UK inward investment report 07/08 - Managing Director’s report

I am delighted to report that the UK enjoyed another strong inward investment performance in 2007/08. A total of 1,573 foreign direct investment (FDI) projects from 48 countries were recorded in the UK during the year, a 10 per cent increase. This was another record year, representing the fourth successive year of growth. Forty-two per cent of investment projects were new investments; 28 per cent were expansions; and 30 per cent were mergers and acquisitions (M&A).

In total, inward investment during the year created over 45,000 new jobs and safeguarded over 58,000. Over 100 projects had between 100 and 1,000 associated jobs.

This performance confirms the UK’s continuing position as number one in Europe and second globally only to the USA in attracting international investment. This in the year where the latest UNCTAD figures confirmed the UK’s FDI stock to be over US$1 trillion, some 9.4 per cent of the global total.

New investment projects grew by 9 per cent over the previous year and it was particularly pleasing to see a record number of expansion decisions by companies already invested in the UK, demonstrating continued confidence that we have the right conditions and support for investors to grow. Mergers and acquisitions, an important investment route for some, were down 3 per cent.

The projects reported in 2007/08 reflect the UK’s global reputation as an innovative, knowledge-based economy and by a significant margin the number one recipient of research and development (R&D)-related inward investment in Europe. Last year saw an increase of 83 per cent in R&D investment and over two-thirds of all inward investment projects were innovative or knowledge driven.

Investment performance held up well across a wide range of sectors including ICT, life science and financial services, with significant increases reported in creative industries, environmental technologies and advanced engineering, reflecting recognised UK excellence in these areas.

The continuing attraction of the UK as a centre for headquarters operations was demonstrated by over 200 companies establishing HQs here in 2007/08. Service sector projects exceeded 2006/07 and were the highest on record, while manufacturing investment – although down on the previous year – accounted for 276 projects and over 40,000 associated jobs.

The United States was again the source of the largest number of investment projects which, while slightly lower than previous years as a percentage of the total, still accounted for some 30 per cent of all investment.

The choice of the UK as a platform for growth by companies from across the world continues to grow. Notable examples are Germany and Japan, whose investments into the UK increased by 39 per cent and 28 per cent respectively last year. This made Germany our second biggest investor and Japan the third largest. Our business relationships with China and India continue to be very strong. 59 projects from China created or safeguarded over 1,300 jobs; while there were 75 projects from India with well over 19,000 associated jobs.

A wide cross section of other countries have continued to inject high levels of FDI into the UK, including Italy, Australia and New Zealand. There was also a strong increase in FDI projects from smaller economies such as Ireland, Portugal and Sweden, demonstrating that the UK represents a key opportunity for expansion within Europe and beyond.

Global springboard

The UK’s strong inward investment success in 2007/08 can by no means be taken for granted. Although an open and supportive investment environment, global connections, access to sophisticated capital markets, and a world-class skills and technology base present a compelling investment opportunity, the reality of established competitors, high-growth countries such as India and China, together with global financial turbulence mean that there is no room for complacency.

To keep our leading position we must maintain our focus on a UK investment offer that differentiates on what is of value to our existing and prospective inward investors. Building on the shift initiated last year at UK Trade & Investment, we will continue to align our resources more precisely with priority sectors and markets and to specific target companies. This is being supported by a deepening business knowledge, working closely with the private sector, drawing on the experience of business leaders and the rollout of sectoral strategies to market the UK internationally.

Connecting inward investors to high quality networks in the UK and overseas, helping them to realise a multiplier effect on their business growth directly related to their presence in the UK, will be key to delivery. Our international trade teams are now firmly a part of that effort supporting foreign-owned companies with UKbased operations to grow from, as well as in the UK.

This alignment in the UK and overseas, putting the customer at the centre of our thinking, will ensure that we make it even easier to do business with us and with the UK to mutual advantage.

Partnerships delivering performance

We greatly value the efforts of all our partners in the UK and overseas who have helped to deliver this world-class inward investment performance. In many cases an exceptional joint effort has been key to success delivering nationally and regionally across the UK. The principal inward investment agencies – the nine English regional development agencies and the devolved administrations in Scotland, Wales and Northern Ireland – all played a crucial role in building the UK share of global FDI to record levels. And our relationship with our private sector partners again contributed significant value.

Another exceptional performance. I look forward to reporting continued progress in the year ahead.