A strategy focused on the future

Forum Members
Pictured, clockwise from front: Elaine Ballantyne, John Boyle, John Henderson, Allan Hogarth Graham Hill, Chris Stewart and Mark Hallan. Center: Alasdair Nimmo

The Forum congregated at Scotland’s capital city’s newest hospitality offering, The Edinburgh Grand, to discuss FDI in Scotland’s cities.

by Graham Lironi

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Four Scottish cities – Glasgow, Edinburgh, Aberdeen and Inverness – rank among the top 10 in the latest fDi European Cities of the Future report. The report reveals that Scotland’s cities are alive with possibilities if you’re looking for a location that fits the modern connected economy. All four cities have solid local support systems to ease inward and foreign investment and direct connections to skills and academic partners. But, in a globally competitive market, how can Scotland’s cities continue to attract more levels of Foreign Direct Investment (FDI)?

What makes a city ‘investable’ and what is happening in Scottish cities to ensure they remain a good investment proposition over the long term?

Elaine Ballantyne I would put people first: talent. In Edinburgh we see an incredible and growing talent pool; from a growing student population to the skilled investment companies make in people in the tech sector. That seems to be a priority for companies coming to locate in the city. Another associated factor is the quality of life.

Chris Stewart
Chris Stewart says Edinburgh still represents good value from a real estate perspective

Chris Stewart Edinburgh is a captivating city for people who have not experienced it before, so when you bring investors to this city, they can’t help but fall in love with it. People certainly invest with their heads, but they also invest with their hearts. Edinburgh still represents good value from a real estate perspective, relative to other parts of the UK, and Scotland is under-valued, which differentiates us from other parts of the UK.

Allan Hogarth We have to ensure that we keep hold of those companies that have made investments over recent decades and ensure the costs they face are reasonable, because if they see costs rising in Scotland, they can choose to relocate elsewhere.

Michael Henderson
Michael Henderson points out that cities need real leadership to plan for infrastructure

Michael Henderson More than 50% of the world’s population is now based in urban areas and that means cities have to be dynamic environments that are well-led to plan for the infrastructure required for the future.

Is Brexit an issue for FDI? What initiatives are being implemented to increase Scotland’s and its cities’ competitiveness post Brexit?

Mark Hallan Our research shows that the kind of FDI that Scotland is competing for is changing in that we see many more firms locating global functions in Scotland, whereas previously it would have been FDI aimed at servicing the domestic UK or European market, and those types of organizations will be less vulnerable to what happens as a result of Brexit.

John Boyle In Donald Rumsfeld’s parlance, ‘it’s the known unknowns’. We don’t know what Brexit’s going to look like, whether it’s going to be hard, soft or something in-between, and for many Scottish cities it is a double-edged sword because we want to attract FDI, but the more exposed we are to FDI, the more Brexit will hurt.

CS There’s a growing interest in investing in Scotland, partly because the geo-political issues globally are so significant now, whether it’s Trump’s trade war about to start with China, the activities of Russia or all the instabilities of the Middle East. When it comes to investors placing their capital, the UK in the context of Brexit is still seen as a stable environment in which to invest and, within that, Scotland is still a clearly identifiable FDI market.

EB Investing in future sectors will continue to bring that appetite for talent into Edinburgh so there’s a massive amount of work going on in the city around using data in the future and how it underpins, disrupts and creates new sectors and new activities. The City Regions Deal was a boost of confidence in the city that governments will back and support that future injection.

Graham Hill The key features of the City Deal are about innovation and the growth agenda, which play to Edinburgh’s strengths. We recently published a report looking at 24 UK cities and it was encouraging to see that Edinburgh came top of that league and that is due to the people and the skills. People like living here and raising their families here and we’ve got good infrastructure and connectivity.

Looking beyond Brexit, how can Scotland develop its links with the US to attract greater volumes of FDI?

M Hallan We’re exceptionally good at wrapping the public and private sector together around an investor once they arrive. The value of that to companies is immense and it’s one of the reasons we get so much reinvestment from companies that have set up here.

JB The other selling point is that we’re in the right point of the cycle. One American investor recently visited Edinburgh and saw very strong socio-economic drivers and a state of excess demand, and that’s where the quickest returns on investment are going to be made.

What are the sectors that you anticipate will attract future FDI?

Elaine Ballantyne
Elaine Ballantyne says that Edinburgh’s top sector is tech and the US is top source country

EB Our top sector is tech and our top source country is the US and we have worked very closely with Scottish Financial Enterprise and with Scottish Development International to create Fintech Scotland so there is a highly disruptive but new sector arising through that, based on the future of data and informatics.

M Hallan Looking to the north east of Scotland, subsea engineering is relevant to future exploration and production of the oil and gas industry, to decommissioning, to renewables for offshore wind and for subsea mining. Scotland is a global leader in subsea engineering. There are 400 companies in the supply chain in and around Aberdeen and 15% of the global industry is represented in Scotland, so it’s a massive growth area with a projected market of $68.2bn over the next decade.

GH Edinburgh is one of the leading data centers in the world and there’s an aspiration for recognition as the data capital of Europe. As we see an acceleration towards Artificial Intelligent machine learning, Scotland can be at the front of the disruption that’s coming in the market and attract investment. That need for being able to harvest data then makes analysis that responds to what citizens need and want – that’s where future investment will be seen.

What innovations in the real estate environment are being applied to create the right buildings for modern companies and workers?

GH Scotland is looking to lead in terms of the decarbonization of the transport network and, therefore, the push toward electric and autonomous vehicles. As we move toward mobility as a service, the buildings we’re constructing now need to react and respond to future demands.

CS There will always be competition between the car and the pedestrian and the cyclist until policy and infrastructure responds and starts to move in another direction. We’re at that point where we’re having to make difficult decisions about how things work.

M Hallan Whether it’s intelligent buildings or co-working space or teleworking, broadband connectivity is vital and the Scottish government has pledged that every property in Scotland will have access to superfast broadband by 2021. That will support the development of more smart, intelligent buildings and greater flexibility in terms of how and where people choose to work.

Scotland has set itself a target to phase out new petrol and diesel cars eight years earlier than the rest of the UK which should in itself be a catalyst to accelerate the development and deployment of some of these new technologies.

Around the table

The Forum was chaired by Insight’s Alasdair Nimmo, who was joined by:

  • Elaine Ballantyne, Head of Investment and International Relations, City of Edinburgh Council.
  • Dr John Boyle, director of research and policy at Retties
  • Mark Hallan, Scottish Development International’s global director of strategic relationships
  • Michael Henderson, partner in the property and infrastructure team at Shepherd and Wedderburn
  • Graham Hill, Arcadis’ Scottish cities expert
  • Allan Hogarth, a director with the Scottish North American Business Council
  • Chris Stewart, CEO of Chris Stewart Group