Foreign Direct Investment to the UK

Lord Mountevans Excerpts

Tuesday 10th September 2024 Lords Chamber

[Lord Mountevans (CB)]

My Lords, I add my congratulations to the noble Lord, Lord Harrington, on his splendid review. Noble Lords may know the City is close to my heart. I spent my career in global shipping markets. But my ship really came in, as it were, when I was elected as Lord Mayor. In that role, I represented UK plc around the world, promoting UK exports, particularly financial and professional services, and highlighted the attractiveness of the UK as a place for international investment. It is with that background that I turn to the subject at hand.

Following the views of the then Chancellor, the review focused on five key growth sectors in the UK: green industries; advanced manufacturing; life sciences; digital technology; and creative industries. The list does not include financial and professional services, arguably Britain’s most important and successful sector. I urge the new Government not to overlook it. I wonder if sometimes Governments have felt that FPS can look after itself. It must be high among Government’s promotional priorities; a dynamic FPS is fundamental to successful business.

At the forefront of our minds must be the UK’s competitors, from Ireland to Singapore and those in the Middle East—each with powerful investment agencies focused on attracting FPS. By contrast, here in the UK, there are a wide range of organisations promoting FPS and other FDI. A change in targeting support could give these organisations far stronger impact. We know that improving FDI helps growth. For example, in 2023 the UK attracted FDI in 222 FPS sector initiatives involving 177 foreign companies valued at £1.1 billion. FDI in 2022 alone created nearly 15,000 jobs. Over half of the jobs created in 2021—the last year for which I could find figures—were outside London.

City of London Corporation research indicates that improving support for financial and professional services within FDI could significantly increase growth, adding an additional £0.7 billion to the economy by 2030. The UK has a great potential in FPS. We have our skills and expertise; we are a great place to connect to global talent and markets; we have strength in sustainable investment and green finance; and we have our pioneering fintech sector. This means that the UK has a strong offer across the FPS piece.

I offer four ideas for how we can expand and strengthen the position. First, there is the FCA’s innovation of a sandbox, where companies can experiment with new ways of doing business while under close, agreed regulatory oversight. The UK has led the way in creating new opportunities for services firms to innovate. This helps to attract growing and vibrant business to the UK. The UK can be a world leader again by establishing multijurisdictional sandboxes, which would help develop regulatory approaches across jurisdictions in response to emerging technologies. This would act as a catalyst for increased foreign investment in the UK.

Secondly, we should be embracing emerging parts of the services industry, such as carbon markets. These markets have the potential to position the UK as a global centre for carbon market activities. With this comes the opportunity to attract foreign investment in UK professional services, capital markets and trading activities. The City of London Corporation’s UK carbon markets forum seeks to highlight the importance of this sector.

Thirdly—perhaps the Minister will be attracted by this proposition—we should create as a pilot an FPS investment hub as the first step to creating a stand-alone cross-sector national investment agency. This should be established as a joint venture or public-private collaboration. It should be arm’s length from the Government. This would create focus for foreign investors wanting to direct investment to the UK.

Fourthly, the much-applauded review of FDI from the noble Lord, Lord Harrington, shines a light on how the UK might strengthen and deepen its attractiveness to FDI, but perhaps we could go further. The establishment of a financial and professional services strategy would help UK and overseas businesses to see a road map of how the Government may offer help and support. By having a single codified strategy, foreign investors might be galvanised into directing their investments to the UK.