Lord Hunt of Wirral
To ask His Majesty’s Government what steps they are taking to incentivise foreign direct investment into the United Kingdom.
The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)
My Lords, this Government are firmly committed to ensuring that the UK remains a leading destination for foreign direct investment. We are strengthening stability and certainty for investors, advancing planning reforms to unlock growth and championing our globally competitive sectors. Working closely with partners across the nations and regions, we are developing a clear, investable opportunity, so that inward investment supports productivity, high-quality jobs and long-term sustainable economic growth throughout the United Kingdom.
Lord Hunt of Wirral (Con)
My Lords, we all want to see more inward investment, yet the figures on the Minister’s departmental website show a fall of about 12% over the last year. We hear from those businesses that are thinking about investing in the UK that they are very concerned about the £1 billion in additional costs that were imposed on business under the Employment Rights Act. There is now talk of the trade unions pressing for another employment rights Act, which would impose even more burdens on business. What is the Minister going to do about this?
Lord Stockwood (Lab)
The reason I have come into government is to try to balance the need to grow our economy with making sure that our economy works for all sectors and parts of our country. Creating an economy that delivers for businesses and for working people requires some changes. To put these into perspective, total annual employment costs in the UK were £1.4 trillion in 2024, and the costs associated with the Act that the noble Lord mentioned are equivalent to an increase of less than 0.1% of that. Those reforms are not about burdening businesses for the sake of it; many employers already offer good terms and conditions that go well beyond what the law requires, and will consequently be less impacted by this package. The Act is designed simply to help level the playing field, so that responsible businesses and employers cannot be undercut.
Lord Fox (LD)
My Lords, the Minister is no doubt aware of recent research published by King’s Business School late last year which estimates that foreign direct investment is 12% to 18% lower than it would have been had the United Kingdom not left the European Union. Does the Minister agree with me that the best way to make his job to attract investment into this country easier is for us to eliminate from our economy many of the bad things that Brexit brought, as quickly as possible? We could start by negotiating a customs union.
Lord Stockwood (Lab)
Hold that thought.
In the seven months I have been doing this job, the UK has clearly been redefining its position in the world, post Brexit and Covid. I am proud to be part of a Government who are out there doing trade deals, whether with India, the Gulf states or the US—ours is its first deal globally. Undoubtedly, renewed engagement with our closest trading partner, which represents 41% of exports from the UK and high figures for our direct investment, is critical to our long-term success. I would not go as far as the noble Lord suggests, but I agree that we are now in a position to have constructive and equitable conversations with our European partners.
Viscount Hanworth (Lab)
My Lords, the UK has been a premier destination for foreign investment. This has enriched the financial sector, which has mediated the inflows of capital. However, in the process, we have experienced a loss of economic sovereignty. We no longer own our airports, seaports, energy industry, water industry, rolling stock and much else besides. Moreover, the heightened demand for sterling has led to its overvaluation and to the collapse of our export industries. What can the Government do to lessen the detriment of foreign direct investment?
Lord Stockwood (Lab)
We are trying to balance the need for foreign direct investment to ensure that our industrial strategy is fully capitalised. One answer to the question is that we welcome foreign direct investment from partners around the world that are aligned to our strategic intention, but the greater opportunity is to access the reforms made through the Mansion House Accord and Sterling 20 to ensure that our pension capital is utilised in funding and capitalising our industrial strategy. I do not agree with the noble Viscount’s premise that foreign direct investment is inherently bad, but there is a huge opportunity in our pension services and providers to make sure that our pensions reap the benefits of not only the innovation that we are going through but the economic growth.
Lord Wigley (PC)
Is the Minister aware of the key role that was undertaken over a 25-year period by the Welsh Development Agency, which helped attract more than 200 businesses from the United States and more than 50 businesses from Japan to invest in Wales? If, following the coming election to the Senedd, the next Welsh Government take steps to establish a similar agency, will the UK Government co-operate fully with them in fulfilling those objectives?
Lord Stockwood (Lab)
What has been rewarding since I took this job on seven months ago is the ability to work with all the devolved nations, realising that every part of our country needs to benefit from the economic development that is coming through. We have members of our Office for Investment teams throughout the United Kingdom and the devolved nations, and I look forward to working with any partner that can encourage growth and innovation around our industrial strategy.
Lord Redwood (Con)
Banning investment in new diesel or petrol vehicles, putting on very high energy taxes and having very high energy prices are a massive turn off to large sectors of industry worldwide. Will the Government lift the bans and lower the taxes and then we will have much more investment?
Lord Stockwood (Lab)
If anything is clear from the past couple of weeks, it is that energy sovereignty and controlling our own destiny when it comes to energy is critical. The macro environment and geopolitics are regrettable and unfortunate. They bring pressures on our energy, but security and the commitment we have made to low-cost renewable energy for the long term is where this Government will stay the course. The call for new fossil fuel exploration misses the point somewhat, in that the near-term pressures that we are feeling will not be solved by new exploration licences in the near term. We are committed to the net-zero goals and renewable sovereign energy powers, and that is where we hold control and our own destiny.
Baroness Winterton of Doncaster (Lab)
My Lords, as the UK trade envoy for Bangladesh, I am very aware of the need for accurate information about and strong promotion of the opportunities for foreign investment in the UK. Our diplomatic missions across the world do brilliant work on this, which I have seen at first hand. Can my noble friend the Minister assure me that the Office for Investment will continue to support these diplomatic missions in the work that they do and make the Treasury aware that funding those diplomatic missions in this work is very good value for money?
Lord Stockwood (Lab)
I thank my noble friend for the question. It is incredibly important that people understand that we have partnerships and relationships that go deep around the globe and that they are critically important. The trading relationships act as the gateway to having diplomatic conversations—and conversations where we might disagree with partners. The trade deal we did with India had a number of conditions that allow us to have difficult conversations on areas where we might not always see eye to eye. I agree wholeheartedly that these roles need to be protected. I commend all the people who work in the regions and in the Foreign Office’s global network.
Lord Sharpe of Epsom (Con)
My Lords, a report from the CBI and Energy UK found that 40% of firms have reduced investment because of high electricity costs, going back to a question that was just asked. Does the Minister accept that funding contracts for difference—subsidies through electricity bills—is making Britain more expensive and that key industrial sectors are becoming increasingly unattractive for investment, both foreign and domestic?
Lord Stockwood (Lab)
It is undeniable that there is a challenge in trying to get the balance between the energy sovereignty that I previously mentioned and the need to make us attractive in the short term. This Government are taking practical steps to reduce barriers, including targeted regulatory simplification, faster grid connections, planning reforms and action on energy costs. The energy-intensive industries exemption scheme provides 85% relief on electricity policy costs for eligible energy-intensive industries. The British industrial competitiveness scheme makes eligible firms exempt from green energy levies, and 7,000 companies come under that scheme. Trying to balance our need for sovereignty and attractiveness for investment is something to which we give careful consideration day by day.
Lord Roberts of Llandudno (LD)
My Lords, how confident are we in our relationship with the United States when we have a President who seems to change his mind from day to day?
Lord Stockwood (Lab)
It is clear that we are trying to retain long-term stability and our own attractiveness as a place for investment. The US is clearly a key partner; it has been historically and it will be in the future. We are trying to make sure that our global reputation does not focus on one relationship. I am certain that the trade deal that we are negotiating should bear fruit over the coming months.