Brexit is already having an impact on the number of overseas firms investing up in the South West, according to new research.
The number of foreign direct investment (FDI) projects in the region fell by a quarter from 37 in 2015 to 28 last year, with experts predicting the number could fall further as the UK prepares to leave the EU. 
The latest annual Attractiveness Report produced by accountancy group EY reveals that the South West was among a minority of UK regions to suffer a drop in inward investment – along with Wales, the North East and the North West.
But despite an increase in the majority of UK regions, the report shows that investors are predicting a decline in the UK’s future attractiveness as a destination for foreign investment.
London remained the UK’s dominant location for FDI, followed by Scotland, which maintained its second place.
The ‘super regions’ of the Northern Powerhouse and the Midlands Engine continued to do well, attracting roughly double the number of projects they secured at the beginning of the last decade.
Within the South West, there was a mixed picture with Bristol continuing to lead investment by securing nine projects last year, the same number as in 2015.
In terms of sectors, manufacturing and the financial & business services sector dominated FDI investment into the South West with 13 and nine projects respectively.
EY South West and Wales managing partner Andrew Perkins, pictured, said: “Whilst it is great to see Bristol bucking the overall trend in declining FDI, the 25% reduction in FDI across the South West region signals a wider malaise that is seen in other more geographically peripheral regions such as Wales, the North East and the North West.
“With a new [Metro] Mayor in position to deliver on our regional growth strategy to promote the West of England on a global stage, it’s crucial that we find ways to share the benefits of FDI more evenly across the whole of the Great South West.
“This is a critical challenge that future policy needs to address to ensure the whole region remains attractive, competitive and connected so that we can compete with the rest of the UK.”
Germany was the biggest investor in the South West with seven projects, closely followed by the US with six. In total investments came from 14 different countries across the globe.
The report shows that 60% of all FDI projects in the South West were announced before the EU referendum in June 2016, with 40% announced after this date.
Global investors surveyed between March and April this year had mixed views when asked about the future attractiveness of the UK.
Some 32% of respondents said they expected the UK’s attractiveness to FDI to improve over the coming three years, while 31% expected it to decline.
Both figures are significantly worse than recorded long-term averages of 53% and 8% respectively. In fact, since March last year the share of investors with a negative view of the UK’s medium term prospects for FDI have almost doubled.
Mr Perkins added: “The research suggests that the EU referendum vote, and the uncertainty created by it, is having an influence on global perceptions of the UK’s medium to long-term attractiveness. We have also seen that Western European investors are twice as negative as Asian and North American investors.
“Decisions on the majority of investments made in 2016 would have been made up to three years ago, which helps to explain the UK’s solid performance last year, but signs of a slowdown are on the horizon.”
Some 9% of investors surveyed said leaving the European Single Market will prompt them to change their investment plans or re-locate from the UK to Europe in the next three years.
The report shows that the UK economy has performed well since the EU referendum and the outlook for FDI remains strong in the short-term.
However, it concludes that there are a number of indicators suggesting that the outlook for the UK is likely to be challenging and its investment strategy needs to move quickly to position for future success.
Mr Perkins added: “What is clear, is that the UK has a short window to act. On a positive note, across the South West we have a solid base to build from, with globally renowned strengths in aerospace and high-tech manufacturing sectors.
“A rapid response and clear regional strategy can help strengthen our leading position and demonstrate that we are open for business and that we welcome inward investment from all parts of the globe.”
