Foreign Direct Investment (FDI) is often judged by simple metrics: jobs created, capital invested, square footage developed. These indicators matter, but they tell only part of the story.
Rethinking the purpose of FDI
For regions grappling with low productivity, skills gaps and entrenched inequality, the real question is not how much FDI is attracted, but what kind of FDI and how it is positioned to deliver long-term economic value.
Used correctly, inward investment can be a powerful lever for structural change. Used incorrectly without strategy and forethought, it risks reinforcing existing imbalances.
Not all investment delivers the same impact
Two investments of identical size can have radically different outcomes. One may create low-wage, low-skill jobs with limited progression. Another may anchor innovation, strengthen supply chains and raise local productivity.
The difference lies in intent and design. Regions that think deliberately about the outcomes they want from FDI – and reflect this in their propositions – are far more likely to see sustained benefits.
This requires moving beyond opportunistic attraction towards a more selective, outcome-led approach.
Linking FDI to productivity growth
Productivity remains the fundamental driver of prosperity. Yet many regions struggle to influence it directly. FDI offers an opportunity to do so, particularly when aligned with:
- knowledge-intensive sectors
- advanced manufacturing and clean technologies
- digital and data-driven industries
- R&D-led businesses with global markets.
When these investments are integrated with local innovation assets and skills pipelines, productivity gains can extend well beyond the investing firm.
Skills, supply chains and spillover effects
The most successful inward investments are rarely standalone. They connect into local ecosystems, drawing in suppliers, creating demand for skills and encouraging collaboration.
Regions that actively design for these spillover effects see greater returns. This may include:
- linking investors to local SMEs early
- co-designing training provision with employers
- encouraging collaboration with innovation centres
- supporting scale-up pathways for local firms.
In this way, FDI becomes a platform for wider economic development rather than an isolated win.
FDI and inclusive growth
There is growing recognition that growth that bypasses large parts of the population is neither sustainable nor politically resilient. Inward investment strategies increasingly need to demonstrate how they contribute to inclusive outcomes.
This does not mean lowering ambition. It means aligning investment with pathways into good work – whether through apprenticeships, technical roles, or progression opportunities that do not rely solely on academic routes.
Regions that make these pathways visible are better placed to retain talent and rebuild confidence among younger people that opportunity exists locally.
Designing for the long term
Outcome-led FDI requires patience and coordination. It often means saying no to opportunities that do not align with long-term goals and investing effort upfront to shape the right ones.
This approach is more demanding than transactional attraction, but it is also more rewarding. Over time, it builds stronger clusters, deeper skills pools and more resilient local economies.
A question for reflection
When your region celebrates an inward investment success, what outcomes are you really celebrating?
Reframing FDI as a tool for productivity, skills and inclusion does not diminish its value – it multiplies it. For regions serious about lasting prosperity, this shift in perspective is increasingly essential.
