According to Jeremy Hunt’s key adviser, the UK faces a “big” threat from US green megasubsidies. It also needs a culture change to attract inward investment.
Lord Richard Harrington said that Britain faced a tough competition, including from the US, France and Ireland, and needed to increase state support for industries like life sciences and green technologies.
Harrington leads a review of Hunt’s plans to increase foreign direct investment in the UK. According to analyses, the value of this investment has fallen every year between 2016 and 2021.
AstraZeneca made a decision in February to build its $360mn plant in Ireland instead of Britain. The pharmaceutical company was unhappy with the UK’s high tax rate.
Harrington refused to comment on whether the Brexit vote in 2016 had made it more difficult to attract inward investment. However, the April increase in UK Corporation Tax rates from 19% to 25% has not helped. Harrington, a strong supporter of this idea, will encourage the chancellor and prime minister to adopt a more proactive state.
Harrington stated that the rules of global capitalists were changing. He cited President Joe Biden’s $369bn subsidy scheme for green industries , which is enshrined by the US Inflation Reduction Act.
He added, “It is a serious threat for us.” We must react to any move made by a rival to attract investment. We must change the culture of government.
Harrington, who reports to Hunt in September admits that Britain cannot compete “pound-for-dollar” with the US. “But do I believe we can improve our offer of investment in this country?” “I absolutely do.”
The pro-European Conservative member, who was kicked out of his party by the former premier Boris Johnson over Brexit, now wants foreign investors looking at the UK to have a “one stop shop” within the government. Harrington thinks that each FDI should be managed by a “account manager” who will bring together the British offering on topics such as grants, energy and skills, planning, visas, etc.
The government will create a new “entity” that is responsible for dealing directly with investors, and for the successful completion of projects. This eliminates the need for potential investors to negotiate Whitehall bureaucracy.
Harrington says Britain can learn a lot from the slick operations of inward investments in Ireland, Franceand Singapore. He hopes that Hunt will invest more in key sectors.
The chancellor wants to promote five industries: technology, creative industries, life science, advanced manufacturing, and green.
Previous business secretaries, including Labour’s Sir Peter Mandelson Liberal Democrat Vince Cable and Tories Greg Clark said that if the Government has an Industrial Strategy, it would be hard to detect.
Harrington, former business minister and self-declared “Greg Clark fan”, said that the government shouldn’t pick winners. Instead, it should “pick the race” it wants to win and “put muscle” behind it.
Some Conservative MPs believe that Hunt is more open to the idea than Sunak, and that Harrington’s nomination will give some political cover for this approach.
Harrington said, “Capitalism is evolving in a way where governments get actively involved in sectors that they want to develop in their country.” “We ignore it at our peril.”
Harrington, when asked if Hunt would adopt a brand new industrial strategy, said that it was merely a matter of words whether you called it that or not. “A business investing strategy.”
Sunak, in his capacity as chancellor of the country, supported the scrapping, by 2021, of the old industrial strategy developed by Clark. Kwasi Kwarteng was the business secretary of the time. He called it “a pudding without a theme”.
Rachel Reeves, the shadow chancellor, has supported Biden’s industrial policies and the idea of an active state in the economy.
According to a House of Commons Library analysis of official statistics, the value of foreign investment in the UK has fallen every year since the peak reached in 2016, a period when the data were skewed due to four large acquisitions of British firms. This trend will continue until 2021.
Johnson’s government established an Office for Investments in 2020 in order to attract high-value investments. This included a £10bn deal with Abu Dhabi Mubadala Investment Company, which will invest money in UK schemes such as green energy projects.
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