Is Scotland's foreign direct investment success actually a good thing?

The National

22-06-2025

It comes after data published by accounting giant EY last week showed that Scotland had been the top destination for foreign direct investment (FDI) in the UK outside of London for a decade.
EY reported that Scotland was bucking international trends by seeing an increase in its share of FDI projects in the UK against a 'backdrop of a marked decline in project numbers' across Europe.
In 2024, the country attracted 135 FDI projects, the second highest ever recorded after 2023's 142. That represented 15.8% of the UK projects targeted for FDI, up from 14.4% in 2023 and above its decade average of 11.5%.
Deputy First Minister and Economy Secretary Kate Forbes (Image: Colin Mearns) Deputy First Minister Kate Forbes, who also serves as Economy Secretary, called the figures 'an incredible endorsement of Scotland's proposition as a destination for global investment'.
However, Craig Dalzell, the head of policy and research at Common Weal, urged caution, saying that Scotland was a 'massive outlier' internationally for the wrong reasons.
'Essentially, every investment demands a return on investment. So if foreign companies are investing in Scotland, then the profits that result from those investments go overseas,' he said. 'That has a direct impact on the amount of wealth that leaves Scotland.
'The level of profit extraction in Scotland as a proportion of our size as a percentage of GDP is higher than the average of West African countries. It's higher than the collection of the poorest and most indebted nations on the planet.
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'It's like we have this wealthy country, but we're treating it as if we're a completely undeveloped company, utterly reliant on other people coming in to develop it for us. It's just bizarre.'
Last year, Common Weal published a paper looking at FDI projects titled 'Profit extraction: How foreign ownership drains Scotland's wealth'.
It compared Scotland's GDP (gross domestic product) and its GNI (gross national income) and found that, in 2021, £36.5 billion was extracted from Scotland – largely in the form of profits and dividends to foreign companies and shareholders – while £26.4bn flowed into Scotland – largely as foreign investment income: a net outwards flow of £10.1bn.
The Scottish Government does not routinely publish GNI figures, and has not done so since the 2021 figures were published. Dalzell said this meant it was 'impossible to know' the true impact of FDI projects on Scotland.
He went on: 'But our paper found that more than a quarter of a trillion pounds has left Scotland through foreign profit extraction since the start of devolution.
'If that had been domestic companies investing in Scotland, that wealth would have stayed in Scotland and recirculated around Scotland.'
Norway and the UK's different approaches to oil and gas are worth examining, Craig Dalzell saidDalzell argued that Scotland was heading towards a repeat of the same mistakes of the past in allowing vast sums of wealth to be extracted from the country by private enterprise.
'If you look at the level of profit extraction as a proportion of the size of the wealth of a country, GDP per capita of a country, there's a very clear correlation: richer countries are more able to become profit importers rather than profit exporters,' he said.
'The rich countries tend to invest elsewhere and then they pull the profits in. Scotland is a massive outlier in this.
'One of the reasons that Denmark is a profit-importing country is because it has several public energy companies and they're investing overseas. The Danish state is investing in Scotland. Why not the other way around?
'Where Scotland lacks capital for investment, you can do it in a way that doesn't mean selling off your economy. Look at the way that Norway developed its oil fields, for instance.
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'Britain sold off its oil fields and allowed the companies to come in and drill the oil and take the profits. Norway hired the companies to build the rigs but kept ownership of them.
'We're seeing the same thing happening with renewables. We're allowing companies to come in, put up the wind turbines, own them, and take the profits.'
Responding to Dalzell's concerns, Deputy First Minister Forbes said the Government was 'focused on ensuring that foreign direct investment projects create jobs, bring benefits to towns and cities throughout Scotland and grow the economy'.
'Exciting projects this year including green aircraft engine developer ZeroAvia and ticketing hub Humanitix will bring thousands of new jobs to Scotland and enhance the country's reputation as a world-class location for foreign investment,' she added.
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There have been proposals, such as from the SNP's Trade Union Group or the Alba Party, for the Scottish Government to take shares in energy projects north of the Border. However, these have not progressed at government level.
Dalzell further called for more routine publishing of GNI statistics to give a clearer picture of Scotland's economy.
In response to a Freedom of Information request in February, the Scottish Government said: 'One of the key data sources for [GNI] statistics is an extract from the FDI survey conducted by the Office for National Statistics (ONS).
'During 2024, the ONS delayed its processing of the FDI survey … and the Scottish Government has not received data for 2022 or subsequent years.
'We expect to receive data for 2022 and 2023 during 2025, and will review plans for our publication when this is received. A publication date will be pre-announced when known.'