Inward Investment: On Priority Sectors and Your Location's Economic Development Needs

Tuesday, 28 November 2017



In this blog, we’ve often written about the importance of effective value propositions in inward investment promotion – aligning your location benefits with the identified needs of investing businesses. But there’s another alignment that’s equally important – the one between the priority sectors you promote through your inward investment marketing and your location’s identified economic development needs.

Here’s an example to illustrate what we mean…

In the last few years, we’ve worked with several locations that share the following characteristics:

1) They offer fast access to high-income, high-population regions, making them attractive to firms distributing goods to wealthy consumer markets (i.e. they have a strong warehousing and distribution value proposition)

2) They’re also located within, or with fast access to, world-class high-technology industry clusters, for example life sciences, ICT or advanced engineering (i.e. they have strong value propositions in these high-technology sectors too)

So how should a location with these characteristics prioritise its industry sectors?

If we assume that both value propositions are equally strong, identifying the location’s economic development needs helps to answer this question. In simplified terms*, if the location is characterised by relatively high unemployment at lower skills levels, and can deliver large-scale, well-connected sites, there’s likely to be a sound case for making the warehousing and distribution sector a priority. If, on the other hand, unemployment is low, relevant skills levels are high and land is constrained, there’s likely to be a case for prioritising high-technology sectors in which investments are typically characterised by fewer, well-paid jobs, smaller-scale property requirements and high productivity.

*It should be emphasised that we're talking about relative importance here, not an 'either/or' choice between sectors, as well as generalised sector characteristics.

But that's obvious, isn't it?

Perhaps it should be, but in our experience it often isn't, because local authority economic development and inward investment functions aren't always as coordinated as they could be. In which case, a location's investment promotion agency may be focused on attracting high-technology companies while overlooking an equally important need for large-scale employment at lower skills levels (e.g. warehousing). Or, based on strong market demand, planners may be granting permission for large-scale warehouse operations when sites are limited and there's limited local need for the type of employment created. In the latter scenario, high-tech, high-productivity businesses can be crowded out by companies that respond less well to the location's economic development needs.

Lessons learned...

The basic lesson to be learned here is: know your location. Once you understand its economic development needs and its benefits for businesses (in response to identified business drivers), economic development and inward investment teams can work together, with private sector partners, to deliver the right mix of sites and market them to businesses in targeted, prioritised industry sectors. That, in turn means starting out by collecting and analysing high-quality location data that identifies your location's opportunities as well as its problems - its unique value propositions for businesses as well as its economic development needs.


Author:
Nick Smillie
Managing Director, Clarity

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