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The Parliamentary Under-Secretary of State for International Trade (Mark Garnier)
I thank my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) for securing the debate. It is encouraging to see him coming along, and he has been supportive of the work of the Department for International Trade since he became a Member of Parliament.
The Prime Minister has been absolutely clear about this Government’s ambition to build a global Britain, which is about being the most passionate advocate for free trade in the world. That means championing British business in global markets; remaining a hub for global inward investment and a source of outward investment; and building a competitive trade policy for when we leave the European Union. I have been struck by one thing in the debate, which is that everyone across the House seems to believe in that idea of global free trade and a global Britain. It is encouraging to have no protectionist dissenters among us in Parliament, and that is a good thing for this country.
For the first time since 1983, a Department dedicated to international trade exists to drive forward that global ambition and meet the global challenges that face us. Personally, I am delighted that, following a departmental reorganisation, I am now the Minister for Investment, covering foreign direct investment and a renewed emphasis on overseas direct investment out of the country. Responsibility for FDI, which was previously held by UK Trade and Investment, now falls directly under the remit of the Department for International Trade—we are the Department responsible for going out and harvesting opportunities from around the world and bringing investment to the UK.
We intend to leverage our presence in 108 markets around the world—we are in 179 diplomatic posts in 108 countries—where we will harness the capabilities of the most revered diplomatic network to bang the drum for UK plc to overseas investors. Trade and investment is a key pillar of the Government’s industrial strategy, and I will convene colleagues from across Government to ensure that we target investment in the right areas and build an economy that works for everyone throughout the UK, including in all our devolved regions.
As we have discussed, FDI creates jobs, develops our skills and makes us more innovative. Global investors do not simply provide capital, but facilitate the transfer of technological know-how and new ideas, which increase our skills base and our productivity. Billions of pounds have poured in since the referendum from the likes of Toyota, Facebook and Google. To respond to the point about Japan made by the shadow Minister, the hon. Member for Sefton Central (Bill Esterson), FDI from Japan actually rose in 2016-17, with new jobs provided from Japan rising from 2,600 in 2015-16 to more than 3,500. Global investors therefore continue to see opportunity in the UK. They realise, as the Government have said all along, that Britain remains open for business.
The Department for International Trade was established just over a year ago. As I said, this is the first time since 1983 that we have had a Department dedicated exclusively to promoting trade policy and investment. That was as a consequence of the EU referendum result. Our purpose is absolutely simple: to turn the UK into the most passionate advocate for free trade.
We have heard a number of people speaking about the changes brought about by Brexit. I for one was a very passionate remainer; I campaigned fervently to stay in the European Union. As a Minister in the Department for International Trade, however, I absolutely recognise that we have enormous opportunities around the world that we must go out and seek. As last night showed us, we must not disrupt the will of the electorate and try to frustrate the Brexit process. We must realise that the remain side lost and that we must get on with this, embrace the opportunities, and not hold back and come up with a fudge that prevents us from striking new free trade deals with countries which we could not otherwise do.
The DIT promotes the UK as a destination for investment by providing specialist support for foreign investors in 60 markets worldwide. In 2016-17 we supported the creation or safeguarding of more than 91,600 jobs through our work with foreign direct investors. That equates to nearly 50 new and safeguarded jobs per project that we undertake. A key part of our investment approach is to leverage the power of the GREAT Britain campaign, the Government’s flagship international marketing and branding platform for the UK. It represents the whole of the UK and is present in more than 144 countries. The GREAT campaign effectively signposts the wealth of opportunity in the United Kingdom, including Northern Ireland.
In January we launched the Invest in GREAT Britain and Northern Ireland international campaign to promote the UK as a natural choice for overseas investment. Since its launch, the campaign has generated more than 600 inquiries, which have so far resulted in 89 qualified leads for investment into the UK. The campaign’s focal point is a new website—invest.great.gov.uk. One of the key aims of the marketing activity is to direct traffic to the website, where prospective investors can find out more about the UK as a destination for investment.
