Report Highlights Importance Of FDI To Tackle Growth And Support The Levelling Up Agenda
A new economic report is predicting that the size of Greater Manchester’s economy will grow to almost £71bn 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), the value of Greater Manchester’s economy will be £1.9bn larger and employ 27,700 more people by the end of 2023 compared to Q4 2021.
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 by the end of next year be home to eight of the top 10 fastest growing cities.
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.
Highlighting the strengths and the potential of Manchester, the report says Greater Manchester’s economic success has been borne out of diversifying from traditional industries into new markets. The North West offers the largest financial services sector outside London, making Manchester perfectly positioned to attract FDI which the UK Powerhouse report identifies as a key factor in promoting the domestic economy.
Manchester has also established itself as a national tech hub and is home to many key players in the video games industry. Several other employers, such as professional services firm EY, are also set to ramp up operations in the city.
The report reveals that despite the most recent stats pointing to a general fall in the number of FDI projects into the UK, the North West is in fourth place with a 10% reduction compared to 23% falls in London and the South East.
The challenge will be for the North West 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.
Tim Newns, Chief Executive at MIDAS, Manchester’s Inward Investment Agency said:
"This report focusses on 2020/21 which was a time of significant economic uncertainty – hence the slight fall in volume – however, it actually shows that Greater Manchester and the NW were relatively resilient compared to other areas of the UK such as London and the South East, which saw much greater falls. MIDAS and Greater Manchester’s figures for the 2022 have been record breaking, showing a positive bounce back since restrictions were relaxed which is much more reflective of Manchester’s position over the last decade, where it has been the most invested in city in the UK outside London, reflecting Manchester being the fastest growing city over the last few years.
"It is vital that as we move further away from the peak of the pandemic, we work with central government to reduce the barriers to FDI for high-value, innovation-oriented investment in to places such as Greater Manchester, so that it can play its full role in our continuing recovery, but also reflect the ambitions of Levelling Up, attracting investment that aligns with Greater Manchester’s Local Industrial Strategy and key strategic aims of a fairer, greener city region, driven by innovation.
"Our role as Manchester’s Inward Investment Agency has allowed us to facilitate innovation-oriented investment in our areas of strength including digital and tech, life sciences and advanced manufacturing through successfully supporting the attraction of new R&D projects that are located right across the city region, leveraging our major innovation assets. MIDAS’ latest figures for 2021/22 show that over 20% of projects were R&D oriented, 20% were low carbon-related and over 20% were HQ’s, directly reflecting the ambitions of Greater Manchester’s Economic Vision."
Expert Opinion“This latest UK Powerhouse report makes clear that northern cities like Manchester have huge potential.
“The Greater Manchester International Strategy report highlights the importance of working with the government on delivery of new investment strategy. The incentives needed to drive additional FDI can unlock the strength of a region like the North West and deliver not just on the levelling up agenda, but the wider aim for a truly global Britain post-Brexit.
“The UK Powerhouse report shows the North West is well placed to make the jump to higher performance in terms of FDI, having seen a smaller percentage change than other regions.
“The time to invest in Manchester’s 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.
“With targeted investment for northern regions in growth areas such as the life sciences, coupled with polices and incentives to encourage new streams of FDI, many more should be able to follow in Manchester’s footsteps by recognising the transformative power of FDI on local economies.
“The North West‘s fourth position for FDI is cause for optimism and their performance in the coming years should prove a bellwether for the levelling up process going forwards.
“With a combination of business, local and central government backing, there’s no reason why the north 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.” Bryan Bletso - Partner
* 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)