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By Baroness Smith of Llanfaes
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The government must act more like a business to attract investment

Department for International Trade

3 min read

Attracting more foreign direct investment into the UK is complex. However, after speaking with over 165 companies, politicians and civil servants over the last six months for my review of foreign direct investment, there is a simple maxim under which my recommendations fall: to succeed in attracting more investment, the government needs to act more like a business.

Our heritage, culture, financial sector and legal system – which have attracted foreign investment into the UK historically – have not changed, but interest in businesses relocating here has. 

Most of our global competitors have around 12 per cent of gross domestic product (GDP) in business investment compared to our 10 per cent. That two per cent difference translates to around £50bn a year, not counting the missed opportunities for skilled jobs, increased growth and greater tax receipts to fund public services.  

I am grateful that earlier this year the Prime Minister and Chancellor asked me to conduct this review, and I am even more grateful that they have not only accepted my recommendations but put them at the heart of the Autumn Statement.  

Our response to investment is simply too slow and cumbersome to compete in our modern world

Having been in business myself for 30 years – as a Conservative and business minister – I have never believed that more government is the answer to growth. In speaking to business, it is clear that too often the systems created by successive governments provide uncertainty with ever-changing priorities. Well-meaning but risk-averse civil servants create barriers that act as a tax rather than incentive on investment.  

Many colleagues will have experienced companies keen to invest in their local area but who ultimately give up, or don’t bother starting at all, as they are put off by the complexities and time it takes to complete necessary steps.  

Our response to investment is simply too slow and cumbersome to compete in our modern world. However, with the right structures set out in my recommendations, government used in the right way will be agile and business-minded, attracting a greater share of the prize on offer.  

A new Business Investment Strategy will provide certainty on the UK’s priorities, and a dedicated senior minister working across departments will break down silos and problem-solve – similar to any other business.  

We must provide a tailored, responsive and comprehensive offer that meets contemporary investors’ expectations, and we must allow civil servants to identify and back winners. We should harness the metro mayors, drive regional growth and strategically target industry, demonstrating we are not only open for business but willing to work in partnership to see firms thrive in the UK. 

We know that when the government invests, the private sector follows, and that £1 of government investment can unlock between £7 and £9 of private sector investment. With a can-do approach, we can achieve great things in partnership with business.  

This review has been created by business, for business. I am incredibly grateful for all the time and experience shared with me by businesses of all sizes and sectors. 

Business and government want us to succeed in seizing global opportunities. Working together, we have every opportunity to deliver: on greater investment, more good jobs and securing our position as a leading global economy.

Lord Harrington, Conservative peer and author of The Harrington Review

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