More than 6,500 jobs were created in the Midlands by foreign investors during 2011 despite the number of investment projects falling, new data has shown.

According to Ernst & Young’s latest UK Attractiveness Survey there were 58 new foreign direct investment (FDI) projects in the region in 2011 compared to 91 the previous year, however the new projects created 6,738 jobs, almost 3,000 more than the number created in 2010.
 
In the West Midlands there were 38 projects and 2,919 new jobs created and the East Midlands saw 20 projects creating 3,819 new jobs. 

The majority of job creation across the Midlands came from the automotive sector with Jaguar Land Rover creating 1,750 new jobs in Solihull and Wolverhampton, Toyota creating 1,500 new jobs in Burnaston and Rolls Royce creating 800 new jobs in Derby.
 
Across the Midlands the sectors with the most investments were Machinery and Equipment (7), Software (6), Electrical (5) and Food (5). 

Commenting on the report, Sara Fowler, Ernst & Young’s senior partner for the Midlands, said: “While the Midlands followed the national trend of having fewer inward investment projects in 2011, it is encouraging to see a strong increase of job creation. 

“The economy is still creating a number of challenges but investors are continuing to take advantage of the skilled workforce we have here in the Midlands, particularly in manufacturing. 

“The region’s expertise in the automotive industry has shone through in this year’s report with some substantial investments creating thousands of new jobs for people in the Midlands.”

The UK remains Europe’s top destination for foreign direct investment (FDI) but will lose its crown to Germany within two years unless action is taken.

The report, which analyses inward investment and the attitudes of global investors, shows that the UK attracted 679 projects in 2011 creating nearly 30,000 jobs.

However, the UK’s suffered a 7% decline in overall projects, with financial services investment, a traditional source of FDI, dropping by 15%. In contrast, Germany’s share of overall inward investment rose by 15% – leaving it only 2% behind the UK. 

For the first time in 15 years Germany secured a higher share of manufacturing projects and overtook the UK in securing investment from Japan. Germany also swept up investment from the BRIC countries, winning twice as many FDI projects from Chinese businesses. 

The report demonstrates how dependent the UK is on a small number of countries, especially the United States, and sectors, such as financial services, for the majority of its projects. Germany’s growth illustrates the importance of two-way trade and strong domestic demand, in driving investor choice and shows how linked success in attracting inward investment is to wider economic performance. 

The 500 decision makers surveyed as part of the report called for greater focus on supporting R&D and innovation, developing education and skills, and improving attractiveness via incentives, taxation and attention to real estate and labour costs. 

Ernst & Young UK & Ireland managing partner Steve Varley said: “The ability to win investment has been a crucial source of pride, job-creation and growth over many years and is now more important than ever. These findings must act as a wakeup call to prevent the UK losing its lead in foreign direct investment. 

“The UK needs to keep existing FDI sources and investors happy, while also seeking out new markets and opportunities. The consistent theme coming through loud and clear from investors is that the UK needs to focus on three areas to increase its attractiveness: R&D and innovation, developing education and skills and creating a strong economic environment that balances demand, efficiency and incentives.” 

The main foreign investment into the UK comes from the US, followed by Germany and India. India is the bright spot among the BRICS – with the UK receiving by far the most investment from the country. The leading sectors for the UK were business services, software and machinery and equipment. 

Despite overall positivity about the UK as an investment destination, barriers to investment remained. Less than half of major investors cited labour costs as appealing. One in six said the cost and availability of real estate was unattractive, while only 53% found the UK’s corporate taxation appealing. 

The survey found that the UK’s most attractive qualities among foreign companies are its quality of life, culture and language, stable political environment and infrastructure. 86% of respondents are confident the UK will overcome its economic challenges – higher than for other European countries (81%) – excluding Germany. 

However, it said there were clear warning signs about the risks if the economy does not recover; the level of demand in the UK is the single most important factor driving investor decisions to locate in the UK. The importance of the UK as a gateway to export to other markets was also highlighted, an issue that may become more significant as the economic and political situation in the Eurozone and wider EU develops