The recent survey by Ernst & Young of the UK's attractiveness to foreign investment showed a 2.7% rise in foreign-backed UK projects.
This came in the face of an overall decline in investment across Europe. Measures such as the 'patent box', offering a lower tax rate on some intellectual property, seem to have helped to improve the UK's overall attractiveness.
London (which has kept its development agency) remained the regional investment powerhouse in the UK, attracting 45% of the UK's total projects. This was equivalent in scale to the fourth largest European country. The devolved administrations of Scotland, Wales and Northern Ireland also saw strong increases.
However the English regions outside of London, now represented by Local Enterprise Partnerships following the scrapping of Regional Development Agencies (RDAs), mostly saw significant declines in foreign investment projects, taking their aggregate number of projects in 2012 down to a level almost a quarter lower than that in 2010. The West Midlands was, however, one region that bucked the trend but even here the region didn't see an increase in projects as against 2010.
And when reinvestments in existing projects were stripped out, the disappointing regional position on new inward investment projects came out even more strongly.
The report notes that in 2012, the English regions as a whole outside of London secured their smallest total of new investment projects on record, at just 122 projects. And comparing that 2012 figure with 2009 (the final year before the scrapping of RDAs was announced), then new projects secured by the English regions had declined by 40%.
And it was interesting that perceptions of the English regions among investors in 2012 had declined markedly; ratings for North-East England dropped from 10% to 2%; East Midlands from 9% to 2%; the North-West of England from 9% to 4%; and Yorkshire from 4% to 1%.
Not surprisingly, the report notes that " 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. "
And perhaps most strikingly, it notes that " it appears that 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 ".
It goes on to stress that " the weakness of the English regions could damage the UK's overall ability to attract FDI, in comparison to countries such as France and Germany, which have much more balanced regional portfolios ."
Not of this should come as a surprise as the risks involved in simultaneously recentralising and fragmenting much of what RDAs did is something I've been banging on about for some time.
One of the supposed reasons for scrapping RDAs by the coalition government was the alleged inter-RDA competition for foreign investment which was deemed wasteful by the government.
That was anyway a misplaced criticism in reality. Firstly active RDAs promoting their regions could actually have increased size of the foreign investment 'pie' for England as a whole. Secondly there were some good examples of inter-RDA cooperation in marketing to foreign investors, such as that between the West and East Midlands' RDAs.
After the scrapping of RDAs, inward investment responsibility was centralised in Whitehall to save money, with responsibility handed to UK Trade and Investment (UKTI) in London. UKTI subsequently contracted out delivery on inward investment in 2011 to the PA Consulting Group, the British Chambers of Commerce and OCO Consulting. It was only after a protracted scrap that the newly formed LEPs were let back into the game.
But the new system is confusing, as our recent research (with Dr Lisa De Propris at Birmingham Business School) on the EU Interreg funded NICER* project has indicated. We found that post RDAs, there is a low budget for inward foreign direct investment, and a narrow local policy mandate. In theory at least the role of LEPs is supposedly only to support UKTI and help with local issues such as site location. And in some smaller and rural LEPs there is a lack of expertise and proficiency in foreign investment matters.
Furthermore, our research found in some places a degree of parochialism, with some LEPs pursuing narrow local interests, with low and short-term ambitions, and a degree of duplication and inter-LEP competition. Different LEPs sometimes target similar industries (e.g. the automotive industry) and even seem to be trying to attract firms from other locations within the UK rather than just from abroad.
Under this post-RDA system, there is meant to be a centralised national foreign direct investment (FDI) 'pipeline', under which all enquiries regarding inward investment are forwarded to the FDI 'Hub' in London which then places the inquiry in the single national FDI pipeline.
The reality is that this doesn't happen on a significant scale - after all why should LEPs pass on their prospects if UKTI might then decide to place that enquiry with another LEP rather than them? And given that the 'pipeline' itself anyway doesn't account for a very significant share of some LEPs' investment projects, it is seen by some LEPs at least as pretty irrelevant.
What is meant to happen under this system is that LEPs' use their local knowledge to help develop propositions on their local offer and the international comparative advantage that it provides. They are also meant to support UKTI in its work to deal with local issues such as planning, site finding, utilities and so on, and support account management activities for existing foreign investors.
Our recent research did find some interesting examples of good practice on FDI policy here in Birmingham and the wider region. This included the retention of sector specific expertise post RDAs, the alignment of FDI strategies with supply chain opportunities such as in auto, the linking of FDI with geographical targeting, and cross LEP cooperation on FDI attraction - such as that undertaken by Marketing Birmingham between Birmingham and the Black Country. We have flagged these up as good practice examples in the project.
But more broadly the fragmented patchwork quilt of LEPs across the country and rather opaque lines of demarcation between LEPs and UKTI must leave foreign investors confused and wondering who they need to go to when looking at investment possibilities. The E&Y report seems to hint at this.
(We also found that the closed round nature of the Regional Growth Fund also doesn't really help - RGF deadlines may well seem pretty irrelevant for investors (the new 'E-RGF' scheme may go some way to help this).
' Who ya gonna call ?' was the question posed in the 1980s' film Ghostbusters. Potential foreign investors must be wondering the same thing when looking at some of the English regions right now, post RDAs.
*'Networks for the Internationalisation of Cluster Excellence in Regions'.
* Professor David Bailey works at Coventry University Business School