Britain must resist unwinnable subsidy races and instead fix its foundations
3 min read
Our economy is anaemic. Infrastructure is crumbling. Electricity prices are among the highest in the developed world. For a country with our history, our talent, and our potential, that’s simply unacceptable.
These aren’t just unfortunate outcomes; they’re the result of decades of short-term thinking and reactive politics. This government has struggled to tackle the root causes of our stagnation. There’s a complacency at the top – a belief that tweaking around the edges will somehow lead to transformation. It won’t. Without bold, radical action, we’ll continue missing housing targets, dragging our feet on productivity, and falling behind our global competitors.
Whether Keir Starmer’s Cabinet reshuffle improves matters remains to be seen. Some changes are disappointing; Baroness Gustafsson was a respected voice for business, and her departure leaves a gap. Jason Stockwood has big shoes to fill. I hope Peter Kyle brings the energy and innovation he showed at the science department into his new brief at business and trade.
But shuffling the deck only matters if there’s a real will to deliver.
One thing we know is this: foreign direct investment (FDI) can help boost productivity by acting as a channel for skills, innovation and capital, and so it should be a priority to ensure that Britain becomes a more attractive destination for foreign investors.
At the moment, Britain is sending the wrong signals. Investors see a country that dithers, delays, and dilutes. The Planning and Infrastructure Bill, for example, was watered down when strength was needed.
And so investors ask the obvious question: if Britain won’t invest in itself, why should we?
Britain must fix the foundational problems that deter investors. Our archaic and cumbersome planning system is a national embarrassment. We need to set hard deadlines for statutory consultations and make brownfield sites readily available and connected to energy infrastructure through a certified kitemark process.
On energy, we cannot afford to fall further behind. We must find a new mechanism to reduce our world-leading electricity costs. And we need to speed up nuclear development with the deployment of small modular reactors.
The UK has also got to resist the temptation to engage in unwinnable subsidy races. The US, China and EU are signalling trillions of dollars and euros in state aid for their industries. We would be foolish and fiscally irresponsible to try and outspend them. A subsidy is a quick fix; but instead, Britain really needs strategy.
That means making the investor experience as frictionless as possible. It means providing clarity on decision-making authority by either centralising it in Whitehall or devolving it to regions with genuine power to act.
We need an improved single point of entry – a genuine ‘concierge service’ for investors across a wide variety of sectors. That means improving support for the Office for Investment and staffing it with professionals who truly understand the motivations of investors.
We must get much smarter about tax policy. First, a five-year reduced tax rate of 10 per cent for direct foreign investments in critical sectors such clean tech, quantum, and biotechnology. Second, offering 100 per cent first-year capital allowances, or full expensing, for investments in those same areas. These incentives will show investors that Britain is ready for business.
That’s why I commissioned Caudwell Strong Britain, a two-year research programme at the Council on Geostrategy, an independent think tank. Its latest report – Fixing the Foundations by Dr Mann Virdee – set out recommendations to make Britain a more attractive destination for FDI.
The UK has the ingredients for success, a world-class science and tech ecosystem, a relatively flexible labour market and a strong history of innovation. But the world is transforming at a remarkable pace, and Britain cannot afford to be watching from the sidelines.
