City Improves Local Skills And Infrastructure Scores But Economic Growth Potential Falls

Birmingham has retained its position in the top 10 UK cities for foreign direct investment (FDI) attractiveness, according to a new study published today.

Produced by law firm Irwin Mitchell, the Investment Attractiveness Index has been compiled by a team of experts at the Centre for Economics and Business Research (Cebr), who have analysed the UK’s 50 largest cities according to eight indicators related to Growth Potential, Local Infrastructure, and Local Skills.*

The report says Birmingham remained in 7th place although its overall attractiveness score is 7.6 points lower than the previous year. This reduction in the overall score was in line with all but one of the other 50 cities analysed and mainly due to a falling Growth Potential score caused by lower predicted GVA growth in 2024 compared to 2023.

Despite this, Irwin Mitchell’s report says Birmingham is performing well in other areas related to attracting overseas investment. In the case of Birmingham, its improved online connectivity boosted its Local Infrastructure score whilst the city is also doing well in the Local Skills pillar - ranking 5th in terms of the number of economically active people, and the number of universities

There is a mixed picture for other West Midlands’ cities. Coventry’s relatively better growth potential and new business creation contribute to its rise by 18 places. Resultantly, it stands out as the only city with an improved overall Investment Attractiveness score.

Wolverhampton and Solihull are not performing as well with both cities falling in terms of rank, to 40th and 31st, respectively.

Bryan Bletso, partner and Head of International at Irwin Mitchell said: The results in our report point to challenging conditions and mirror the sentiment amongst both businesses in the West Midlands and overseas investors we are speaking to.

“Although the widespread fall in forecasted GVA growth is impacting overall FDI attractiveness scores, the improvements in local skills and infrastructure will pay dividends longer term.

“The new Government has said that it will be taking immediate action to fix the foundations of the economy and according to our findings, this is going to be crucial if the UK is to enhance its attractiveness to foreign investment. There are promising signs already with the Chancellor announcing the creation of a £7.3 billion National Wealth Fund to catalyse private sector investment.

“The recent King’s Speech, and the proposed introduction of an English Devolution Bill, is vital also for the creation of a modern, dynamic economy that is attractive to foreign investors. We certainly welcome legislation that will give new powers to metro mayors and combined authorities.”

Pushpin Singh, Senior Economist at Cebr, said: “With FDI remaining crucial for economic growth, driving innovation and creating jobs, local and national governments should work together to make improving attractiveness to investment a key priority over the coming years.”

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.

EY’s 2024 UK Attractiveness Survey recently revealed that the West Midlands was Europe’s seventh best performing region for FDI, securing 127 projects in 2023, 72% higher than in 2022.