Ambitious and sustainable - shaping tomorrow's great cities

A report by Ernst & Young, sponsor of the 'Competition in a New Society, Cities and Regions' supple

James Close looks at how the UK's cities are competing on the world stage and our record at attracting vital inward investment.

Globalisation has meant that cities all over the world are more interconnected than ever before, as capital and people move freely between them. Both these trends have increased the competition for talent and investment between cities worldwide. Shifting economic power from West to East and North to South has increased both the number and the sophistication of urban centres in emerging markets.

Today, every city in the world needs to be clear about its appeal to people and investment in a competitive global marketplace. Cities need to provide a sustainable, vibrant community for their citizens to live, work and enjoy life. Cities also need to foster economic growth by providing the right conditions for business and to promote and protect innovation. City leaders need to ensure they build an entrepreneurial ecosystem that supports the commercialisation of innovation and attracts foreign investors.

In 1950, only 29 per cent of the world's population were classed as urban dwellers. By 2050, the UN predicts that this will have risen to 69 per cent. As a result of this trend and population growth, cities' populations are booming. In 2000, 16 of the world's top 30 most populous cities had over 10 million inhabitants.

By 2025, the UN predicts that only one of the top 30 will have fewer than 10 million - China alone will have five cities in the top 30.

Cities must focus on creating an urban environment based on performance, creativity and balance to build the right environment to attract people and investment, and promote innovation. Our cities vary hugely in profile but every city - whatever its condition - needs to compete for an ever-shrinking pool of resources. Competition for resources - the talented people and capital that drive innovation - has never been so fierce. And because people are increasingly mobile they will migrate to cities that are the most aligned inwhat they offer in terms of brand, strategy, investment, services and culture.

Achieving this depends on city leaders ensuring that the four environments that co-exist within a city - urban, business, social and cultural - are supportive to attracting and retaining innovative companies, talented people and crucial foreign direct investment.

The good news is that foreign direct investment to the UK rebounded in 2010 after the reduction in projects recorded in the recessionary year of 2009. Staying at the head of the pack of competing European economies, the UK was the leading recipient of company investments for the 13th year in a row -- with a 19.38 per cent share of investment and recording its highest number of investments since 1997 when Ernst & Young's European Investment Monitor began.

UK cities attracted over 700 foreign direct investment (FDI) projects in 2010, up 7 per cent on 2009, compared with fewer than 600 projects won by cities in France and 560 in Germany -- whose projects rose by 34 per cent, bolstered by its position as the numbe- one location for Chinese investment. London alone secured more FDI projects in 2010 than all European countries, apart from France, Germany and Russia.

Nonetheless, British cities are failing to keep pace with those in Brazil, Russia, India and China with German cities the leading challengers to the UK's, largely due to Chinese investment.

The UK's cities have shown strong resilience in the face of adversity, pulling through the recessionary years to reinforce its position as the leading base for investment across Europe. One thing is clear: in an increasingly complex global economy, UK Government, cities and business leaders must to work together on this shared agenda for growth and continue to build the UK's reputation as investors' first choice destination for investment.

James Close
Partner, Ernst & Young
+44 (0)20 7951 0866
jclose@uk.ey.com

The 'Competition in a New Society: Cities and Regions' supplement was sponsored by Ernst & Young. James Close, a partner of E&Y, offered the above report.