This article examines the nature of FDI in Northern Ireland, looking at the type of FDI that Northern Ireland attracts, areas in which Northern Ireland holds a competitive advantage and forecasts for future FDI flows from 2021 to 2025. Information in this article is taken from DfE-commissioned research conducted by Wavteq:
Context
Over 2015 to 2020, Northern Ireland has been successful in attracting quality FDI and holds the fourth highest proportion of FDI in high-tech sectors of any European region. This is supported by Northern Ireland’s strong track record in attracting FDI in software and IT and business services, with well over half of FDI projects over 2019 to July 2021 in the IT sector.
Competitive advantages
Key competitive advantages attributed to Northern Ireland are its strong cost advantage compared to Western European locations and a high degree of specialisation in sectors such as life sciences, industrial equipment and aerospace. Northern Ireland also possesses a revealed comparative advantage against other regions for FDI projects and FDI jobs in software and IT services, business services, renewable energy, aerospace, metals, engines and turbines and paper, printing and packaging.
Northern Ireland is expected to achieve continued success in attracting FDI in high tech sectors over 2021 to 2025, with an average 41 FDI projects estimated to be attracted per annum, which is a 20% increase on the previous five years. A further 2,000 new FDI jobs could be created per year, which represented an 8% increase over the previous five years. Approximately half of the FDI projects and three-fifths of the jobs are expected to come from new investors, with the remaining projects and jobs forecast to come from existing foreign investors.
On a broader level, the software and IT sector is forecast to remain the largest sector for FDI in the UK and globally in 2025, with Northern Ireland having already built a strong track record in its associated sub-sectors, particularly in cybersecurity, where rapid growth is forecast. The research recommends that, to capitalise on future FDI opportunities, Northern Ireland must build on current and past success with a sharper focus on target markets and priority clusters and technologies.
Recommendations
The research also recommends the innovation of the Northern Ireland FDI strategy to include a clear programme of promotional activities and support services for remote/hybrid working and develop a comprehensive talent attraction and skills strategy, with talent being a key driver of FDI for both new and existing investors.