Freeports And Investment Zones Becoming Increasingly Influential And Could Tackle FDI Imbalance

The UK’s largest towns and cities are more attractive to Foreign Direct Investment (FDI) compared to three months ago - despite the current economic challenges and downgraded GVA forecasts for most locations, says a new report.

The latest Irwin Mitchell and Centre for Economics and Business Research (Cebr) study examines the attractiveness of 50 locations based on 10 economic indicators.

Inner London, with its strong growth potential and large, economically active, highly qualified population, is in first place for FDI attractiveness with an improved score of 78.6.

There was a noticeable improvement in the fortunes of cities in the Midlands, the North of England, and Scotland. The study found that these locations not only had a good showing in the top 10, but they accounted for almost 80% of the 24 locations which saw a quarterly increase in their ranking.

The results also point to government initiatives, such as Freeports and Investment Zones, becoming more influential and having the potential to address the current imbalance between the north and south.

Biggest Risers

Aberdeen, Cardiff, Liverpool, and Newcastle emerged as the biggest risers in the latest quarterly report. The study says that these locations are notably benefiting from their relative distances from a Freeport or an Investment zone, with all four cities likely to enjoy this advantageous status.

Biggest Fallers

Conversely, the report identifies several cities that have experienced significant declines. Milton Keynes saw a substantial drop in its investment attractiveness ranking, falling 18 places to 39th overall, following a seven-place drop in the previous version of the report. Peterborough, Swindon, Brighton, and Reading also ranked among the top five largest fallers.

The report adds that a common factor among these cities is a marked deterioration in their growth potential rankings, adding that the relative distance from the nearest freeport and investment zone has the potential to substantially weaken their potential for future growth. Furthermore, Swindon, Milton Keynes, Peterborough, and Brighton all suffered double-digit drops in their GVA forecast scores.

Expert Opinion

“Despite the economy facing numerous challenges and setbacks, the level of foreign direct investment into the UK remains strong. Our latest report provides valuable insights into the factors driving investment decisions and highlights the importance of strategic locations such as Freeports and Investment Zones.

“The Department for Business & Trade’s latest statistics revealed London accounted for a third of all UK FDI projects in the 12 months to April 2024. The findings in our report which highlight the growing influence of Freeports and Investment Zones should therefore be considered by policymakers and businesses looking to attract and retain investment in the UK.”
Bryan Bletso, Partner and Head of International at Irwin Mitchell

Freeports are designated areas, typically located at seaports or airports, where normal customs and tax rules do not apply. These zones offer various incentives such as tax reliefs, simplified customs procedures, and reduced tariffs to encourage economic activity, trade, and investment. The aim is to create hubs of innovation and economic growth by attracting businesses that benefit from these regulatory advantages.

Pushpin Singh, Senior Economist at Cebr, said:

“Our findings underscore the transformative potential of Freeports and Investment Zones in reshaping the UK’s investment landscape. Cities like Aberdeen, Liverpool, and Newcastle are emerging as significant beneficiaries, demonstrating how targeted infrastructure and skills development could potentially create hubs of economic opportunity.”

The Office for National Statistics recently published the latest FDI statistics, revealing that the value of the UK’s inward FDI position increased by £126.8 billion, reaching £2,068 billion.

According to the latest statistics from the Department for Business and Trade, 1,555 projects landed in the UK during the 2023/24 financial year because of FDI, resulting in 71,478 new jobs being created

London attracted 503 FDI projects which created 23,541 jobs. This compares to the North East (4,296 jobs), North West (5,097 jobs) and Yorkshire (3,732 jobs). Highlighting the dominance of London, the capital is attracting approximately the same number of FDI projects as the combined number for the North West, North East, Yorkshire, and the Midlands.