Latest Analysis Signals Need To Seize Investment Zone And Freeport Opportunities

Specialist business lawyers at Irwin Mitchell are calling on the government to continue its support for Investment Zones and freeports following new figures which reveal that interest in businesses in the East Midlands from overseas corporate investors has stalled.

The law firm has analysed industry data and says although the UK continues to drive significant interest from foreign buyers, the number of UK firms in the East Midlands which were targeted in an overseas deal, such as an acquisition or management buyout, fell to 27 last year compared to 34 in 2022.

The research says foreign investment in the UK is increasingly concentrated in London and the South East, with these areas accounting for 42% of deals in 2023, up from 35% in 2019.

Bryan Bletso, partner at Irwin Mitchell and a specialist in advising overseas businesses that are looking to invest in the UK, said:

“Despite the dynamic nature of global investment patterns, this data underscores the enduring economic significance of London and the South East in attracting international business interest. Our research does however also highlight that investment activity in this traditional FDI hotbed is increasing whilst in other regions, such as the East Midlands, deal activity has been rising steadily over the last five years but reduced in the most recent 12 months.”

Foreign Direct Investment (FDI) refers to an investment in an enterprise operating in a foreign economy, where the purpose is to have an ‘effective voice’ in the management of the organisation. According to the latest ONS data, FDI into the UK has increased year-on-year for a decade to stand at over £2 trillion by 2021.

Last November, Conservative peer Lord Harrington published a report which called for a change of approach by the government in terms of attracting FDI. The report made several recommendations and the governmentaccepted in its response that it needed to work more collaboratively with local government and public and private stakeholders.

The UK Government also say that Freeports and Investment Zones are a part of their FDI strategy.

Announced in 2023, Freeports are designed to boost economic activity and the ‘levelling up’ agenda by fostering trade, investment, and job creation around maritime ports and airports. Companies operating within freeports can enjoy reduced property taxes and national insurance rates. The East Midlands Freeport was announced in 2021 and features three main sites: the East Midlands Airport and Gateway Industrial Cluster (EMAGIC) in North West Leicestershire, the Ratcliffe-on-Soar Power Station site in Rushcliffe in Nottinghamshire and the East Midlands Intermodal Park (EMIP) in South Derbyshire.

The government is committed to establishing 13 Investment Zones across the UK, including one in the East Midlands. The expectation is that many of the zones and tax sites within them will go live in Spring 2024 but so far Liverpool is the only one to have officially done this, announcing details of its proposition at MIPIM.

Bletso added: “Government initiatives such as freeports and investment zones could be a gamechanger for providing favourable conditions for businesses based in the East Midlands, attracting more interest and investment in the UK from abroad, and levelling up the economy.

“Making the UK the top investment destination in Europe, attracting new investment into communities and helping to level-up the country, is one of five key priorities for the Department of Business & Trade. Providing tailored support for each investment zone and promoting our offering in this area on an international stage is a crucial part of this.”

Irwin Mitchell published a report last summer which examined the most attractive locations in the UK for FDI. Inner London secured top spot due to its local skills, large economically active population, and many well-respected universities.

In the report’s ‘FDI Attractiveness’ league table, Derby came 27^th, ahead of Leicester in 32^nd place and Nottingham which came 36^th.

About the research

Irwin Mitchell analysed deals recorded on Experian’s MarketIQ database. The type of deals were Acquisitions, Development Capital, Employee Buy-Ins, Employee Buy-Outs, Investor Buy-Ins, Investor Buy-Outs, Leveraged Buy-Outs, Management Buy-Ins, Management Buy-In / Buy-Out, Management Buy-Outs, Mergers, Public to Private, Reverse Takeovers, Secondary Buy-Outs, and Startup Fund Raising.

About East Midlands Investment Zone

East Midlands’ Investment Zone will focus on Advanced Manufacturing and Green Industries, with anchor investment from Rolls Royce and Laing O’Rourke worth £9.3 million. The Investment Zone will bring benefits to communities and businesses across the East Midlands including those in Nottinghamshire, Derby and Derbyshire and is expected to help leverage £323 million in private investment and help create 4,200 new jobs over the next 10 years.