More than a third (37%) of areas across Scotland have been identified as High Investment Areas – places which share an expected high rate of growth in business investment, according to new figures from KPMG UK and the University of Nottingham.
In comparison, 22% of places across the UK were considered High Investment Areas. The data comes from the new quarterly Local Business Pulse Index (LBPI), which uses AI technologies to pinpoint what is influencing economic activity across the UK’s regions and devolved nations by using seven ‘clusters’ to characterise potential growth.
Created by the professional services firm and university, the aim is for businesses and local government leaders to use the LBPI to prioritise what type of investment is needed and where it should go. The live tool will be updated each quarter presenting a current and forward-looking view across each area.
Using AI technology, the seven clusters have been derived from the geographic, sub-national data covering businesses, employees, and consumers. These clusters include Business Creation; Sales Growth; High Investment; Employment Growth; Research and Development; Consumption Growth; and High Productivity.
Paula Holland, Officer Senior Partner at KPMG UK in Aberdeen, said: “The new Index provides valuable insights into various aspects of the city's economy. Aberdeen City demonstrates strong performance in several key areas, positioning it in the top quartile for expected growth in sales, R&D expenditure, venture capital growth, and online job advertisements. This is consistent with a well-established industry pushing to redefine itself as a next-generation energy hub from an established skill-base.
“However, the analysis also indicates areas that may require attention. Aberdeen City ranks in the bottom quarter for new business creation, perhaps suggesting the change to date is being largely driven by existing market players. It will be important to track how the new local initiatives that support efforts to foster entrepreneurship and develop start-ups move that dial in future indices. Additionally, the wider Aberdeenshire area ranks in the fourth quartile for expected growth in employment, signifying the importance of implementing strategies to boost job opportunities and stimulate economic growth in the wider region.
“By leveraging the insights from the Index, local leaders, investors, and businesses can make informed decisions and tailor their strategies to bolster the city's strengths while addressing the identified challenges for sustainable economic development in Aberdeen and its surrounding areas.”
Key insights for Scotland in Q3 2023
Scotland’s Central Belt is experiencing above-average levels of research and innovation and business investment compared with the UK, while high levels of investment are seen across the highlands. The west of Scotland is also experiencing above-average productivity growth compared with the UK.
The leading growth centres for research and innovation are spread across the regions with Birmingham, Bristol, Edinburgh, Glasgow, Leeds, and Manchester showing highest rates of growth in research and development spending and venture capital investment.
New business creation is strongest across the devolved nations and regions with Wales, Northern England and Scotland, East Anglia and the North East experiencing the fastest rates of new business creation. Dundee, Angus, East Ayrshire, and Borders are experiencing the fastest rates of new business creation in Scotland.
Investment in digital and remote working technologies is benefiting the Midlands and northern cities, with firms in these areas reporting high rates of investment in new technology, and faster adaption to working from home. Highlands, North Ayrshire, Inverclyde and Clackmannanshire all score highly.
Karl P Edge, Head of KPMG Private Enterprise in the UK, said: “As the economy continues through a challenging period, there’s growing emphasis on local authorities to define their economic strategies and leverage profile of their business community.
“That’s why we’ve created the Local Business Pulse Index to help pinpoint the growth opportunities across England, Scotland, and Wales. From the data, we can see there are distinct hubs for job creation, use of technology when working remotely, and investment. While we’ve experienced significant economic challenges over the past few years, it’s encouraging to see high investment levels come out on top, reassurance that growth and confidence are headed in the right direction for local areas.
“The need to understand local economies is crucial in prioritising investment and informing wider policy and with this tool, we can start to map out where our priorities should lie.”
Professor John Gathergood, at the University of Nottingham School of Economics, said: “We are delighted to bring together the latest economic data, together with artificial intelligence technologies, to create this exciting new product with KPMG. It will support businesses and governments to help make better decisions about localities across Great Britain.”