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The UK must adopt the strategic state-backed approach of the US and European governments in wooing foreign investors, according to a plan accepted by chancellor Jeremy Hunt in his Autumn Statement on Wednesday.
Tory peer Lord Richard Harrington, head of a government review into the UK’s approach to attracting foreign investment, said Britain could no longer afford to ignore schemes such as the US’s $2tn Inflation Reduction Act as he laid out a new blueprint for boosting FDI.
“I have formed the view during this process that capitalism has changed,” he wrote in the foreword to a 123-page review of UK FDI performance, the findings of which were announced by Hunt.
“The reality is that many of our competitors chase investments via their industrial strategies backed by substantial government support,” Harrington added. “The UK needs to respond.”
Prime Minister Rishi Sunak’s government has repeatedly rejected calls for a UK industrial plan despite calls from industry to create a road map.
Harrington on Wednesday set out a new “business investment strategy” and suggested picking targets in the five sectors identified by Hunt as growth areas: green industries, digital, life sciences, creative industries and advanced manufacturing.
The recommendations include appointing a cabinet-level minister to co-ordinate across Whitehall, which Harrington said was too often “disorganised, risk-averse, siloed and inflexible”.
He said only a minister with a role straddling the Cabinet Office, HM Treasury and the Department for Business and Trade, with regular input to Number 10, would have the power to offer investors a “single front door” to the UK.
Prospective investors should expect an “account management” approach, including assistance with “planning, visas [and] financing” and other “delivery-critical factors”, such as jumping the queue for grid connections and fast-track planning approvals.
The report said business had concerns that “supply chains are weak and that clusters are failing to form around big-ticket investments”, leaving the UK’s level of foreign investment as a percentage of gross domestic product “persistently lower than its peers”.
“The prize is a big one: most of our competitors have about 12 per cent of GDP in business investment [domestic and foreign], our equivalent is 10 per cent. The difference is about £50bn per year,” Harrington wrote.
Make UK, the manufacturers’ umbrella group, and the British Chambers of Commerce welcomed the blueprint, including plans to amend national planning rules to enable high-value investments to be prioritised. Both groups have long called for an industrial strategy.
Stephen Phipson, chief executive of Make UK, said “outmoded beliefs” about the international investment arena had led the UK to miss out on valuable investments from overseas, adding that Harrington’s report was a “vital first step” in catching up.
However, some MPs and regional business groups warned that without changes to planning rules and more resources for local development the review risked disappointing.
Robert Buckland, Conservative MP for Swindon, an area seeking to revive its fortunes by attracting more FDI, said planning reforms were needed “as quickly as possible” if the town was to be able to make an attractive offer to investors.
Matt Griffith, director of policy at Business West, welcomed Harrington’s vision but warned that delivering the plan would still require overcoming a chronic lack of investment-ready sites.
“The Harrington blueprint risks running into under-resourced local government and a planning system which incentivises housing over investment sites,” he added.
