Well, we've been putting a lot of money into the UK, so they have a lot of pockets of strength that they've been through a complex time politically, but if you look longer term, I think there are some interesting things going on here.
There was a boss of Blackstone, one of the world's biggest private equity investors, headlining the government's flagship investment conference just a couple of weeks ago, trying to attract investment and get more money in the country.
Hampton Court. No, last you were that, weren't you.
He was very christmasy and cold.
Everyone showed up.
You had sovereign wealth funds, you had the guitarian investment authority of a well run show, and they actually got real money behind it.
I remember having to do something for it at the one two years previously at the Science Museum, the first one, the inaugural. Yeah, it was quite awkward because I was asked to share something between the then Prime Minister Portions and Bill Gates and Boris announced the amount that Bill gwent Gates was investing in the country and he got
it wrong. And I remember not knowing how to adjudicate between Boris getting Bill Gates's quantum wrong Bill Gates was furious that he had been kind of under sold and this was the beginning of the investment summits. So but that was you know, that was very slick and very good as well. Though there has been some commentary recently about it takes so long to get some of these amounts that agreed at the time, but still it takes a while to get them actually into the country.
And I guess the UK still has structural problems right. It's not doing as well as it could in terms of productivity, in terms of worthy economies headed so you always have to make the case of why you'd invest in the UK instead of elsewhere.
Yes, and the gentleman we're going to hear from in a second, Lord Harrington. What's interesting about his review is the amount of cross party support it does seem to have, and lots of the commentary from Bloomberg and others has been around. You know, this is a decent package, but why has it taken so long?
Come to In the City Bloomberg's podcast, connecting you to the conversations and the stories shaping the world of finance and fronting like One our London studio with Alecrastratton and this week we speak with Tory peer Lord Harrington, who recently headed the government review into the UK's approach to attracting foreign direct investment.
Not Harrington, you've been around Westminster and UK politics for quite a while. You've proposed these investment changes. Why, reflecting on the last few years, or indeed thirteen years, has it taken so long do you think for the government to give you the mandate it did well.
I think government moves slowly. And the reality is capitalism has changed as far as investments concerned. From what I can see, it's moved from a belief in this country amongst certain sections of the Conservative Party that actually businesses not much to do with government. You move out the way, you reduce the taxes, and you provide an environment that the market will take care of itself. Well, the world
has changed now. Every other capitalistic country Western democracy, will include the Eastern Western democracies are actively going out to bribe in the companies to come there. Actually bribe sounds dishonest, but you know, incent them to do it with a package of money, energy, a site you know will rent free site or packages are skills, visas and everything else. And we've been very slow to react to that.
Hasn't it always been like that? I remember Emmanuel Macron rolling the red carpets for the banks in Paris.
Well, Macron is the exemplar of the active head of state. In fact, if I had fifty pounds for every person who told me that they've got Macron's mobile number and speak to him regularly about investment, I'd be a rich man. But I do exaggerate to make a point. You know, they've definitely been much more investment friendly, and I do think Rishi and is credit for this. I think he's done his best to try and counter that. For example, we had a very good global investment summit a couple
of weeks ago at Hampton Court. It was impressive. But the reality is of companies that want to invest in the UK. And I say companies I include sovering, well funds, pension funds, financial institutions as well as multinational companies. They find us very disjointed in our approach. It takes too long. They get written offers from other countries in thirty days. I mean one company told me who wanted eighty million
on a one point four billion investment. So actually on the scale of it not a lot that fourteen months later they hadn't heard whether you've got it or not. And this is the whole purpose for my report on foreign directing investment is to come up with a system of organization of government to make sure that doesn't happen. It's not just saying we'll throw a lot of money around, because we don't have a lot of money.
So how confident are you that these changes will be becoming to affect asap?
