Scottish investment success should be celebrated amid gloom

It was heartening indeed to hear some very good news for Scotland’s two biggest cities on the foreign direct investment front this week.

The overall UK economic backdrop is undoubtedly dismal. It has been so for a long time and there is no end in sight.

Labour has undoubtedly inherited some major woes from the Conservatives when it comes to the economy and the public finances.

That said, the UK Government is unfortunately not making things any easier for itself by also embracing the key elements of the Conservatives’ hard Brexit.

While it has been good to hear friendlier tones from Sir Keir Starmer’s administration on Europe and see some positive moves at the margin, Labour’s red lines of refusing to rejoin the European Union, the single market or even the customs union represent a major barrier to UK growth.

Labour has been tinkering around the edges with trade deals that offer tiny benefits relative to what has been lost with Brexit.

It has also tried to come up with various other programmes aimed at boosting growth but it is all small potatoes.

And the mood music in the run-up to the UK Budget on November 26 has been far from uplifting.

Given this grim picture, research this week from law firms Wright, Johnston & Mackenzie (WJM) and Irwin Mitchell highlighting the attractiveness of Glasgow and Edinburgh to overseas investors, in a UK context, was all the more uplifting.

It was the latest of a raft of positive reports relating to inward investment in Scotland.

Edinburgh retained its position as the highest-placed UK city for attractiveness for foreign direct investment (FDI) outside London, which remains in top spot in the latest rankings for the third quarter of this year, the report from WJM and Irwin Mitchell showed.

Glasgow meanwhile climbed to seventh spot in the league table. It was in ninth position in the fourth quarter of last year, the period used by the law firms for the comparative rankings.

The cities study incorporates the latest analysis by the Centre for Economics and Business Research. It examines the attractiveness of 48 UK locations for FDI, based on 10 indicators. Cities are assessed in relation to three “pillars”: growth potential, skills and local infrastructure.

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Edinburgh recorded an overall score of 52 in the investment attractiveness index. While well adrift of the score of 76.7 achieved by London, it enabled Edinburgh to remain ahead of Oxford in third place, Birmingham in fourth, Greater Manchester in fifth and Cambridge in sixth spot.

Glasgow’s latest overall score of 44.9 represents an increase of 3.4 points from the fourth quarter of last year.

The breakdown of the assessment of Scotland’s two major cities was also encouraging.

Glasgow achieved a major gain in its growth potential score, while also making progress on infrastructure and skills.

Highlighting Glasgow’s growth potential in a UK context, WJM said: “This improvement is largely driven by a substantial 11.6-point gain in the growth potential pillar, where Glasgow now ranks seventh nationally. The report says that steady progress in both infrastructure and skills further reinforces the city’s reputation as a dynamic and adaptable destination for investment.”

Infrastructure was among the factors that enabled Edinburgh to retain second spot among UK cities for FDI attractiveness.

WJM noted Edinburgh “demonstrates consistent strength across all three pillars, particularly local infrastructure, where it rose 1.6 points to score 64.1”.

The law firm added: “Improvements in online connectivity and infrastructure also underpin Edinburgh’s success, while its skills base remains robust.”

Fraser Gillies, managing partner at WJM, was glowing in his assessment of the attractiveness of Glasgow and Edinburgh to international investors.

He said: “At Wright, Johnston & Mackenzie, we see first-hand the opportunities and potential that exist for international investors in both Edinburgh and Glasgow. Edinburgh’s robust infrastructure and highly skilled workforce, alongside Glasgow’s dynamic growth and improving infrastructure, make Scotland a standout destination for investment.

“With a continued focus on delivery, policy stability, and effective local governance, I am confident that both cities will remain at the forefront of global investment destinations for years to come.”

There is no doubt that Scotland has been enjoying great momentum on inward investment in these most difficult of times.

Accountancy firm EY’s FDI attractiveness surveys have consistently shown Scotland doing very well on this front.

According to EY’s figures, Scotland has been second only to London in terms of the number of FDI projects won in every year since 2015. Scotland was also second only to London in 2010 and 2012.

Prior to Scotland’s long run at the top, it was the south-east of England, excluding London, which tended to challenge for second place in the UK. It has been a while since that has been the situation. And hopefully Scotland will ensure that remains the case.

The comments from Mr Gillies about the attractiveness of Glasgow and Edinburgh to inward investors would appear to provide much room for optimism that Scotland will continue to, as EY’s Ally Scott put it in June, “punch above its weight”.

EY’s latest attractiveness survey in June showed Scotland increased its share of FDI projects in the UK again last year.

Scotland’s share of UK FDI projects was 15.8% in 2024, up from 14.4% in 2023 and well ahead of the average of 11.5% over the last decade. In 2022, Scotland’s share was 13.6%.

The EY research showed that Scotland secured 135 FDI projects last year. Although down by 4.9% on the all-time high annual number of 142 FDI projects won, in 2023, the figure for 2024 was the second-highest on record.

There is much to cheer on the inward investment front in Scotland.

The description by Mr Gillies of Scotland as a “standout destination” for investment seems entirely fair, given what it has to offer and the cold numbers highlighting the success enjoyed by the nation in attracting overseas companies.

While there is no shortage of people who for political reasons seem to delight in focusing on the negatives when it comes to Scotland, it is surely important to celebrate the many positives when it comes to FDI. Especially given that longstanding UK economic gloom which shows no sign of lifting.