FDI: Attractiveness ofthe Midlands

Moderator: Courtney Fingar

Courtney FingarfDi Magazine

FDI: Attractiveness of the Midlands

West Midlands Economic Forum20 June 2014, Coventry

WEST MIDLANDS AS AN INVESTMENT DESTINATION

Courtney Fingar

The global environment: tough times for FDI?

• Economic uncertainty led to investor caution and resultant decline in FDI flows. Last year fDi reported the second biggest decline in FDI since the recession.

• Lower-risk, lower-cost globalisation strategies pursued by companies post-recession: JVs, alliances, partnerships. Difficulty for IPAs not equipped to promote or facilitate these types of investments (more matchmaking)

• Expansions became a more important part of FDI: nearly 1 in 5 projects is expansion of an existing facility rather than investment in a new site. This makes investor aftercare essential to FDI success.

• Increasing focus on SMEs, start-ups and entrepreneurs

But… green shoots of recovery now being seen • Greenfield FDI back in bloom in 2013 with a 10.94% annual growth – although growth was unevenly distributed across regions of the world.

• Latin America and the Caribbean was the best performing area, with a doubling of FDI. Middle East +44%; Africa: +11%

• Declines: North America; Asia-Pacific; Europe (-12%). FDI in China and the US fell slightly as it did in most of the major economies.

• Growth was mainly in small and mid-sized emerging and frontier markets.

• An indicator world economic recovery: FDI in the hotels and tourism sector up by 36.3% in 2013, FDI in building and construction materials by 88.39%.

Source: The fDi Report 2014 (www.fdiintelligence.com/fdireport)

Motives

Companies are bullish on

economic growth, and our studies

on investor motives show

this is of top importance in their

search for locations.

FDI is primarily market-seeking

with nearly ½ of

projects driven by domestic

market growth potential and

1/3 by proximity to markets

and customers.

Source: The fDi Report 2014 (www.fdiintelligence.com/fdireport)

Europe

Capex down 12%,

to $137.26bn

UK’s market share

declined slightly

But has a big lead

Top 10 countries

account for 73%

Turkey is a fast mover,

now at #4

East MidlandsYorkshire and Humberside

North EastEast AngliaSouth West

WalesNorthern Ireland

West MidlandsNorth West

ScotlandSouth East

Greater London

0 500 1000 1500 2000 2500 3000

238

239

242

265

266

272

297

385

498

697

876

2533

No. of FDI projects

West Midlands accounts for 6% of UK regional FDI

Source: fDi Markets, January 2003 - May 2012 (www.fdimarkets.com)

West Midlands top FDI sectors

Sector No. ProjectsAvg Capex

(£m)Avg Jobs Companies

Industrial machinery,equipment and tools 40 4 37 36

Software and IT services 30 7 63 27Financial services 29 20 28 22Transportation 23 44 121 23Automotive OEM 19 63 216 12Automotive components 17 8 95 16Business services 17 7 68 17Hotels and tourism 15 51 99 8Electronic components 15 5 22 13Plastics 14 11 41 13

Source: fDi Markets, January 2003 - May 2012 (www.fdimarkets.com)

West Midlands investor motivesRank Motive % of total citations UK comparison Global comparison

1Proximity to markets or customers 25%

23% 29%

2Domestic market growth potential 19%

19% 22%

3 Infrastructure and logistics 14% 7% 6%

4Industry cluster/critical mass 9%

7% 5%

5 IPA or gov’t support 8% 8% 3%

6 Skilled workforce availability 6% 15% 10%

7Regulations or business climate 5%

5% 8%

8 Facilities site or real estate 4% 2% -

9 Lower costs 3% - -

10Presence of suppliers or JV partners 2% - -

- Other Motive 5% - -

Source: fDi Markets, Sample of 78 greenfield FDI projects citing 113 motives (www.fdimarkets.com)

Automotive OEM manufacturing plant: Quality/Cost matrix

Source: fDi Benchmark (www.fdibenchmark.com)

Looking ahead

fDi Intelligence predicts the

recovery in FDI to accelerate

in 2014 and flows to continue

to grow over the next five years.

We expect particularly strong

growth of FDi into the UK

as economic growth takes hold.

Source: The fDi Report 2014 (www.fdiintelligence.com/fdireport)

For more information please feel free to contact me:

Courtney FingarEditor-in-chief, fDi Magazine

Head of Content, fDi IntelligenceThe Financial Times Ltd

Tel: (+44)(0)20 7775 6365

Email: Courtney.Fingar@FT.comWeb: www.fdiintelligence.com

Twitter: @CourtneyFingar

To download a copy of The fDi Report 2014, visit www.fdiintelligence.com/fdireport)

Wayne LangfordInvest Black Country

FDI: Attractiveness of the Midlands