Inward Investment: what are the rules of attraction?
A number of studies have suggested that recent investment into the UK, particularly greenfield in production predominantly to be exported, has been lower than would have been expected. In some sectors we saw a 90% decline specifically in that type of investment between 2016 and 2020, and that while there had been some recovery more recently, this remained disappointing and had not made up for the previous shortfall.
Various suggestions have been made as to how to understand the UK inward investment picture. There have been suggestions that the UK is doing much better for services rather than manufacturing investment, that the UK is no longer attractive as a base for sales to Europe, and / or of a shift from greenfield to asset investing, reflecting that the UK is still regarded as a safe haven. London in particular remains attractive to investors. While interpretations differ, there is general agreement that a healthy UK economy requires a far stronger greenfield inward investment picture than is currently the case.
Questions under discussion
In what sectors should the UK specifically be looking to attract significant new greenfield inward investment?
Is the transition to net zero a particular opportunity?
To what extent is better market access to neighbouring countries required for the UK to recover investment particularly in manufacturing?
How important is stability in regulatory policy?
How can we ensure all regions of the UK are as attractive for inward investment as London?
Policy Options
Trade Unlocked 2023’s policy partner, the UK Trade and Business Commission, has recently published a comprehensive report containing policy recommendations to the UK Government.
Policy options to improve the UK’s ability to attract FDI included a policy of ‘Alignment with EU Standards and Regulations’, highlighting the predictability that international companies require for major investments in greenfield capacity. For example, to know that the UK will align with EU manufactured goods regulations. Specific recommendations included:
“Enhance cooperation with the EU in the pursuit of shared net zero targets, focusing on joint initiatives, research, and investment in low-carbon technologies and energy infrastructure.”
“Ensure the right skills are in place, including to support inward investment”
“Deepen existing relationships including for the purpose of seeking greater foreign investment”
“Prioritise promoting soft power assets, including world-renowned universities and research institutions, to attract foreign investment”
“Strengthen Transatlantic dialogue, including to seek opportunities for increased investment”
“Work with devolved governments and city-region mayors to actively seek to attract inward investment for new production facilities across the country.”