In 2009/10 there were 84 inward investment successes in the West Midlands and another four knowledge-based investments. These investments created over 1,500 new jobs and safeguarded another 4,300.
Of these 88 successes, Advantage West Midlands were involved with just under half but this assistance helped create over 60% of the new jobs.
Some of these inward investments were high-profile including Kraft’s acquisition of Cadbury in Bournville, Birmingham affecting nearly 3,000 employees at their head office as well many more around the country.
Other investments in the news included the acquisition of Birmingham City Football Club by Far Eastern businessman Carson Yeung’s Grandtop International, the continued expansion of the ex-Longbridge car plant by SAIC of China where a new engine test facility is to be built and the taking on 50 skilled engineers by Indian Tata Group’s Jaguar Land Rover.
Some other notable inward investments included:
- Expansion of Japanese tool-maker Makita‘s manufacturing facility in Telford, which created 70 jobs
- Expansion of TK Maxx‘s distribution depot in Newcastle-under-Lyme, Staffordshire, which created 100 jobs
- FourStar from the Netherlands is to open a new UK headquarters in Birmingham employing over 250 people to provide employment and skills training to the unemployed
But it’s the opening of a new computer games design studio in Digbeth, Birmingham by Microsoft-owned Rare Games that’s hoped will give a boost to games design in the Midlands. 90 new games designers will be employed there.
Analysis of West Midland inward investment
Further analysis of the inward investment figures show that, with 88 investments, 2009/10 saw the fewest number of investments in the West Midlands since 2005/06 when investment numbers were still recovering from the falls in global investment since 2001. This highlights the fact that the global economic crisis began to seriously affect investment decisions.
In fact, global investment inflows fell by 37% in 2009 according to the World Investment Report 2010 (pdf, 13.9mb). Furthermore, it was not only project numbers that fell but job numbers too, with both new jobs and safeguarded jobs less than half the average figure for investments into the West Midlands since 1992.
Therefore it appears that, not only are overseas investors not investing in the same numbers as they have been, but the associated jobs are also reducing as any penetration into overseas markets is now being done with fewer employees or perhaps through a small sales office or shared service centre rather than build or take over a new facility outright. A lot of inward investment is now speculative with minimum exposure.
Which countries are investing?
The United States has traditionally been the largest investor into the West Midlands. A third of all investments into the West Midlands since 1991 have been from the US. Again, the US is the top investor but with just 13 out of the 88 investments (15%) this is the lowest proportion since our records began in 1991 (and which peaked at 50% in 1999).
The second highest investor was Germany with 10 investments (see the chart below), then France, Japan and Canada; all countries with a strong history of investing into the West Midlands.
More recently, we’ve seen an increase in investments from Australia and Sweden, partly as a result of increased Advantage West Midlands presence in these markets and partly as a result of representatives presenting attractive investment opportunities through the Bridge to Growth programme.
Other countries such as India have begun investing heavily in the West Midlands. From virtually no investment at all up to 2003, India is now the 9th highest investing country in the West Midlands since 1991. Also, with the acquisitions of Jaguar Land Rover and Corus Steel, it’s one of the largest employers in the West Midlands.
Is manufacturing investment dead?
If we look at what industries these investments are in we see that exactly half of the 88 inward investment were in manufacturing (see chart below). Over half of these were in two sectors—motor vehicle manufacturing and electrical equipment—showing that manufacturing appears to be thriving in terms of new projects.
However, associated job numbers are not quite as healthy.
Manufacturing, traditionally such an employment-intensive industry, only accounts for a third of new jobs being created whilst banking and finance accounts for over half.
In addition, if we look at the sector which has generated the highest number of investment projects, it’s ‘Computer and related activities’ with 18.
Furthermore, for jobs created we see that motor vehicle and electrical equipment manufacture created over 440 jobs. ‘Computer and related activities’ and ‘Other business activities’ created nearly 800.
Manufacturing is not dead, as the expansions at Remotec, Jaguar Land Rover, Makita and at places such as French-owned Areva in Stafford and SAIC’s MG Rover plant show. However, these are all high technology, high skill facilities and this is where investment in manufacturing in the West Midlands must be directed.
One further chart shows the move away from what is seen as the traditional heavy manufacturing tradition of the West Midlands. The following chart shows inward investment by activity — the type of business actually carried out at the investment location:
This shows that, despite half of all inward investment being in the manufacturing sector, only 16 of those 44 investments involved the manufacture of the product.
Other functions such as sales, servicing, headquarters and distribution are also strongly represented with sales being the dominant activity having 31 investments.
So, despite manufacturing appearing strong in the West Midlands, it’s the sales offices and associated servicing of manufactured products on the rise.
This has implications for manufacturing jobs. As can be seen, even excluding the 3,000 Cadbury employees, manufacturing is still relatively employment-intensive, whilst the associated jobs within sales and servicing sectors are considerably fewer.
The service industry is now, in terms of Gross Value Added (pdf, 721kb), contributing more to the West Midlands’ economy than manufacturing. Since 2005, investment in services has begun to match, and in some years exceed, investment in manufacturing. This trend is likely to continue.
So, in summary, very difficult global economic conditions reduced inward investment all over the world and falls in projects and jobs in the West Midlands reflect that.
However, 88 investments still represent a relatively strong performance in terms of investment into the UK regions (see chart below).
London and the South East will always be extremely attractive locations to invest and the total numbers of projects (527 into London and 145 into the South East) confirm this — but the West Midlands compares reasonably well with the other regions.
2010/11 will also be a difficult year for inward investment but, with the effects of the economic downturn starting to ease for some countries, there are opportunities. The West Midlands needs to be ready to show that it has the skills, the technology, the design expertise and the marketing ability to attract those companies here.