Cardiff and Swansea are lagging behind the rest of the UK when it comes to attracting foreign investment, a new economic study has found. The study, published by the Centre for Economics and Business Research (Cebr) and law firm Irwin Mitchell, assesses the 50 largest cities in the UK and ranks them on their ability to attract foreign direct investment (FDI).
These are investments made by overseas investors in a company located in a different country and can take the form of greenfield investments or mergers and acquisitions.
The UK economy has attracted £2,000 billion in FDI, which generates jobs and boosts productivity, competitiveness, and innovation. The USA is the biggest source of FDI flowing into the UK reaching £676bn in 2021.
Read more: Marine energy sector in Wales reports 'record-breaking' year for investment
However the study, which scores cities on their growth potential, local skills and local infrastructure, showed that both Welsh cities fell short of being good places to do business for FDI.
Growth potential is marked on a city’s GVA forecast and the number of new enterprises per 10,000 people. Local infrastructure on a city’s online connectivity, major road length (relative to the population) and public transport use.
Local skills are scored on the share of the population with a qualification at NVQ4 level or above, the number of economically active people in the city, and the number of universities in the city.
Cardiff’s overall index score for investment attractiveness was 30.5, ranking 27 out of 50 and placing it in the mid-range among cities like Derby, Portsmouth, and Liverpool.
Cardiff’s strongest feature was its growth potential with a score of 35.5 comparable with Edinburgh. However, the study found the Welsh capital fell short in terms of local skills and local infrastructure.
Slow economic growth in Swansea saw the city ranked in last position with an index score of 14.3 and scoring 6.4 for its growth potential, the second lowest of all the UK’s largest cities, only ahead of Aberdeen.
The report recommends three ways to boost economic development and foreign direct investment in UK cities both at a national and regional level.
These include providing quality infrastructure for transport and digital connectivity, ensuring businesses have good access to credit through a supportive financial system, and promoting sustainable economic growth to create a stable environment that attracts foreign investors.
The top three locations for investment were Inner London, London and Outer London. Brighton was ranked fourth in the study followed by Oxford, Greater Manchester, Birmingham and Edinburgh. Reading was ninth and Cambridge in tenth place.
Managing economist at Cebr Josie Anderson 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.
“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.”
Bryan Bletso, director of strategic growth for Irwin Mitchell’s international team, said: “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.”
He added: “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.”
