Hywel Ball, EY UK Chair, said: “The UK recorded a rise in inward investment projects last year, outperforming most other countries in Europe. There were standout performances for certain regions including London, Scotland and the West Midlands, however, investment across the country continues to be uneven.
“Our survey shows that global investors are confident in the UK’s future prospects and have the appetite to invest outside of London. There is an opportunity for policymakers to focus on how best to capitalise on the UK’s distinct advantages, such as its flourishing tech and AI sector, and leading expertise in areas such as renewable energy, particularly offshore wind. Fostering a skilled nationwide workforce and deploying the right combination of national policies and tailored local strategies will be essential to maximise growth, ensuring that all parts of the country benefit from the UK’s strong standing among investors.”
Peter Arnold, EY UK Chief Economist, comments: “We saw the UK return to a period of relative political stability in 2023 after a volatile 2022, which may explain the improved national investment performance. There is an opportunity for the new UK Government to build on this further and reassert the UK’s reputation as a stable, business-friendly investment destination. The UK may see a combination of outreach initiatives intended to reset international perceptions, together with practical policy changes that unlock investment.
“The Government may also be considering which practical policy changes could help unlock investment. For example, easing planning requirements and reducing the timeframe for the approval of infrastructure spend could help major projects move from concept to construction at a faster rate and reassure investors that they can make timely returns.”
UK’s regional FDI gap widens
Greater London, Scotland, the West Midlands and the South West were the only UK regions to see FDI project numbers increase in 2023. Project numbers in the South East (67) and the East of England (44) were consistent with the previous year, while every other region and devolved administration in the UK saw a decline.
The biggest declines were seen in Wales, Northern Ireland and the East Midlands. Wales saw FDI projects fall by 52%, while Northern Ireland recorded a drop of 35%. The East Midlands recorded 31 FDI projects in 2023, which was down 35% from the year before.
Regions across the North of England collectively recorded a 22% fall in FDI projects in 2023. The North West, Yorkshire and the Humber, and the North East saw project numbers decline by 23%, 33% and 5% respectively. Yorkshire and the Humber (34) and the North West (68) both received their lowest number of FDI projects (34) since 2014.
The recovery of Greater London following a challenging 2022 saw the region grow its share of national inward investment projects. Greater London accounted for more than a third (36%) of all UK FDI projects in 2023, compared to 32% the year before. In comparison, the North East, North West and Yorkshire and the Humber collectively accounted for 14% of UK FDI projects in 2023, compared to 19% the year before.
FDI performance in UK cities: Birmingham reaches decade high
Outside of London, the UK’s most successful city for FDI in 2023 was Birmingham, which attracted 67 inward investment projects in 2023, a 139% increase on the year before. This was Birmingham’s highest FDI figure for a decade and more than twice the total of any other UK city outside of London during 2023.
Birmingham’s success was driven by the technology sector, with the city recording a 50% rise in digital FDI projects in 2023 compared to 2022.
Edinburgh retained its position as the UK’s second-best performing city for FDI outside of London, despite project numbers falling by 20% year-on-year to 32.
Projects into Manchester declined by 31%, falling from 45 in 2022 to 31 in 2023. This means that Manchester is now the third highest ranked UK city for FDI outside London – down from first place in 2022 and its lowest ranking of the past decade.
Glasgow (fourth), Bristol (fifth), Cambridge (sixth) and Leeds (seventh) all saw increases in the number of FDI projects secured in 2023, with Cambridge recording a decade high.
Peter Arnold, EY UK Chief Economist, comments: “Technology remains an integral part of the UK’s investment story and, while London continues to dominate, Birmingham and the wider West Midlands saw strong growth in digital investment last year. The West Midlands also benefitted from the 2022 Commonwealth Games and the subsequent campaign to drive further inward investment, which looks to have had a positive impact on FDI numbers for the region as a whole.
“Last year proved challenging for the North West and Manchester slipped down the rankings after a drop in investment numbers. However, Manchester saw impressive levels of technology investment in 2022 and so this may be a natural drop-off after a good year. This doesn’t necessarily reflect a unique issue for the city, as digital FDI declined across much of Europe in 2023 as companies investing in technology contended with tighter borrowing conditions. There are grounds for optimism, as the North West was the UK’s third best performing region outside Greater London for attracting research and development projects, behind only the South East and the East of England. Local policymakers will be keen to build on this performance to attract more high-value, strategically important investment in the future.”
Digital technology remains key sector for UK FDI growth
Digital technology was the UK’s leading sector for inward investment in 2023 and the largest source of FDI projects for six out of nine English regions, including Greater London, the West Midlands, North West, South East, South West and the East of England.
More than half (52%) of the country’s 255 technology FDI projects were located in Greater London, which secured 132 digital projects – a 24% increase on 2022. Greater London also remained Europe’s leading city destination for digital technology projects, a position it has maintained for the last decade. The UK’s second most popular region for digital investment was the West Midlands, which attracted 50 technology FDI projects in 2023 – a 108% increase from 2022.
The UK’s second largest source of FDI projects was the financial services sector, with 108 projects secured in 2023. Three quarters (75%) of these projects were located in London.
Business services and utility supply were the joint third highest ranking sectors for UK FDI, recording 92 projects each in 2023. Greater London was the leading region for business services, securing 42% of the UK’s national share. Scotland led on utility supply FDI, securing 43% of all projects in the UK, followed by Yorkshire and the Humber and the West Midlands in joint second place at 10% of projects each.
When assessing investment by activity, Scotland was the largest regional recipient of manufacturing projects in 2023 for the third successive year, recording 45 projects – a 29% increase year-on-year. The West Midlands was the second-largest regional recipient of UK manufacturing investment in 2023, with 30 projects – a 58% increase on 2022. The South-West ranked third with 13 manufacturing projects. Aside from increases in Greater London and the East of England, there was a decline in the total of manufacturing projects in the other UK regions and devolved administrations.