Fall in foreign investment projects in West Midlands

The West Midlands saw a 4.7 per cent decline in foreign direct investment projects last year, according to new figures.

DPD's Oldbury Hub
DPD's Oldbury Hub

There were 61 compared to 64 in 2019 but the region performed better than the UK overall with 975 projects – down 12 per cent on 2019’s 1,109.

This helped the West Midlands record a rise in market share of UK projects from 5.8 per cent in 2019 to 6.3 per cent.

Among the projects was Smethwick-based DPD, which has a major sorting hub site in Oldbury, and operates from more than 60 locations across the UK with more than 13,000 employees.

It is part of parent French group DPD and announced plans in June last year to create 6,000 new jobs and invest £200 million to expand its capacity in response to the boom in online shopping as a result of Covid-19.

The West Midlands’ attractiveness as an investment destination proved resilient amid the Covid-19 pandemic.

The Ernst and Young 2021 UK Attractiveness Survey, which launched today, found that the region secured the fifth highest number of projects among all UK regions and nations in 2020 – maintaining its 2019 ranking. London secured the most projects in the country with 383.

Digital

The West Midlands’ top sector was digital technology, which saw 11 projects in the region in 2020, slightly down on the 13 in 2019 – a decline in line with UK trends. The next largest sectors were transportation manufacture and supply with nine projects (down from 13 in 2019), agri-food with seven (up from six in 2019), machinery and equipment with seven (down from 13 in 2019) and business services with four projects (up from three in 2019).

Projects were most likely to involve sales and services activities (29 projects, up from 23 in 2019).

Meanwhile, manufacturing activities have seen a continuous decline in the West Midlands over the last four years, and although there were 11 manufacturing projects in 2020, this is significantly below the 2015 high point of 38. Logistics activities doubled from five projects in 2019 to 10 in 2020.

Simon O’Neill, office managing partner at EY in the Midlands, said: “Against the backdrop of a global pandemic, the West Midlands delivered a positive year for FDI in 2020. The impact of both the pandemic and the UK’s departure from the EU can be seen in how some of the region’s key sectors and activities have performed too, particularly the big increase in logistics projects as businesses in the West Midlands have reacted quickly to the changes around them.”

Birmingham was the West Midlands’ leading location for FDI projects and the only place in the region to feature in the top 10 UK towns and cities, having secured 26 projects in 2020 – a figure above its 10-year average of 19.4. This put the city in fourth position for all UK towns and cities, behind London (383), Edinburgh (36) and Manchester (35). Coventry recorded 10 projects, the joint 12th highest figure in the country.

The decline in manufacturing activities in the West Midlands matches a UK-wide post-2017 trend, EY’s research found.

The 112 manufacturing projects attracted in 2020 represented a 15 per cent decline from the 132 projects in 2019, while an 11 per cent market share was some way below the sector’s average UK market share of 15 per cent over the last decade.

Mr O’Neill said: “The manufacturing sector is key for the West Midlands and despite the sector’s recent performance there are still positives in the research.

"Supply chain changes have created an opportunity to capture a larger share of investment in modern manufacturing, with almost half – 45 per cent – of all respondents to our UK survey planning to change their supply chains, a figure that rises to 52 per cent in consumer goods and 62 per cent in the technology sector.

“With manufacturing and logistics opportunities likely to fall outside of London and major cities, this may be a one-off opportunity to reshape the UK’s economic geography."

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