Economy: Overseas Trade Deficit

Lord Leigh of Hurley Excerpts

Wednesday 25th May 2016 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, I emphasise, as I tried to do in my opening comments, that the current account deterioration is not being driven by a deterioration in the trade deficit. In fact, our trade deficit has been relatively stable at around 2% of GDP for the last seven years.

[Lord Leigh of Hurley (Con)]

My Lords, the Minister is right to say that the deficit is caused by the imbalance in FDI. Does he agree that the way to address this is to encourage industry to divert investments away from low-yield FDI into high-yield areas, such as China, which currently represents less than 1% of our overseas investments abroad?

[Lord O'Neill of Gatley]

I am very grateful for the accurate suggestion by my noble friend Lord Leigh as to what is really going on below the data. I emphasise—as, rather generously, Ernst & Young did yesterday in a very important report—that the recent deterioration is due to the growing attractiveness of the United Kingdom, especially areas outside London, in the minds of investors all over the world. Narrowing this deficit requires us to invest more in other places in the world that give a higher return.