The value of foreign direct investment into the north of England has risen by almost three-quarters in the past five years while falling in every other part of the UK, including London.
Analysis of market data and government statistics carried out by the Northern Powerhouse Partnership lobby group — whose economists include former Treasury minister Lord Jim O’Neill — also shows that the north has increased its share of the UK’s FDI projects from 19 per cent to 33 per cent over the same period, overtaking London. The number of jobs created in the north rose by 18 per cent.
O’Neill, who spearheaded the “Northern Powerhouse” push to boost the region’s economy between 2015 and 2016 when George Osborne was chancellor, said the rise represented the only “notable success” to have emerged from the project.
He added that the rest of the agenda had “dwindled” under the Tory administrations that followed. During Osborne’s chancellorship the north was marketed heavily to overseas investors, particularly in Asia.
The latest analysis, which combined data from fDi Markets, part of the Financial Times group, with those from the Office for National Statistics and the Department of International Trade, shows FDI rising by 72 per cent — from $25.257bn to $43.683bn — across the North West, North East and Yorkshire and the Humber during the years 2017-2021, compared with the previous five year period.
In Greater London and the South East it fell by 14 per cent, from $56.26bn to $48.524bn. FDI also fell in all other regions, with Scotland recording the largest drop, at 23 per cent.
O’Neill highlighted that Asian investment into the north had risen by 7 per cent while it had “plummeted” by 56 per cent across the rest of the UK.
“I often felt that the Northern Powerhouse concept was better understood by investors in Asia than it was among politicians and financiers in London,” he added.
The agenda was designed to capitalise on the potential of northern cities, and to provide a counterweight to London in an economy with some of the greatest regional disparities of any major western country.
The project fell out of favour with Tory governments that followed the Brexit referendum in 2016. But the NPP report argues that the new prime minister Liz Truss’s goal of hitting 2.5 per cent economic growth will require “higher productivity overall — which means closing the north-south divide”, including through FDI.
FDI into some sectors nevertheless dropped sharply in the north during the five-year period, including into coal, oil and gas, industrial equipment and automotive components, all once regional strengths. These falls were offset by much larger increases of foreign investment into electrical components, where the value rose ninefold, followed by biotech.
That was particularly the case in Osborne’s own seat in Cheshire, near Greater Manchester, where the departure of AstraZeneca for Cambridge in 2014 had caused concern.
But Jessica Bowles, director of strategy at property company Bruntwood, part of the public-private Manchester Science Park partnership that now owns AstraZeneca’s former base at Alderley Park, said there had since been a surge in FDI.
“I think what we’ve done really well over the last five to eight years is be really clear about where our specialisms are — so a biotech and life sciences focus and an understanding of our strengths across the north,” she said.
“I would like to see it capitalised upon. I think understanding of this success is patchy across government.”
International trade secretary Kemi Badenoch said overseas investment had created more than 50,000 jobs across the north in the past five years, describing it as “great news” that would be capitalised upon through the government’s tax-cutting agenda, which was designed to “allow businesses to invest more of their profits and boost our attractiveness to overseas investors”.