Core cities still attracting ‘lion’s share’ of foreign investment

The UK’s largest cities still receive the ‘lion’s share’ of foreign investment coming into the country, while smaller towns get left behind, according to a new study.

The report by consultants EY and the Centre for Towns think tank reveals almost two thirds (59%) of all Foreign Direct Investment (FDI) went to the UK’s 12 core cities in 2018 compared to less than a third (31%) in 1997.

According to the report, London has been the primary beneficiary of FDI projects secured by the Core Cities but Bristol, Edinburgh, Leeds, Manchester and Newcastle Upon Tyne all more than doubled the number of projects between 1997 and 2017.

Nevertheless, London’s 5,875 projects over that time period dwarfs the 419 secured by second placed Manchester.

This trend continued in 2018, with London accounting for 457 (73%) of the total of 624 FDI projects secured last year.

But researchers also found that towns with a population of more 75,000 people – have seen their share of FDI fall to 17% last year, and all place types – except core cities – attracted fewer projects in 2018 than they did in 1997.

In 2018 the gap widened further, with university towns (down 46%), coastal towns (down 84%), ex-industrial towns (down 35%) and new towns (down 41%) all seeing significant falls in the number of FDI projects.

‘The towns and conurbations on the periphery of the UK’s core cities are facing unprecedented economic challenges, but what is particularly worrying is how deep the economic disparity between cities, towns and smaller communities has become over the last 12 months,’ said EY UK’s chief economist, Mark Gregory.

‘Core Cities have been far more successful in attracting FDI while levels of investment in other locations has, at best, flatlined over the past 20 years.

‘UK economic policy has tended to be based around core cities and this is likely to have exacerbated the geographic disparities in attracting FDI. With Brexit being one of a range of challenges facing the UK economy it is vital that a new approach to FDI policy, centred on geography, is developed as a priority,’ added Gregory.

The co-founder of the Centre for Towns, Lisa Nandy said: ‘London and the core cities swallow far too much of the investment coming into the country, benefitting as they do from an economic model which means they are best-equipped to capture such investment.

‘Those places which are best placed to attract inward investment secure it, whilst towns with creaking infrastructure, a hollowed-out skills base and ageing populations simply cannot compete for investment on a level playing field.

‘The government rightly talks about levelling up disparities between towns and cities. This excellent report outlines one reason why this needs to happen now,’ added the MP.

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