Edinburgh named as UK’s most attractive city for inward investment

Edinburgh has been revealed as the UK’s most attractive city for inward investment, according to Arcadis. 

Topping the charts for economic performance, as well as being recognised for having a strong quality of ‘place’ and high proportion of skilled and educated workers, Edinburgh has a huge amount to recommend it to potential investors. However, London’s position in seventh place, behind smaller regional cities including Liverpool (fourth) and Coventry (fifth), highlights the challenges associated with sustaining the growth of some of the UK’s most established economic centres. 

The results are detailed in the latest Arcadis report, Investing in Britain: Cities Built for the Future. The study ranks 24 of the UK’s key cities based on their performance across six key pillars deemed crucial for future inward investment and growth potential. These are: business environment; workforce and skills; infrastructure performance; housing; place; and city brand. 

The report identifies three distinct groupings of cities, representing different economic profiles and subsequently a city’s ability to sustain its attractiveness to future investment. These are: Established Economic Centres; Future Growth Hubs; and Smaller Regional Cities. 

Although Edinburgh currently tops the rankings, as an Established Economic Centre it requires high levels of investment just to accommodate continuing growth. The biggest risk for Established Economic Centres is that they could fall back down the rankings if weaknesses around infrastructure and housing capacity - a direct result of population growth thanks to a city’s attractiveness - are not addressed.  As is the case with London, the positive agglomeration effect of talent and resources may not be sustained unless fundamental issues that impact on quality of life are addressed.

According to the report, the UK’s largest cities, including London, Manchester and Birmingham, all face particular challenges to sustain their long-term attraction as magnets for investment.  The sheer volume of work needed in housing and transport infrastructure to sustain these big cities, sharing the benefits of economic success and ensuring long-term investability, is a major challenge for devolved government.

Edinburgh needs to ensure that the speed of its economic growth doesn’t surpass its ability to invest in housing and infrastructure, say Arcadis. Yet, while it benefits from having strong business fundamentals already in place, some additional improvements - including more affordable housing and an environment that fosters invention and the creation of patents - could mean that its strength as a magnet for investment rivals that of any other city worldwide. 

Future Growth Hubs like the Northern Powerhouse and West Midlands face different pressures on housing and infrastructure. Compared to London, for example, these cities benefit from a more balanced housing market, healthy business environment with a sustainable pace of growth, and often a better quality of life.  For large, successful cities like Manchester and Birmingham, a lack of skills could be the biggest barrier preventing them from realising their full future potential as an investment destination. 

Smaller regional cities need to consider different levers for attracting investment, building on their specific strengths and opportunities - including better access to schools and hospitals, cheaper housing and a better quality of life. For many cities, the report says, raising profile and brand presents a further opportunity to build on existing strengths to increase investment potential. Recognition can come from regeneration, innovation, sporting success or even the idea that a city is a great place to live, the report says.

Peter Hogg, UK cities director at Arcadis, said: “All cities have strengths and weaknesses, and no area is fundamentally ‘un-investable’. Every region needs to look at what it has, and how it can make the most of it. Most importantly though, the governance of a city needs to be structured in a way that makes investment easier and more welcome. We need to see a more joined-up approach between regions. This will ensure that investment opportunities are focused on the right locations, helping to accelerate growth potential and ultimately realise new sources of competitive advantage.” 

The top 15 most investable cities in the UK, and three of the key levers they will need to pull to increase their attractiveness to investment, are listed below.