Inward Investment in a Recession: 5-Point-Plan

So it's official, we are in a recession. Manufacturing output is down; retail sales are down; confidence is down. Unemployment is growing daily and the fragility of major companies grows by the hour. Things don’t look good for inward investment flows.

However, across European investment promotion agencies, the news continues to be positive, with a steady stream of announcements – a new Airbus plant in Germany; Facebook opens their European HQ in Dublin; Unilever and Yahoo establish new R&D facilities in Italy and France respectively. The picture in the UK is less rosy though, with the majority of inward investment agencies failing to report a single new project in the last few months. Indeed, the most noticeable flow of companies has been “out” not “in” with WPP, Shire, United Business Media, Henderson, Regus, Charter and Brit Insurance all relocating parts of their headquarters to other countries with more favourable tax rates.

So in the midst of such gloom, what can inward investment professionals do?

Breeze Strategy has come up with five recession-busting actions which should be keeping UK agencies busy over the coming months:

1. Reprioritise Inward Investment

When your town, city or region loses hundreds of jobs at a time, there is only one sure-fire way of replacing them and that’s with inward investment. No amount of new start-up activity or indigenous growth can replace these jobs in the short or medium term. The time is right to make the case for the reprioritisation of investment attraction. During the last ten years, inward investment has been relegated and diluted as urban renaissance and regeneration has taken priority. It’s time to remind our politicians that the quickest way of injecting new money, securing higher skilled jobs and boosting local economies is through the sustained attraction of new investment projects.

2. Retain Your Key Companies

Everyone says they have an investor development or aftercare programme, but how does the resource balance compare with other activities? In any region, there are thousands of international companies, but interaction with development agencies is extremely patchy at best. Identify your priority investors that show greatest potential to grow in the future (hint – they probably aren’t your biggest ones or the most famous brand names). Don’t throw limited resources at companies who appear to have made up their minds to leave, accept the limitations of your interventions and concentrate on the medium-sized firms that often fall below the radar.

3. Resist Ambulance Chasing

Financial services has been turned on its head and anyone who thinks that the sector is therefore ripe for targeting is deluded. Yes, wholesale reorganisation of functions will lead to more companies looking at reducing overall costs (largely by moving tax jurisdictions), but having lower-cost office space and cheaper staff costs is not going to make for a compelling proposition to companies that are struggling to stay in business. Several agencies are pushing through new marketing and lead generation activities aimed at London-based financial companies. This is akin to trying to sell double-glazing to someone whose house is on fire after an earthquake.

4. Refocus on Recession-Proof Sectors

Sure, if we could identify recession-proof sectors, we’d be making millions on the stock markets. But there are some things to look at and bear in mind. There are sectors that are showing sustained growth and will continue to provide opportunities for new inward investment projects. These include energy and environmental industries, ranging from nuclear to renewables and waste management. Food and drink is a sector that will fare better than most. Logistics and transport is another. Public sector projects are a likely safe-haven in times of turmoil, although this could be short-lived if the Conservatives have their way at the next election and deliver their promised “bonfire of the quangos” and reduction in the bloated infrastructure of government. And across all sectors, there will be winners and losers. Locations that do their homework and monitor industries and markets carefully will be a step ahead.

5. Redefine Your Proposition

How well do you articulate your offer to businesses? Probably not as well as you could. The likely slowdown in inward investment activity provides the perfect opportunity for locations to smarten up their act and use their time wisely to put the fundamentals of place marketing and investment attraction in place. Most effective activities take a few years to bear fruit, so the time to start is now.

If you’ve got your propositions sorted; if you’ve begun to implement intermediary and ambassadorial strategies; if you have world-class communications and marketing collateral; if you’ve done your homework and sorted out your targets – then you’ll be more likely to ride out this recession and reap the rewards.

A recession is not an excuse for inactivity.