A Labour government would threaten London’s position as Europe’s top destination for FDI. Only one part knows how to create an attractive regulatory and investment environment, says Lord Johnson
One of this Government’s most important missions is to drive innovation and growth by attracting a continuous stream of high quality, global investment.
As the Minister for Investment, I firmly believe that Britain is the best place in the world for investors to put their confidence and their money. This is being borne out by the £100bn plus commitments we have generated over the past 18 months ranging from the £30bn announced at the Global Investment Summit to the recently hailed multi billion-pound investment in new data centres in the North East.
So less gloom please and more facts. Just this week, a survey from the accountancy firm EY confirmed that foreign direct investment (FDI) projects were up by six per cent in the UK last year, with nearly 1,000 new projects recorded.
This is even more remarkable as elsewhere in Europe, levels of FDI fell showing that the UK strategy is paying off.
I’m particularly proud of the nine per cent increase in FDI we attracted into our technology sector. In total, British tech firms received over 25 per cent of all the FDI into Europe in 2023. It is also interesting to note that the EY survey shows that we generate far more jobs from our overseas investors than other countries, meaning that on a value basis we are probably number one in the rankings. That’s after Brexit, the inflation shock and Covid. As business people we need to celebrate this.
It is also important to realise that international capital outside of the EU continues to drive our economic activity with strong showings from the USA, India and Australia. We expect to see more from Australia given our new Free Trade Agreement. Our strategy is evolving as we continue to target global pools of capital. This will build on our existing FDI strategy which is clearly bearing fruit as evidenced through our foreign direct investment stock. This is the third highest at nearly £2 trillion after only the US and China and (something which will surprise you all) in greenfield investment in clean energy the UK has topped the world since 2010.
Financial services and the services sector have also continued to flourish with the City of London taking first place as the top destination for investment in Europe.
So good news indeed – but we can do more, and the government is acutely aware that in areas such as grid connectivity, planning and regulation there is need for focus and delivery.
We will be taking forward many of the recommendations from Lord Harrington’s recent review, including placing more expertise within the office for investment – the UK government’s front of house for potential investors.
We have initiated numerous support options such as the £4bn plus advanced manufacturing plan which pours government investment capital into essential projects to boost this sector. This has already yielded incredible benefits with the Tata giga factory, Stellantis’s new auto lines and the revolution in green steel making in Port Talbot. These are all recent celebrations of this powerful approach. Inflation Reduction Act – eat your heart out.
We also have a clear plan to increase our grid connection power to enable the new sources of green energy to flow into and around our country and we continue to tackle the issues facing planning so that we can actually build these new laboratories, EV plants and infrastructure we urgently need to complete our vision.
Finally, we are improving our regulatory environment so that regulation drives innovation, investment and economic growth by better assessing the cost of regulation and ensuring regulators design their frameworks with the broader economy in mind. More of this to come!
As Investment Minister I collaborate with all parties in all regions and nations, to help win the confidence of the international investor community – but it is important to note that no other party has the same understanding of how to create an attractive investment environment as we do. I am concerned, as are many who want to put money into the UK, that a Labour government will destabilise the incredibly attractive labour market flexibility which has been so hard fought for.
We worry that Labour is naturally more focussed on regulations and controls than is healthy for a functioning economy and I am often asked about the nature of previous Labour administrations who have, through a general distrust of free markets, hampered growth, job creation and the important sense of ambition which has made this small nation the most successful economy in Europe and one of the most powerful nations, in terms of innovation and investment, in the world.
So to conclude, the EY survey shows that we are doing things right, both in absolute terms and in relative terms to our peers. In addition to this we have a clear strategy to solve the problems which we know exist and are not afraid to confront them and own them. Ultimately though, our fundamental, deep-rooted nature, is to help you as businesspeople to flourish and celebrate your success, knowing that this is the key to a strong economy which creates jobs, wealth and the ability to control our destiny as a nation. A gentle reminder to those out there who run the nation down or think that change for changes sake is a good thing!
Lord Johnson is minister for investment