The results are reasonably encouraging. Investors remain convinced of the UK’s resilience and future potential with 25% planning to invest over the coming year, a strong result by historical standards albeit down from 31% in the summer survey. But the FDI market will be smaller than in the past for some time and investors expect Europe to be a strong competitor to the UK.
Our survey results are unequivocal: COVID-19 has changed the economic landscape forever, and there is no going back. At the sector level, investor interest in digital technology and health and well-being has soared, while the attractiveness of cleantech has grown significantly across Europe, as changed lifestyles during the pandemic have increased awareness of climate and sustainability issues.
The crisis has accelerated pre-existing trends with two-thirds of our survey respondents indicating they are working to reshape their supply chains. Regionalization, reducing dependence on one source of supply, and nearshoring are all driving this shift. Most interestingly for the UK, 32% of manufacturers indicated they are likely to reshore activities to the UK — a significant increase compared to our previous research, creating a potentially unique opportunity to generate new economic activity outside of the UK’s major cities.
The UK must move quickly to articulate its vision for the future economy, especially around the shift to net zero and the infrastructure investment plan. Investors are willing to make significant long-term commitments to the UK but require a clear, long-term policy framework to assist their decision-making and risk assessment.
Investors also provided a clear steer on the policies that they will be looking for to support their future investments. The ability of a country to withstand future shocks, its cost competitiveness and the quality of its infrastructure were afforded the highest priority. The signs are that investors will generally be more demanding in future. Unlike in previous surveys, a much larger range of policy options were identified as important by investors. A joined-up offer across the whole of government will be required to provide the comprehensive package investors are seeking.
Notwithstanding the current challenges, the good news is that the UK has the opportunity to build on its proven strengths to exploit the opportunities that will arise as the world emerges from the pandemic. In this report, we suggest a set of policy steps to help to achieve this, as the UK develops its new post-EU economic identity. We at EY look forward to supporting and participating in that renewal.
