UK Prime Minister Rishi Sunak has been urged to appoint an investment minister who could help the government attract foreign direct investment (FDI), it has been reported.
Citing a report to be published ahead of next week’s Autumn statement, the Financial Times indicates that a series of proposals is to be put forward, including the creation of a high-level minister to oversee the new FDI strategy.
According to the FT, the minister is expected to have cabinet rank, but the government is reluctant to introduce another secretary role after reshuffling his team on Monday.
In addition, the report, produced by Lord Richard Harrington, a Conservative peer, is said to suggest creating a cross-government committee chaired by the chancellor and in charge of setting an investment plan to attract FDI in the UK.
The Office for Investment, which is a government unit set to attract significant FDI projects into the UK, would similarly see an increase in powers and would report to the investment minister, one official briefed on the plan told the FT.
According to a parliamentary research briefing published in June, the value of FDI in the UK was -£51.7bn (-$63.5bn) in 2021, down from £34.8bn in 2020. Negative flows occur when more money is going out than coming in, indicating things such as disinvestment, discharges of liabilities, company dividends exceeding recorded income or company operations being at a loss.
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Overall, the value of inward FDI in the UK was £2tn, a slight increase from 2020.
FDI plays a critical role in the levelling up of the country. While FDI levels in the UK have been gradually increasing over the past few years, investors mainly concentrate their investment efforts in a few regions in the UK.
For instance, London accounts for just under one-quarter of Britain’s GDP, yet it receives 34.9% of the country’s inward greenfield FDI. The UK’s capital and business hub was home to 411 international company expansions in 2022. Overall, it ranks as the third-largest FDI recipient city, just behind Dubai and Singapore.
In a comment published by Investment Monitor in May 2021, Neil Rami from West Midlands Growth Company said the UK’s imbalance in attracting FDI across all regions of the country “is reinforcing economic disparities at a heightened time of overseas competition post-Brexit.”
Rami highlighted that is due to the “varying levels of institutional capacity” to attract inward investment across different regions, adding: “Sub-nationally, each of the devolved governments has an investment promotion agency – namely Invest Northern Ireland, Trade & Invest Wales, and Scottish Development International – complete with discretionary powers, such as the ability to attract FDI projects through grants.”
“Undoubtedly, devolved economic decision-making is integral to future UK prosperity, but the current uneven distribution of IPA autonomy means that some parts of the UK are much better equipped to attract investors than others,” Rami said.