The South East’s attractiveness as an investment destination proved resilient amid the COVID-19 pandemic, with the region seeing a decline in projects in line with the overall UK and European markets and recording the fourth highest number of projects out of all parts of the UK, according to the EY 2021 UK Attractiveness Survey which launched today.
The South East secured 72 inbound Foreign Direct Investment (FDI) projects in 2020, down 13% from the 83 achieved in 2019. This matched the 12% decline in overall UK projects (from 1,109 to 975) and the 13% decline in overall European projects (from 6,412 to 5,578).
The fall in projects in the region can largely be attributed to a decrease in the number of projects in the digital tech sector, which saw 28 projects in 2020 compared to 36 in 2019. Other sectors, including pharmaceuticals, and machinery and equipment, also saw small declines.
Despite the fall in project numbers, the digital tech sector remained the leading sector in the region. The next largest sectors were agri-food with seven projects (up from six in 2019) and transport manufacture and supply with six (up from four). Projects were most likely to involve sales and service activities (41 projects, up from 38 in 2019), and R&D and logistics (both nine projects).
The South East secured the fourth highest number of projects in the UK in 2020, behind Greater London (383), Scotland (107) and the North West (85). The region had a 7.4% share of all UK projects.
Digital sector accounts for the largest number of projects in the UK
The digital sector has accounted for the largest number of projects in the UK every year since 2013. London remains the city driving the UK’s success in digital technology, securing 57.8% of all digital tech FDI recorded in the UK in 2020, or 66.5% when London and the South East are combined.
However, while the UK retained its leadership position for digital investment in Europe – securing 322 projects in 2020 and staying well ahead of Germany on 187 – project numbers fell by 25% from 2019 (432). This was almost double the fall in the overall European digital market (13%).
The UK’s decline in digital was reflected in the South East, which saw a 22% decrease in project numbers. But, while 2020 saw a decline in project numbers, the signs are that the sector remains attractive to investors.
Richard Baker, Managing Partner at EY in the South East, comments: “The impact of the COVID-19 pandemic is clear in 2020’s FDI figures. While some sectors across the country have seen additional investment as a result of the pandemic, things have been pared back in others. Digital technology is a good example of this as the cutting-edge digital technology projects you’re likely to find in London and the South East have been paused.
“Despite 2020’s performance, there are signs things can bounce back. Over half of the investors we spoke to identified digital technology as one of the main drivers of UK growth in future. For the region, 9% of the investors we spoke to said, the South East was the most attractive UK region for investment, up from 7% in 2019.
“In order to remain attractive to investors, we need to put digital infrastructure, cybersecurity, entrepreneurship, and protecting intellectual property and data at the forefront of policies. This will help differentiate the UK against competitors to attract digital FDI.
“It’s also important that ‘levelling up’ the UK doesn’t become ‘levelling down’: the South East has its own investment needs too and can continue to develop alongside the rest of the country. There are connectivity challenges to resolve and the region is home to a number of mid-sized towns which need investment support.”
Reading remains top location in the South East
Reading was the South East’s leading location for FDI projects, securing six in 2020. This put the town in joint 18th place for all UK towns and cities (alongside Sunderland, Newport and Warrington). The South East’s proximity to London is often seen as one of the reasons for the lack of prominence of its towns and cities in the FDI rankings, although this means FDI is more spread out in the region than it is elsewhere in the country.