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The number of foreign investments into projects in Wales fell by nearly a half last year compared to the year before, according to a new report by Ernst and Young.

According to EY’s latest annual Attractiveness Report, Wales saw 23 foreign direct investment (FDI) projects in 2016, a decline of 44% compared to 2015 when there were 41 projects.

The Welsh Government, which will release its own report on foreign direct investment later in the year, said the figures were in the EY report were incomplete because some foreign investments have not been publicly announced.

Between them the 23 projects in the EY report have created or will create more than 2,200 jobs.

Among them was MotoNovo’s expansion of its Cardiff operation with its move into the 1 Central Square office building in Cardiff which will create 600 jobs.

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Fourteen of the projects were expansions of existing operations, seven were new projects and two co-locations.

Cardiff was the most popular destination for foreign investors in Wales, securing eight projects in 2016. Wrexham was the second most attractive destination with five projects locating in the town.

In terms of sectors, manufacturing and the financial and business services sector dominated FDI investment into Wales with 15 and five projects respectively.

Andrew Perkins, managing partner at EY across the South West and Wales, said: “Whilst it is great to see Cardiff bucking the overall trend in declining FDI, the 44% reduction in FDI across Wales signals a wider issue in terms of economic rebalancing.

“Overall, the regional FDI figures for 2016 suggest that the strong ‘super regions’ are thriving whilst more geographically peripheral regions – for instance Wales, the North East, North West and South West of England – are slipping behind.

“Finding ways to share the benefits of FDI more evenly across the country is a critical challenge that future policy needs to address to ensure that Wales remains attractive, competitive and connected.”

The future

The report shows that most UK regions saw an increase in projects last year compared to 2015, with Wales being among just four seeing a decline, the others being the North East, North West and South West of England.

However, investors predict a decline in the UK’s future attractiveness as a destination for foreign investment. A third (32%) of respondents surveyed between March and April said they expect the UK’s attractiveness to FDI to improve over the coming three years, while 31% expect it to decline.

Both figures are significantly worse than recorded long-term averages of 53% and 8% respectively. Since March 2016 the share of investors with a negative view of the UK’s medium-term prospects for FDI have almost doubled.

Mr Perkins added: “The research suggests that the EU Referendum vote, and the uncertainty created by it, is having an influence on global perceptions of the UK’s medium to long-term attractiveness. We have also seen that western European investors are twice as negative as Asian and North American investors.

“Decisions on the majority of investments made in 2016 would have been made up to three years ago, which helps to explain the UK’s solid performance last year, but signs of a slowdown are on the horizon.”

Nine per cent of investors surveyed said Britain’s leaving the European Single Market would prompt them to change their investment plans or re-locate from the UK to Europe in the next three years.

EY said the UK economy has performed well after the EU Referendum vote and the outlook for FDI remains strong in the short term, but there are a number of indicators suggesting that the outlook for the UK is likely to be challenging and the UK’s investment strategy needs to move quickly to position for future success.

“What is clear, is that the UK has a short window to act. On a positive note, across Wales we have a solid base to build from.

“A rapid response and clear regional strategy can help strengthen our leading position and demonstrate that we are open for business and that we welcome inward investment from all parts of the globe,” said Mr Perkins.

Welsh Government

The Welsh Government will release its own report on foreign direct investment later in the year.

However, on the EY report, a spokesperson for the Welsh Government, said: "The figures presented do not include all investments and therefore are incomplete.

“Wales has a strong story to tell on inward investment and has performed well in this area over the last three years. 2015-16 was our second best year on record and while results for 2016-17 have not yet been finalised, we know that over two thirds of the projects recorded by the Welsh Government in that period have not yet been publicly announced.

"Consequently, they would not have been captured by this survey.

“Whilst we cannot yet reveal the detail of 2016-17 investments, provisional figures suggest it was another strong year for investment into Wales. We will keep working hard to build on this success and ensure Wales is well placed to capitalise on all the opportunities associated with the UK’s exit from the EU.”