New figures highlight challenge faced by government in levelling up the British economy
First published on Mon 19 Jul 2021 07.24 EDT
The government’s challenge in levelling up Britain’s economy has been highlighted by official data showing London accounted for almost half of foreign direct investment (FDI) into the UK in the pre-pandemic year of 2019.
Reflecting the dominance of the capital to the economy and its position as a global financial centre, the Office for National Statistics (ONS) said London’s FDI was more than three times that of the second highest region – the south-east.
Between them, London and the south-east accounted for 55% of FDI in 2019 and experimental ONS figures published for the first time suggest show a large and growing north-south divide.
Between 2015 and 2019 the value of FDI in the capital rose from £416bn to £661bn at a time when the value of inward investment in some regions flatlined and – in some cases – fell slightly. Scotland had the third highest FDI position in the UK (£86bn), while Wales (£19bn) and Northern Ireland had the lowest FDI stocks.
The ONS said for every job in London, there was £108,656 of FDI stock in 2019 and £39,727 for each one in the south-east in 2019. The average for the other English regions plus Northern Ireland was £20,801 for each job.
The official figures also underline the reliance of most of the UK on investment from the EU. Only three regions – London, Scotland and the north-east – did not have most of their FDI from the EU in 2019.
US investment outstripped that from the EU in London and Scotland – both financial centres – while the north-east attracted the biggest share of its FDI from the rest of the world.
The government has made the “levelling up” of the UK regions a priority and has said it is prepared to use procurement, freeports and state aid to spread economic prosperity to all parts of the country.
Ministers also hope that devolving powers to city regions will lead to faster growth but the ONS said breaking down FDI by city regions showed a “mixed picture”.
Of the 16 city regions, six showed an upward FDI trend between 2015 and 2019, with the biggest percentage increase in the Tees Valley, where the value of investment from overseas doubled from £4.7bn to £9.4bn.
Glasgow’s FDI rose from £20.5bn to £30.8bn – a 50% increase – while inner London’s FDI was up from £356bn to £587bn, a 65% jump.
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