Investors show confidence in Glasgow

03 Jun 2009

by Mark Williamson, The Herald

Glasgow remained one of the five most popular UK cities for inward investors last year according to research which showed Scotland held on to third place in the UK rankings. However, the number of projects fell more sharply in Glasgow and Scotland than other parts of the UK as the recession took hold.

An analysis by Ernst & Young, the Big Four accountant, shows international investors provided a vote of confidence in Glasgow in 2008, when they committed to nine projects.

This was dwarfed by the 262 projects won by London but was enough to allow Glasgow to clinch fifth place in the city rankings.

It was a notable result in a year when the fall out from the credit crunch reduced firms' appetite for expan- sion and left many facing challenges raising funding.

Glasgow ranked second in 2007 and fourth in 2006, winning 46 investments in total over the three years. That made it the second most popular city for inward investors after London.

It outperformed cities like Leeds that have been competing hard to persuade firms in industries like financial services to shift to their areas.

Glasgow won one more project than Edinburgh in 2008.

The success may be a sign that the high profile effort to win inward investment by creating the new International Financial Services District has paid dividends.

The survey shows that Scotland was the most popular destination for inward investment in the UK behind London and south-east England for the third year running in 2008. Scotland won 53 projects in 2008, while south-east England won 64.

The survey provides evidence that the country remains an attractive place for investment by manufacturers, which will be welcome at a time when major financial services firms headquartered in Scotland have been shedding jobs.

There were 29 inward investment projects in the manufacturing sector in Scotland, compared with 14 in finance and business services and six in energy.

"It is encouraging to see that Scotland is still able to attract projects across a wide range of industry sectors," said Hywel Ball, managing partner for Ernst & Young in Scotland.

"It is this diversity of industry groups, combined with the skills base of the Scottish labour market, that will hopefully help speed Scotland's recovery from the current economic storm."

However, the number of projects in Scotland fell by 23% on the 69 recorded in 2007. In 2006, Scotland won 63 projects.

The number of projects in Glasgow was down 57% on the 21 recorded in 2007. In 2006 Glasgow won 16 projects.

Edinburgh ranked fourth in 2007, with 13 investments, but was not in the top five in 2006 or 2008.

Across the UK the number of projects fell by 4% in 2008, to 686.

This may be a sign that sectors in which Scotland is strong are attracting less investment. Investors may be sharing the work out more widely.

The UK remained the most popular destination for inward investment in Europe. Across the continent there were 3718 investment projects, up six on 2007. However, the number of jobs created fell 16% to 148,333, accelerating a downward trend evident since 2004.

Mark Lhermitte, a partner at Ernst & Young, warned of trouble ahead. "Five years of sustained inward investment growth in Europe came to an end in 2008," he said.

"But, the true picture of how the global recession has hit inward investment has yet to emerge. Investment decisions for 2008 will have been made many months earlier. We expect 2009 to tell a very different story."

However, E&Y said countries like the UK could benefit from increased risk aversion among firms in Europe and the USA.

"The BRIC (Brazil, India, China) regions are not providing the absolutely safe ground international investors are looking for. Europe is seen as predictable and safe. Investors are showing greater loyalty to their countries of origin and historical markets, launching fewer projects in Emerging Europe," said Lhermitte.

Increased interest in areas like renewable energy could benefit countries that position themselves as supportive places to base ventures.

Reproduced with the permission of the Herald & Times Group.


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