Well? All I can say is that Jeremy Hunt, the Chancellor, has assured me that they will. One of my main recommendations was an investment committee at cabinet level that that will convene in January. But it's all about reorganizing government in an investment friendly way. So the nearest comparison I could say to answer your question is that the first component is having a senior level investment committee kind of cabinet level, who is like the board of a bank,
laying out an investment strategy. If that sits, which it is in January, I hope everything will flow from that because there's not that much politics in it, the opposition of being I've spoken to Jonathan Reynolds, who's the Shadow Business Secretary about it and Rachel Reeves, and they've said publicly. I think Jonathan Reynold spoke publicly a couple of weeks ago at PwC saying that they support it. So our hope this is not politically contentious.
What happened to the UK? I've been living here more than twenty five years fifteen twenty years ago, all of European capital wanted to come to the UK. It's capital that wanted to be put to work because it had the rule of law, which it still has. I mean, it was just it made sense to put money here.
We definitely start for the point you've made English language rule of law. People like to live here, kids go to school and those cliche stuff. Yes we are fifteen love up. But after that I'm afraid things really But why? Because the government's very old fashioned. It's not organized in a way. You know, each department has different policy objectives.
The kind of elephant in the room or the department elephant in the room would be the Treasury, where I worked for a period. In my reflections are that they weren't hugely comfortable using UK public money when they thought that the private sector would do it. So I wonder whether you think that cultural change is possible.
I think so. I mean treasury orthodoxy, of which Rishi is a proponent of, is basically it's a begging bowl. If you allow all this stuff, it's just a begging well for companies that would invest anyway. Yep, you know that's mantra number one. And it's not stupid. It's been born about from experience. But the reality is in a business, you have to do what your competitors do. You know, we are not big enough to be market makers, were
market takers. It's not an insult. It's just we've got sixty million people and you know have got hundreds of million. So you do what your competitors do. And the competitors are incenting companies and foreign institutions to invest in them by offering them a package, some of which is money. Now, we're actually quite good at money, we really are. For example, when I was at Bays in twenty sixteen, we were spending about nine billion on research and development. We're now
spending twenty nine billion. I mean, it's not that the money's not there, but it's all over the place. It's in pots. It's challenges it's in competitions, it's in grants, and you know, it's very confusing for a company, very confusing.
But again it does the book stop with the Prime minister. So is it the political instability in the last five six years that means that business and investment were not top of mind when making government policy.
I think that's a fair point, I think, and I can quote some examples where take for example net.
Zero and just thinking about that mobile a.
Very noble policy objective. We did a lot of work when we did the Industrial Strategy, which I helped write a lot of people out right, I'm not saying I wrote it. It's like a huge tone, but I was part of it for various sectors. Take automotive, and we met with all of the automotive companies, scientists, economists, modelers, everyone you can imagine, and came up with a consensus that twenty to fifty was the year for the end of you know, buying internal combustion engine cars, et cetera.
Because the companies said they needed twenty odd years, et cetera. Lots of companies began to make programs around that for investment. Four years later, in twenty twenty, Boris and Grant Shafts at some conference announced that we were changing it to twenty thirty Again. It may be a noble policy objective, but from an investment point of view.
Forward to twenty years in a sentence a.
Few weeks ago, Rishi in a speech changed its twenty thirty five. Now again, I'm not saying that there's arguments for those policies, but from an investor's point of view, there's a complete lack of consistency. So I think that's a sort of waffly way of saying I agree with you, because I don't think it's been The investment consequences of policy decisions have been at the top of the agenda, and I think they should be.
Does the UK have to work harder because of breaksit?
Well, when I was asked to do the job by Jeremy Hunt, I mean my first thought was, oh, it's because of Brexit, because it's gone down since twenty sixteen, significantly address product investment. And then other people on perhaps other side of the political spectrum said, oh, no, it's all corporation tax. If you knock down corporation tax, they'll come. But in fact I found the evidence we took from more than two hundred companies and foreign institute severing, well funds,
pension fans, et cetera. Was Yes, in some cases it was Brexit if it was pure market access, you know, perhaps a heavy manufactured product that required frictionless movement of components and finished product. Yes, Brexit was a point, but actually I found it less significant than I thought. That's not it's easy for me, So it's Brexit, but I'm not saying it wasn't a fact that. Similarly with corporation tax, take Big Farmer for example, you know AstraZeneca who took
a decision to go to Ireland and not US. It wasn't really the difference in corporation tax because they don't because it is so much research and development that they get all the allounces, et cetera. So I'm not saying they're not factors, but they're not as significant as a thought.
