For anyone worn down by what often feels like a relentless stream of politically fuelled negativity about Scotland and its economy, the latest inward investment figures surely constitute a tonic.
As has consistently been the case in recent times, Scotland has again done very well indeed when it has come to attracting foreign direct investment.
This would indicate that, in spite of all the carping, there is much about the nation which overseas investors consider attractive.
In some ways, given the goldfish-bowl nature of Scotland’s political scene and lobbying which is at times so intense it might make people think the economy is a basket case, the view from overseas about the degree to which Scotland is attractive is so valuable because it is an entirely objective one. And it should most certainly be heeded given that talk is cheap, and foreign direct investment (FDI) involves companies based overseas actually putting big sums of money into Scotland.
Accountancy firm EY’s latest annual Scotland attractiveness survey, published yesterday, reveals Scotland won a record number of FDI projects in 2023.
And the nation retained its position as second only to London among UK locations in attracting new inward investment projects.
Scotland won 142 FDI projects last year, a 12.7% rise from the previous record annual figure of 126 achieved in 2022, the survey reveals. This was the fifth consecutive year of increase, and EY noted Scotland was the only part of the UK to achieve this.
It is quite the achievement.
Ally Scott, EY Scotland managing partner, described the nation’s performance on the FDI front in 2023 as “very strong”.
Surely no one could disagree with this.
And the positives just roll on.
The increase in the number of inward investment projects won by Scotland in 2023 was more than twice as sharp as the 6% rise seen across the UK.
Scotland’s increased FDI flow saw its share of all such projects won in 2023 by the UK come in at 14.4%, up from 13.6% in the previous year. EY observed the 14.4% share is the highest over the past decade.
This is also very good news.
In terms of the consistency of Scotland’s strong performance on inward investment, EY’s latest survey observes Scotland has been second only to London in terms of the number of FDI projects won in nine of the past 10 years.
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Edinburgh, Glasgow and Aberdeen all feature in the top 10 UK cities by number of FDI projects won last year.
EY observed that Scotland’s “strong year” in attracting FDI projects in 2023 “is further underlined by its impressive performance in attracting projects from first-time investors, as opposed to expansions of existing investments”.
The accountancy firm noted that the number of such projects, from first-time investors in Scotland, had increased by 28.8% from the level in 2022, rising from 66 to 85 in 2023, “marking the highest across the decade”.
This is also highly encouraging, and it is difficult to see what is not to like in the survey, though you would imagine the doomsayers will be trying their hardest to come up with something.
EY noted the data on FDI jobs for 2023 provides “further encouraging news” for Scotland.
It highlighted the fact that the job numbers “need to be treated with caution, as not all projects disclose employment figures”.
However, it added: “Allowing for this proviso, the fact remains that employment creation announced by FDI projects in Scotland increased by 27.8% from 5,205 in 2022 to 6,650 in 2023.”
This is a big increase.
And EY observed: “This 2023 total represented Scotland’s highest number of FDI jobs since 2021 and second-highest in the past decade. Scotland’s employment creation from FDI in 2023 also grew faster than that for the UK as a whole, boosting Scotland’s UK share of FDI jobs from 11.1% in 2022 to 12.7% in 2023.”
So lots of good news on the jobs front too.
There were plenty of other positives in the latest survey, including Scotland’s success in attracting inward investment on the clean energy front.
EY listed the “top four growth sectors for FDI projects” for Scotland as utility supply, which accounted for 40 of the wins during 2023; and digital technology, business services, and transport and logistics, each of which brought 14 projects.
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Analysing the sectoral breakdown of FDI projects won by Scotland in 2023, EY said: “For the first time in six years, utility supply has overtaken digital technology projects in Scotland due to increasing levels of low-carbon and cleantech investment.
“This shifting trend gives rise to more projects located outwith the country’s main cities. Scotland’s past success in maintaining its longstanding position as the second-ranked [part] of the UK for FDI has been largely built on the success achieved by its cities. However, the strong rise in sustainable utility supply projects - generally located in more rural areas - could create a shift in Scotland’s investment hubs.”
Mr Scott, understandably, highlighted the importance of avoiding complacency in Scotland on the FDI front.
And he mentioned “frustrations” from clients on some fronts, flagging among other things the latest rises in income tax for higher earners in last December’s Scottish Budget, which increased the divergence with other parts of the UK.
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Mr Scott said: “As we celebrate the continued trend of year-on-year success in FDI, there is no room for complacency. We still hear frustrations from clients and the market that Scotland’s tightening economic policies, including the latest income tax hikes and issues around city and infrastructure quality, are causes for concern.
“While the potential impact of these goes far beyond FDI, the fact remains that access to talent is a major driver of attractiveness and investment. Action is also needed around the ease, transparency, and efficiency of planning processes to make Scotland and its cities more globally accessible to help boost the incoming flow of people and capital.”
Mr Scott is right to highlight “frustrations”, where these exist.
And these should be considered, albeit they need to be weighed in the context of straitened public finances in Scotland and throughout the UK and balanced with other priorities.
However, while we must be alert to anything which might blow things off course, Scotland’s consistent success on the inward investment front is a matter for celebration.
It is a great thing that overseas companies see Scotland as a very attractive place to invest.
Amid the UK malaise, we should not underestimate the importance of such success to Scotland’s economy and reputation on the international stage.
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