We have a strong global footprint. The UK leads Europe in foreign direct investment and is third in the world for inward FDI stock. DIT welcomed a record-breaking number of FDI projects to the UK in 2016-17, at 2,265—up 2% on 2015-16. The level of FDI stock in the UK is currently at £950 billion. Inward investment into the UK is estimated to have created and safeguarded nearly 108,000 jobs in 2016-17 alone.
According to official figures, just 1.1% of registered non-financial businesses in the UK are owned by foreign investors, but they account for 34% of annual turnover and 38% of gross value added. Only one European country featured among the top six individual countries of origin for foreign investment projects in 2016-17. The USA was our largest source of investment. American FDI stock in the UK stands at £252 billion and accounts for 27% of inward investment stock. The whole of the UK continued to attract FDI, with parts of England and Scotland seeing growth above the national average. I am pleased to tell my hon. Friend the Member for Mid Dorset and North Poole that the south-west had one of its strongest annual results in 2016-17, with a 13% rise in FDI projects to 101.
Although those figures look very good, it has been said that the jobs numbers are not keeping pace with the increase in the number of investment projects. It is fair to say that we need to do more work to analyse how those numbers are collected. The data are collected on the basis of investment projects. If, for example, somebody invests in a new factory in the midlands costing £50 million, they would have the same representation as somebody opening a chip shop in Barnsley for £50,000. We need to do more work to understand exactly how much money is coming in and how many jobs are being secured.
More productive businesses coming to the UK will not necessarily employ more people. Higher productivity does not necessarily increase the number of people employed, but we see different patterns, from one year to the next, with different types of business coming to the UK. Ultimately, we want to create the wealth of this country, which includes good, high-paying, productive jobs; that is absolutely crucial to what we do. Moreover, and I will return to this point later, we are keen to spread that activity throughout the entire region—most people say from John O’Groats to Land’s End, but I say from the Scilly Isles to Shetland. We are absolutely determined to ensure that that work leaves no part of the United Kingdom untouched.
Global investors repeatedly say that the strength of the UK’s economic fundamentals is the reason they choose the UK. They cite our political and regulatory stability, our transparent rule of law, our low regulatory environment and our low-tax economy, including some of the lowest business tax rates in the G20. We have some of the best universities in the world—and now the top two—feeding a highly skilled workforce and fostering world-leading R and D hubs across the country. We speak the international language of business, and the UK offers a perfect time zone for global trading, where someone can do business with China in the morning and with the US in the afternoon. There is also our cultural diversity and quality of life—but not, sadly, our weather. Those economic fundamentals mean that the UK is now considered one of the easiest countries in the world with which to do business. It is ranked seventh, according to the World Bank. At the start of 2016, the UK had 1 million more small businesses than it had in 2010—a total increase of 23%—and our tax system ranks in the top 10 most business-friendly in the world.
The prospect of taxation was raised, and the shadow Minister responded to the prospect of a Labour Government introducing higher taxes. He was absolutely right that if he adheres to the manifesto pledge from the recent election, the business tax rate would merely rise back to where it was at the beginning of the coalition Government.
Mark Garnier
Indeed, lower. A really important point is that businesses look not necessarily at absolute numbers, but at the direction of travel. One of the things behind businesses coming to this country is the fact that the direction of travel for businesses taxes—which, frankly, raise only about 8% of total taxation—is downward. That creates a greater opportunity for business. If businesses see that direction of travel reversing and taxation going up, they will not know where it will stop. The problem is the direction of travel, not the absolute numbers.
Bill Esterson
I do not want to wander too far from FDI, but most businesses I talk to tell me that improving the incentives in taxation is more important to them than dealing with the taxation of the results and successes. It is the tax level in business rates that needs reform, not the rate of corporation tax. Does the Minister agree?
Mark Garnier
The hon. Gentleman is right that taxation is not simply about the headline corporation tax rate. It includes, of course, business rates, and businesses that operate factories do not necessarily pay the higher business rates for retail spaces, which are calculated per square foot. It is also about national insurance and various other taxes, so we need to bring together a package. Taxing a population too much stifles growth and investment into that economy. The whole package has to come together to ensure that the businesses that invest in the UK can be confident that the Government recognise that those businesses’ taxes—not just business rates, corporation tax and national insurance, but all the money that gets paid to workers, who then pay tax and spend money and pay VAT—buy the hospitals, schools and public services that we value so much in this country. It is vital that we get the business environment right and attract businesses to this country to ensure that we continue to provide the public services that all of us, across the whole of the House, hold so incredibly dear. We do not want to lose any of them.
