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Surge in new foreign direct investment into the region

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Brexit does not appear to have dented overseas groups’ healthy appetite for investing in the region although the country's appeal to foreign investors may fade in the future. The East of England secured 39 foreign direct investment projects in 2016, up from 28 in the previous year and the highest number since 2008. .Over half were announced after the EU referendum last June, according to EY’s annual Attractiveness Report. Peterborough attracted four FDI projects last year, Cambridge and manufacturing accounted for 25 projects in the region with six in the food sector and four in the energy/ utility sector, 

The USA was the biggest investor in the East of England with 11 projects, followed by France and Germany with four each. In all 15 countries accounted for foreign direct investment in the region. However, the report says investors predict a decline in the UK’s future attractiveness as a destination for foreign investment.

Nick Gomer, managing partner at EY in Cambridge, said: “It’s been an outstanding year for inward investment, with the region attracting 39 per cent more FDI projects than in 2015. With a new mayor in position to deliver on our regional growth strategy to promote Cambridgeshire and Peterborough on a global stage, it’s crucial that we find ways to share the benefits of FDI more evenly across the country.”.

In 2016 the majority of UK regions saw an increase in projects, with just four -Wales, the North East, North West and South West- seeing a fall. London remained the dominant location for FDI, followed by Scotland. The Northern Powerhouse and the Midlands Engine also did well.

Nick Gomer, managing partner at EY in Cambridge said: “It’s been an outstanding year for inward investment, with the region attracting 39% more FDI projects than in 2015. With a new Mayor in position to deliver on our regional growth strategy to promote Cambridgeshire and Peterborough on a global stage, it’s crucial that we find ways to share the benefits of FDI more evenly across the country. This is a critical challenge that future policy needs to address to ensure the region remains attractive, competitive and connected if we are to compete with the rest of the UK.”

Brexit impact

38% of all FDI projects in the East of England were announced before the EU Referendum vote in June 2016, with 62% announced after this date.

Global investors had mixed views when asked about the future attractiveness of the UK. 32% of respondents, surveyed between March and April 2017, say they expect the UK’s attractiveness to FDI to improve over the coming three years, while 31% expect it to decline. Both figures are significantly worse than recorded long-term averages of 53% and 8% respectively. In fact, since March 2016 the share of investors with a negative view of the UK’s medium term prospects for FDI have almost doubled.

Nick Gomer added : “The research suggests that the EU Referendum vote and its aftermath may be having an influence on global perceptions of the UK’s medium to long-term attractiveness. Western European investors are twice as negative as Asian and North American investors.

“Decisions on the majority of investments made in 2016 would have been made up to three years ago, which helps to explain the UK’s solid performance last year, but signs of a slowdown are on the horizon.” Nine per cent of investors surveyed said leaving the European Single Market will prompt them to change their investment plans or re-locate from the UK to Europe in the next three years.

Time to act

The UK economy has performed well after the EU Referendum vote and the outlook for FDI remains strong in the short-term. However, there are a number of indicators suggesting that the outlook for the UK is likely to be challenging and the UK’s investment strategy needs to move quickly to position for future success.

“What is clear, is that the UK has a short window to act. On a positive note, across the East of England we have a solid base to build from, with globally renowned strengths in manufacturing and bio-tech sectors. A rapid response and clear regional strategy can help strengthen our leading position for inward investment from all parts of the globe," he added.

Last Updated ( Friday, 28 July 2017 11:33 )