-prioritised.
“There are several bright spots in the data, particularly in manufacturing. Manufacturing projects have more than tripled from last year – from five to 16 – and are easily at their highest level in the last decade.
“With sustainability and climate change high on investors’ agendas, clean technology is an increasingly important investment focus, providing the UK with the opportunity to play to its regional strengths.
“Expertise in sectors like manufacturing will be crucial to any efforts by the UK to establish itself as a place where clean technology is not just deployed, but also developed and built too.”
Nationally, over half of the UK’s nations and regions attracted more Foreign Direct Investment (FDI) projects in 2022 than they did in 2021. The UK hosted 929 FDI-backed projects in 2022, the second-highest project total in Europe, albeit down 6% from 993 projects in 2021.
London (299 projects) was still home to the most FDI projects out of any UK nation or region in 2022, but its share of all UK projects has fallen to 32% from a high of 49% in 2019.
Scotland (126 projects), the North West (88) and West Midlands (74) recorded the most projects outside London, while the biggest gains in England from 2021 were seen in the North East (33%), Yorkshire and the Humber (28%) and the East Midlands (23%).
The English regions joining London and the South East in seeing project declines from 2021 were the South West (down 17%) and the West Midlands (down 5%).
The strong results across the North – all three regions saw double-digit growth – were underpinned by resilience in the digital sector and growth across a range of key activities, including manufacturing, sales, research and development, logistics, and headquarters projects.
Meanwhile, declines in the digital sector were the biggest drag on performance for the South of England. Digital projects in London almost halved from 194 in 2021 to 107 in 2022, with significant falls also seen in the South East and South West. Despite this, the UK still led Europe for tech FDI.
Across Europe, France held onto the top spot for total project numbers for a fourth consecutive year, although the UK once again ranked highest in Europe for new projects and continued to deliver more total jobs and jobs per project than Germany and France – trends consistent with the UK’s pivot in strategy to focus on value over volume when attracting FDI.
Hywel Ball, EY’s UK Chair, said: “The strong FDI performance of Scotland, Wales and England’s regions in 2022 is a clear success for the UK.
“Notably, when asked to identify the policy area in which improvements would most increase the UK’s attractiveness, the investors we surveyed were most likely to pick 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.”
