Level of foreign direct investment in Manchester declines, new report shows

Level of foreign direct investment in Manchester declines, new report shows

Manchester saw a decline in the number of foreign direct investment (FDI) it attracted last year, although Liverpool managed to increase its FDI volume.

The latest UK Attractiveness Report released by EY today (11 July) showed that Manchester attracted a total of 31 FDI projects last year, with only Edinburgh (32), Birmingham (67) and London (353) surpassing the city’s total.

However, this was a smaller total than the 45 FDI ​​projects Manchester attracted in 2022, representing a drop of 31%.

Liverpool was the 16th best performing UK city in attracting FDI in 2023, with a total of nine projects, up from seven in 2022.

The North West was ranked as the UK’s fourth best performing region for attracting FDI, with a total of 68 projects in 2023. Regionally, only Greater London (359), Scotland (142) and the West Midlands (127) attracted more FDI projects than the North West last year.

However, the region attracted 23 per cent fewer projects in 2023 compared to the previous year, when it attracted 88 projects. In contrast, overall UK projects increased by six per cent last year, from 929 to 985.

Manchester continues to attract investment in technology and high-value projects

FDI projects in the Northwest created a total of 3,344 jobs in 2023, down from 3,694 in 2022.

However, despite this annual fall, the North West region ranked fifth in the UK for FDI-related jobs in 2023, up from sixth place the previous year.

The Software and IT Services sector was the region’s largest driver of FDI in 2023, with a total of 12 projects.

Meanwhile, the region’s second largest sector in attracting FDI was Business Services, with a total of 11 projects, more than double the 2022 total (five).

Examining the North West’s FDI projects by activity reveals a prevalence of high-value areas. While Business Services was the activity driving the largest volume (27) of the North West’s FDI projects in 2023, this was followed by Manufacturing projects (11) and Research and Development (R&D) projects (10).

Twelve percent of respondents to EY’s latest UK Attractiveness Survey said they had plans to pursue FDI projects in the North West in 2023.

Stephen Church, EY’s Northern Market Leader, said: “Despite persistent national and global economic challenges, the North West remains one of the UK’s top regions for attracting FDI and has also continued to attract strategically important high-growth investment activity that policymakers have prioritised in recent years.

“This, coupled with Manchester’s enduring performance as one of the UK’s top cities for investment, is testament to the resilience of the region’s business community and the calibre of its talent.”

He added: “However, the decline in overall FDI projects and jobs in the North West should not be ignored, especially given its contrast with the national growth seen in 2023.

“The Northwest has distinct and enduring advantages, such as significant expertise in digital technology, which has previously generated substantial inward investment.

“The new government can support the North West to regain its momentum by working with local policymakers to nurture the region’s strengths and promote them to a global investor audience. Every part of the country must have the opportunity to capitalise on the UK’s strong position among global investors and share in the jobs, prosperity and growth that inward investment projects bring.”

Peter Arnold, chief economist at EY UK, said: “The past year has been challenging for the North West and Manchester has slipped down the rankings following a drop in investment figures.

“However, this does not necessarily reflect a problem unique to the city, as digital FDI declined across much of Europe in 2023 as companies investing in technology faced tighter lending conditions.”

He added: “There is cause for optimism, as the North West was the third best performing UK region outside Greater London for attracting R&D projects, behind only the South East and East of England. Local policymakers will be keen to build on this and attract more high-value and strategically important investment in the future.”

The report shows that Greater London, Scotland, the West Midlands and the South West were the only UK regions to see the number of FDI projects increase in 2023.

Project numbers in the South East (67) and East of England (44) were consistent with the previous year, while all other regions and devolved administrations in the UK saw a decline.

The largest declines were seen in Wales, Northern Ireland and the East Midlands.

Wales saw FDI projects fall by 52%, while Northern Ireland saw a 35% drop. The East Midlands saw 31 FDI projects in 2023, down 35% on the previous year.

The North of England as a whole saw a 22% drop in FDI projects in 2023. Yorkshire and the Humber and the North East saw project numbers decline by 33% and 5% respectively.