South Coast City Identified As Investment Hotspot Due To Predicted Fast Growth, Start-Up Numbers And Skills

Brighton’s fast-growing economy and highly skilled workforce make it currently the most attractive location outside of London for foreign investors looking to inject billions of pounds into the UK, says a new joint report by law firm Irwin Mitchell and Cebr.

The in-depth study into foreign direct investment (FDI) has analysed the 50 largest cities in the UK and ranked their current investment attractiveness according to a newly created index* which is based on eight economic indicators in three different categories: growth potential; local skills; and local infrastructure.

According to the latest data, the UK economy has attracted £2,000 billion of FDI and in addition to creating jobs, it helps enhance productivity, competitiveness, and innovation.

The report ranks Brighton in fourth place with an overall index of 50.8. This score is boosted by it being the top scoring city in the ‘growth potential’ pillar with Cebr forecasting 2.2% year-on-year GVA** growth for the city in 2024. The city also has the highest number of new businesses being created per 10,000 people outside of the capital and comes 10th in terms of local skills.

Top 10 for FDI attractiveness (IRWIN MITCHELL / CEBR)

Recent examples of FDI in the Greater Brighton area include Fintech business Paystrax UAB which is setting up a UK subsidiary and creating new jobs. Other examples are US-based Hi Rez Studios establishing a new mobile gaming development team and France’s Capgemini opening a new digital delivery hub for HMRC. 

London is the top city for investment attractiveness, with inner London leading the way with an index of 79.8 boosted by local skills, a large economically active population, many well-respected universities, and public transport infrastructure.

Oxford, another city in the South East, comes fifth on the investment attractiveness index whilst Greater Manchester is the top scoring city located outside of London and the South East.

Expert Opinion

“Inward FDI is widely considered to be a key factor in promoting the domestic economy, having the potential to raise productivity and facilitate the transfer of technology. Therefore, promoting the UK as a location for FDI can help promote growth.

"In order to attract more foreign direct investment, the UK Government must focus on providing quality infrastructure, offering businesses good access to credit, and supporting sustainable economic growth. This will create an attractive environment for international investors and help the UK become a global leader in FDI.”

“The latest figures also highlight the growing importance of the environmental sector as countries and businesses increasingly work towards a low carbon economy and environmental sustainability. Though these sectors clearly attract investment as sustainability becomes more important to international investors, all businesses which have clear ESG objectives are more likely to be attractive to investors.” Bryan Bletso, partner and director of strategic growth (international)

Josie Anderson, Managing Economist at Cebr, said: “Our league table of the most attractive UK cities to invest in saw London and the South East dominate, accounting for 10 of the top 25 spots. However, the North West also saw a number of high-performing cities, with Greater Manchester coming in sixth place, due to its strong growth potential. While the success of London and the South East in attracting investment is beneficial for the UK economy, a more even distribution across other regions would help drive economic growth across the country”.

The report concludes with three recommendations relevant at both a national and regional level to improve economic development and increase FDI into the UK.

Provide quality infrastructure - As shown by the investment attractiveness index, a city must have good infrastructure to be an attractive place for international investors to place their money. A good road, sea and air transport network is important for any business involved in goods trade. Services businesses also need to move their employees around, so connectivity is key for supporting FDI. The provision of good infrastructure also extends to robust digital infrastructure to attract investment from tech and digital companies.

Offer businesses good access to credit - A business-friendly financial system is key for attracting FDI. Good access to credit will help international businesses operating in the UK, as they will be also to borrow to invest and innovate as part of their project in the UK. Britain is home to a world leading financial services sector, and so supporting this sector will help all businesses and make the UK an attractive place to do business.

Support sustainable economic growth - Foreign investors will only be willing to accept risk in the UK is it is seen to have a sustainable economic environment in which businesses can prosper. If potential investors are concerned about a possible recession, they are likely to be less willing to engage in FDI in the UK. Therefore, it is important the Government pursues policies to support sustainable economic growth.

FDI refers to investments made by foreign investors in a company located in a different country. It can take the form of greenfield investments or Mergers & Acquisitions. In 2021, the UK's inward FDI position was £2,002 billion, slightly higher than the previous year's £1,919 billion.

The USA is the biggest source of FDI flowing into the UK. In 2021, the inward stock of FDI in the UK from United States was £676 billion, accounting for 34% of the total UK inward FDI stock.

The French investment position in the UK increased in 2021, to stand at £101 billion, up by £5 billion on 2020 levels. This puts it as the fourth largest country investor into the UK.

Irwin Mitchell provides full-service advice to overseas businesses and individuals looking to invest in the UK and has experts across jurisdictions including the US, France, India, Germany, Singapore, Israel, and China - all of which are mentioned as countries leading FDI into the UK.