Overseas investment gives a boost to construction prospects in the North

A rare piece of economic good news emerged in a recent report suggesting that the drive for ‘levelling up’ is having an impact and generating some significant new construction work in the North of England thanks to a sharp rise in overseas investment in the area.

The report The Internationalisation of the Northern Powerhouse highlights a 72% increase in foreign direct investment (FDI) in the region over the five years up to 2021. It has been driven by some significant new projects funded by overseas investors in key sectors such as renewable energy, electrical components, chemicals, and biotechnology.

In all, the report shows FDI in the North of England rose to $43.7 billion (£39.2 billion) over 2017-21, up from $25.4 billion (£22.7 billion) in the previous five years. Over the same period, by contrast, FDI in the rest of England fell by 16%. A third of all FDI into England in the period went into the Northern Powerhouse region – which stretches across the North East, North West, Yorkshire & Humber, and North Wales.

The report chimes with Glenigan data which points to a promising outlook for industrial sector work in the North of England, helped by some major overseas investments. The value of industrial projects starts in the North East rose by 155% to £446 million in the three months to August this year, compared to the previous three months, according to the September edition of the Glenigan Construction Review.

Meanwhile, the pipeline in the region also looks good; the value of planning approvals for industrial starts in the North East rose more than three-fold in the quarter to August, to £302 million, compared to a year earlier.

Significant renewables project

Glenigan data highlights a range of current industrial construction projects in the North linked to overseas investment.

At Billingham in Cleveland, Japanese-owned Fujifilm Diosynth Biotechnologies has submitted detailed plans for a new £39.1 million manufacturing facility. Work on the scheme, which is at the pre-tender stage, is set to start next spring and run for 11 months (Project ID: 22310324).

Meanwhile in Middlesbrough, ground was broken this summer on South Korean group SeAH’s huge £400 million Offshore Wind Monopile Factory on a 90-acre site at Teesworks where work is set to run for 49 months (Project ID: 20291276).

As well as a flagship FDI project for the region, the new SeAH plant highlights the North of England’s success in attracting FDI investment from Asia. This is up by 7% over 2016-21, compared to a marked fall elsewhere in the UK over the period. “I often felt that the Northern Powerhouse concept was better understood by investors in Asia than it was among politicians and financiers in London,” says Lord Jim O’Neill, vice-chair of the Northern Powerhouse Partnership.

Another significant renewables project in the Northern Powerhouse region involving FDI is underway at Siemens turbine plant in Hull where an £82 million development will double the size of the plant by the end of the year (Project ID: 21303028).

More industrial work for contractors in the area is also in the pipeline; planning approvals for industrial work in the Yorkshire & Humber region rose to £737 million in the three months to August, up three quarters on a year earlier.

Tax incentives bear fruit

The report also notes that tax incentives are beginning to bear fruit with investors and that there are ‘serious economic opportunities to be unlocked’ in the Freeports of the Tees Valley, on both banks of the Humber, and in the Liverpool City Region.

The Government’s recent announcement that it is in talks with 38 local authorities to create new Investment Zones in their areas - which include Blackpool, the East Riding of Yorkshire, Hull, Lancashire, Liverpool City, North of Tyne, North Yorkshire, South Yorkshire, West Yorkshire, Sunderland, and Tees valley – should reinforce the appeal of the Norther Powerhouse to overseas investors, along with the contract opportunities.