Report Highlights Importance Of FDI To Tackle Growth And Support The Levelling Up Agenda
A new economic report is predicting that the collective size of size of the economies in Newcastle and Sunderland will grow to £28.8bn by the end of 2023 – but it warns that the levelling-up agenda will stall unless more Foreign Direct Investment (FDI)* is attracted to the region.
According to Irwin Mitchell’s UK Powerhouse report, produced by the Centre for Economics and Business Research (Cebr), Newcastle’s economy will grow by £500m and employ 5,400 more people by the end of 2023 compared to Q4 2021.
In Sunderland, the economy is set to see year-on-year growth in GVA** of 1.6% taking the total value of the economy to £6.7bn by the end of next year.
Despite this increase, economic growth in northern cities is expected to be exceeded by that of southern counterparts. The study says the South or East of England will be home to eight of the top 10 fastest growing cities by the end of next year.
Significantly, out of the 50 locations included in the study, over half of the slowest growing economies are expected to be in the North of England.
The report reveals that the most recent statistics point to a general fall in the number of FDI projects in the UK, with the North East in 11th place.
The challenge will be for the North East to spearhead a drive for a greater share of what is a key driver for sustained economic growth and to make inroads into the dominance of the South when it comes to FDI. The report suggests that success here is the key to levelling up northern cities, by allowing them to benefit from the job creation and growth that such inward investment brings with it.
Bryan Bletso, Partner and head of International at Irwin Mitchell, said: “This latest UK Powerhouse report makes clear that North East cities such as Newcastle and Sunderland have huge potential, but the region’s position for FDI is cause for real concern.
“However, with a combination of business, local and central government backing, there’s no reason why it can’t attract its fair share of investment still centred in the south and see the dreams of a true northern powerhouse become a reality. The time to invest in their success is now and by doing so, the corresponding economic growth and job creation will go a long way towards safeguarding future prosperity and making levelling up a reality.”
Josie Dent, Managing Economist at Cebr and one of the report’s authors, said: “The economy is still expected to face some turbulence between now and the end of next year, notably through volatility in commodity prices, supply chain pressures, and the emerging cost-of-living crisis domestically. All of these factors are set to impact growth both at the aggregate level and, to a varying extent, within individual cities.
“This report highlights that much of the fastest growth during next year will be concentrated in the South. Locations such as Milton Keyes, Cambridge and Oxford have economies which are dominated by fast-growth sectors and they have also been hot spots for overseas’ investment. If economic levelling up is to be tackled effectively, these two issues must be recognised and quickly addressed.”
* Foreign Direct Investment (FDI) refers to cross-border flows where an investor establishes a lasting interest in a subsidiary located in a country that is not the investor’s. Typically, 10.0% or more of the organisation’s voting power should be controlled by the foreign investor for this to represent a lasting interest.
** GVA – Gross Value Added (the total value of goods and services produced)