Labour concerned by drop in region's inward investment

A new report showing a drop in inward investment in the North East from foreign companies has attracted concern from the Labour party.

The report, by Ernst & Young found in 2012 there was a drop of investment going to the English regions with now just 24% of inward investment going to the regions, well behind the level invested in London.

The measure used to illustrate foreign investors impressions of the regions showed a large drop in how the North East was perceived as a place to invest in.

Julie Elliott, Labour MP for Sunderland Central said: “This demonstrates again how wrong the Tory-led government were to close Regional Development Agencies like One North East.

“One North East was providing an effective voice for the region internationally and was able to give the confidence and support needed to foreign companies who were interested in coming to the region.

“We know from Nissan, how important foreign direct investment is for the future of our local economy.

“These alarming figures show that the government’s new strategy for inward investment isn’t working for the North East.

“The solution to this problem lies in giving the region the power and it needs to address this issue.

“The government needs to think again quite urgently, respond to the NEvolution campaign and give the region the real decision-making responsibilities and resources it needs to grow.”

The report also found that last year 45% of the total amount for the UK was being attracted into London.

Investors’ perceptions of regions as attractive places to establish operations have fallen, with ratings for the North East dropping from 10% to 2%.

Figures for the East Midlands also dropped from 9% to 2%, northwest from 9% to 4%, and Yorkshire from 4% to 1%.

Shadow Minister for Regional Growth Gordon Marsden MP said: “With our economy flat-lining we urgently need action to boost jobs and growth.

“This new research underlines the government’s failure to get growth going across the regions and rebalance the economy.

“Ministers abolished the Regional Development Agencies in a chaotic way without putting in place a proper replacement and have failed to give Local Enterprise Partnerships the support and powers they need to drive local growth.

“The Tory-led government’s flagship policy, the Regional Growth Fund, has been mired in delay and confusion as winners have been left waiting – in some cases for more than a year – for their money.

“Labour has consistently pressed ministers to properly empower LEPs, and we are currently consulting businesses across the country on plans for regional and local banks to help small firms get the finance they need.”

Responsiblity for regional inward investment was handed to the UKTI after RDAs were replaced by local enterprise partnerships.

UKTI agreed a three-year contract in 2011 with PA Consulting Group, in partnership with the British Chambers of Commerce and OCO Consulting, to support inward investors.

Mark Gregory, Ernst & Young’s chief economist, said: “The findings on the declining performance of the English regions outside London – especially in attracting new projects – raise further doubts over the UK’s ability to retain its lead in European FDI.”

He said the abolition of the RDAs “may be starting to undermine not only the regions in which they operated, but also the UK’s ability to sustain its overall leading position for inward investment.”

“The rejuvenation of the English regions will require more focus and success in attracting investment from sectors such as manufacturing and engineering than is currently the case.

“The weakness of the English regions could damage the UK’s overall ability to attract FDI, in comparison with countries such as France and Germany, which have much more balanced regional portfolios.”