The hon. Member for Livingston (Hannah Bardell) talked about business certainty and the uncertainty of Brexit, and so far people like me, the remainers, have been proved wrong—thank goodness, because none of us wants anything to go wrong with our economy, and we are very keen that things progress. The prospect of a second independence referendum, which the Scottish National party could put forward, although Westminster would not necessarily recognise it, is creating more uncertainty. Businesses need to know what is going to happen. One thing we can say about Brexit is that it is a quantifiable uncertainty: we know that, in the worst-case scenario, our trading relationship will go to World Trade Organisation rules.
What was not decided and resolved during indyref 1 was the fundamental issue of what currency Scotland would use. I think it will be very difficult for businesses to invest in Scotland if they do not even know in which currency they will do their accounts and charge their customers. I do not want to castigate the SNP; I want to work hard with Scotland—and, indeed, Northern Ireland, Wales and all the regions—to ensure we are working together to the benefit of the whole of the country. We see Scotland not as a different part of the United Kingdom but as our friends, whom we want to support. I am incredibly proud, as Minister with responsibility for the food and drink sector, that I spend a lot of time dealing with the Scottish Whisky Association, which generates £3.9 billion-worth of exports and benefits all of us in this country. That is fantastic. We are going to do whatever we can to support the devolved Administration in their efforts to boost investment in Scotland. We do not see Scotland separately; we will always be there to help, and we are doing as much as we can to ensure investment comes into Scotland.
My hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) raised our industrial strategy, and said that we need to look at science research and innovation, the skills agenda and infrastructure. The industrial strategy is about delivering those incredibly important things, and we need to look at supporting business to grow—also in the industrial strategy—and several other areas. My hon. Friend referred to three important and fundamental points, and the industrial strategy is part of the package. In some respects, the Department for International Trade is the sales force of the country. We are the hard-working salesmen with a trolley bag behind us going through airports around the world making sure we are banging the drum for British business. At the end of the day, the product that is being sold is the industrial strategy, plus a number of other items. We are out there. Of course, we feed back and say what the international world is saying; that is very important.
The industrial strategy is about building an economy that works for everyone, improving living standards, creating good jobs for all and cultivating the conditions for competitive, world-leading businesses to start and grow. Encouraging trade and investment is one of the key pillars of the industrial strategy. The right investment in the right areas builds world-leading sectors and develops our skills base. Targeted investment also strengthens our supply chains, putting UK companies in a better place to work together and present a “Team UK” offer for some of the biggest global contracts.
The industrial strategy will use our record investments in infrastructure to unlock and drive growth in every part of the country and it will use major new investments in research to support innovative businesses across the country. I want to reiterate the point that we are a Department for the whole of the UK. We will look to attract investment across all of the English regions, all of the devolved regions, including Greater London, the midlands engine and the northern powerhouse, and, of course, the south and south-west. We will also work with our partners in the devolved Administrations, because investment in one part of the UK has a positive knock-on effect for all of us in every part of the UK.
In March, I launched the midlands engine investment hub, which acts as a focal point for FDI. Its priority is developing and articulating a pan-midlands FDI offer. The northern powerhouse investment taskforce was established in 2016 as part of the cross-Government northern powerhouse strategy, of which trade and investment is one of the main strands. FDI into the northern powerhouse continues to rise. In 2016-17, it grew by 5%, attracting 348 projects and creating nearly 15,000 new jobs.
I think it is fair to say that the south of England looks to the super-region, and quite a significant amount of FDI comes into the region near London because London is a natural hub. However, I have recently been to visit boat-builders as far afield as Falmouth, just about 20 miles from the end of the country, where we see truly global brands such as Pendennis yachts building luxury yachts for oligarchs and big investors around the world. It is a great topic of ridicule: those who have yachts and those who have not. None the less, those who build yachts provide jobs. It is important to remember that building those luxury boats brings in a lot of money. There are some fantastic businesses down there—Rustler Yachts is another—and we are all about promoting every one of those businesses. It is important that my hon. Friend the Member for Mid Dorset and North Poole can take back to his constituents that we are working hard on that.
