In 1984, the most totemic inward investment of recent times was announced in the UK with the unveiling of Nissan’s plans in Sunderland. The factory, still in place today, has secured many follow-on rounds of investment and helped to create a new regional supply chain. Inward investment was not a new phenomenon – Ford opened its first UK production facility in Trafford Park, Manchester, in 1911. The 1980s propelled inward investment to the poster child of economic development.
The UK was the pre-eminent European location for foreign-owned inward investment from the mid-1980s until 2019. Its agency-led approach was emulated by regions worldwide.
Investment flows and types have changed, and the UK has all but dismantled its original approach, but the fundamentals of investment attraction remain and offer much for the new devolved landscape of the UK.
Why do businesses invest in new locations?
The classic model for foreign investment into the UK was to manufacture within Europe. A product modified for European tastes, located within the EU tariff area, and additionally benefiting from lower transport costs, was an oft-repeated template for success.
By the time of the large EU expansion of 2004, however, manufacturing investment was already selecting investment locations across a wider European geography. By now, Western European economies were securing high-value service sector-led investments, not only focused on market access but also on access to skilled labour markets.
In the new environment of the mid-2020s, mobile international investment may seek market access, talent, research, supply chain links, logistics or service optimisation, or equity investment opportunities. Throw in renewed focus on protectionism and supply chain security, and the landscape could change again.
The issue is for regions to understand these dynamics and develop proposals that meet the requirements of those businesses. We do well to remember that investment promotion activity rarely makes the market; it reacts to it.
How do we get selected?
A strategy to secure investment is more closely aligned to a strategic marketing approach than to economic development.
Regions need to set out how they can address the business's fundamental requirements, using economic data to support their proposition. Can evidence be assembled to demonstrate that the business can successfully undertake its activities in the area?
Highly detailed segmentation based on the precise specialism of an area is unlikely to yield a substantial number of investment opportunities. Similarly, investment strategies which create a wish list of sectors for future investment without offering any points of differentiation which would help a business are unlikely to attract interest.
The sweet spot is to identify growth areas for investment where the region can make a strong claim to be a competitive contender.
Gaining Attention
Investment is not secured without securing a position on the long list. Major capital city regions are fortunate and may even gain attention without a strong claim for inclusion. The remaining potential contenders will need to invest in the hard yards – clever strategies to secure attention through established contacts, trade press, events, conferences and exhibitions – and increasingly thought leadership through social media and other new media channels.
MIPIM and UKREIIF are popular – but is this where your target audience will be attentive? Can you cut through the noise in such a crowded space?
I knew the investment manager who established the connections between Japan and NE England, which helped initiate ties with Nissan and others. What was the key to success? Early mornings to align time zones, lots of telephone conversations and perseverance. Times have changed, but there are no shortcuts to building a strong connection.
Cementing the Opportunity
Of course, most of the work needs to be undertaken once the initial connection has been made. This is a point which often seems contradictory to the scale and effort put into websites, branding, initial propositions and attendance at different events.
Securing large-scale mobile investment is a highly competitive sport. Companies may request extensive comparative research and information on the location; they may also seek to meet a series of potentially interesting partners who may support their business once a decision has been made. The serious contenders will also provide additional information, which, whilst not specifically requested, is believed to be useful for investment decision-making, and supporting the location providing the material.
When Boeing was seeking a new corporate HQ in the early 2000s, the pitches from competing cities were likened to securing the Olympic Games. Clearly, few investment decisions mirror this in terms of scale, but securing investment is likely to take tens of days of effort, and of course, success is not guaranteed. There are rarely any prizes for those who do not secure first place.
Don’t snatch defeat from the jaws of victory
Investment is never secured until the lease or contract is signed. Investment agencies need to deliver everything promised, and they are also well advised to stay close to the business and address any additional needs as investment approval travels through different layers of the business.
Even once the business has arrived, the positive outcomes aimed for during the decision-making process are likely to be achieved only if the investment performs well. Ongoing support will help deliver the outcomes, and failure at this point would be extremely costly.
Transformative but not for the faint-hearted
Securing new businesses (or capital flows) in an area can provide new investment and jobs, which can help sustain a local economy for years to come. Many regions have been transformed by successful investment attraction. Success, however, relies on capacity, research capability and business development work to a much greater extent than the initial work on sector strengths and branding. In fact work on sector strengths and branding is largely a redundant exercise if the remaining support activities are not put in place.
Inward investment promotion may be one of those areas of economic development where strategy does suggest ‘go big or go home’.
Mickledore is an economic advisory business focused on strategy, sectors and investment, business cases and evaluation. If you would like to discuss any element of your investment strategy we would be pleased to hear from you at nwilcock@regionaldevelopment.co.uk