The shadow Minister also made a great deal of reference to the Automotive Council UK, the car industry and what is going on in terms of investment. It is right to highlight the car industry, which is an amazing example of a great success story in the UK. By the way, we can look at the experience of Jaguar Land Rover as a historic example. It has always been a great British brand that has built some fantastic cars, but it is the Indian production techniques that have turned it into a truly profitable and successful business. The foreign direct investment coming into JLR and continued investment of the UK demonstrates more than anything else how productivity and jobs are increased by FDI.
Bill Esterson
The Minister is right about JLR, the value of the FDI from Tata and the partnership between Government and investor in achieving that. Is he aware of comments from the head of JLR last week who said that, should we end up paying the tariffs implied by the WTO, that would cost his business £1.1 billion extra a year? Does he share my concern? I urge him and his colleagues to do everything they can to avoid ending up in that situation.
Mark Garnier
Absolutely. I met the chief executive of JLR and he shared those concerns with me. We have concerns—actually “concerns” is the wrong word. We are striving to have a Brexit that feels, in every commercial sense, exactly the way things are at the moment.
It is worth bearing in mind that the history of trade negotiations has been one where we have started with a bad position and tried to work out how to go forwards. People go into a negotiating room and say to the two people across the table, “This is how we trade”—let us say it is under WTO terms—“How are we going to improve this?” What is fascinating about the proposed free trade arrangement with the European Union is that, for the first time ever, people are suggesting that we will have negotiators going into a room, saying, “We have the best outcome that we could want in terms of free trade. How are we going to make this worse?”
It is in everyone’s interests to maintain the trading relationship we have, whether we be in the UK or the European Union. It is a different dynamic, but from the conversations we have with people and businesses in the European Union—bear in mind that we also talk to them about what they want from Brexit—it is crystal clear that no one wants to run into a position where WTO tariffs are being charged. We are doing everything we can to ensure that we get to a tariff-free and customs-free outcome of Brexit.
Hannah Bardell
On tariffs, does the Minister share my concerns and those of others, including business, about the comments made by the EU negotiators that no progress has been made because issues such as the border in Ireland and the position of EU nationals have not been sorted out, and trade agreements cannot be struck until that point? Similarly, his boss has said that the UK Government do not have the capacity to strike trade deals. Surely that is of significant concern to him and to others.
Mark Garnier
The hon. Lady is mixing up a couple of things. The Department for International Trade is doing trade deals, but not the one with the European Union; that is being done by the Department for Exiting the European Union, which does have the capacity to strike that trade deal.
On the wider piece, we are currently having conversations with 15 countries where we are looking potentially to strike trade deals. It is worth bearing in mind that America finds running three trade negotiations at a time slightly taxing and would not want to do more than that. We are trying to do 15, and we are getting on with it. We have 350 trade negotiators and have taken on Crawford Falconer, who has an extraordinary amount of experience. We have therefore upskilled to do that.
To return to the automotive industry, the shadow Minister is right. Since Brexit, we have seen Nissan commit. We have also seen Toyota commit, and we have seen BMW commit to build electric motors in Cowley. That is significant. On the question, “Is Brexit holding this up?”, it is not.
It is widely agreed that FDI has a positive effect on the host country, especially when the supportive business environment is strong. That increases productivity. The Department for International Trade will lead the way in convening the whole of Government to ensure that the UK remains an attractive destination for FDI in Europe and one of the most attractive in the world. A global Britain will always welcome foreign investment for the innovation it spurs and the skills it brings.
As a vital part of the Government’s industrial strategy, inward investment will fuel science and innovation, upgrade our infrastructure and cultivate the world-leading sectors that will allow our businesses to thrive on the global stage. The debate has demonstrated the important role that foreign investment plays in building a stronger and more sustainable economy that works for all. While we have one or two differences of opinion, it seems that the House is united behind the idea of a global Britain.