Do you think that the recent announcements are the right ones to take on the American Ira?
I don't think we can take on the American Ira. The American Ira is based on printing a lot more money than we ever will be able to, and I don't think we should try and compete with it. So what I'm talking about and what some of the announcements have been are targeting investments stuff. So the purpose of having a business investment strategy that I'm proposing would be saying we can't do everything, but let's take things where we have a competitive advantage. Good quote, say, for example,
take aircraft wing manufacturing. We're good at it. Airbus employed load of people there. If you ask the complaints of air Bus or Tyota in Derby or whatever, it's why don't the suppliers come here? We're having to import all these components. Can't you give them incentives like other countries do.
So there's a cluster around Derby or a cluster around brought in in North Wales, and governments need to help with that because we need to seduce foreign manufacturing companies in this case to come over here and say here's a package, a bit of money, make sure that there's a suitable site at a certain level of price, energy connection skills, you know, getting skills set up in the area visas that you want. It's a package. And this
is what a proactive investment strategy would do. We can't say we'll do it for every company everywhere because we just don't have.
You call it a concierge service or something like that.
Yes, well, yes there's not a person standing at the front of government in a nice.
Uniform, but maybe there should they Maybe they should be.
Yes, that's right, Yes you get your Foi grab and delberty. Yes, it's a nice way saying the other cliche is one stop shop, but it's really saying that prospects have an account manager like they would in a business who's there to find out what it takes to incent them to come here, what we need to offer them and that so they wouldn't have to troop around different departments because at the moment you know they have to. They go to transport, they go to healthy, whatever it is in
their field, and the business department it's very confusing. So if you're a big multinational, it's easier because you've got a room full of people you hire ex civil servants and what have you that know these things. But for people that don't already invest here, it just makes it very difficult for them.
So where is this money that could have gone to the UK going.
In no particular order. We've lost business to Spain, We've lost business to Ireland. Singapore is the sort of course celebra of a very very proactive government which is really insenting big money to people. We're losing things now to Abu Dabi the Middle East because they can offer them free energy and visas. Of course not a problem, but it is. It's a general picture. The United States we are losing a lot to but that's a global policy.
We can't because they're basically saying, if you want to supply the American market, then you've got to be located here.
That's I'm sure, right, Yeah, that's.
A protectionist policy, which has its good points and bad points, but that's something you can't compete with.
How quickly do you think you're the benefits of what you're proposing will come about? They sometimes and we've read your document. Is it is it ten years time? Is it a couple of years time? It's certainly not sort of three or four months as I.
No, it's definitely not three or four months. I think because the reason this is a real politicians answer, because it's a bit of a waffly answer. I don't know, of course, who knows.
I don't think many politicians say I don't know. Actually, question of recovering.
Yes, that's right, because the reason I don't know is because a lot of it is changing sentiments. The perception overseas investors of this country is actually not as good as it should be. But when they see a business investment strategy, when they see a senior investment minister, they might think, well, they mean business now, and we're invited to good events here and things are beginning to change.
And I'm afraid Boris did not help matters. Theresa did not help matters because she had to be obsessed with Brexit. Boris had other priorities. But it's the cliche of turning the oil tanker. It's not turning it on. It's not right. Here's the bank, it's open, come and get it. Children. It's not like that. And I think you know these things take time.
But I guess the problem is the timelines, because you don't know what the next regime is. Given how far behind the Conservatives are in the poll, that it makes it difficult over the next six months, eight months, nine months to attract more money.
You're not suggesting the Conservatives might lose the next election.
Surely, am I.
It's very choppy outside outside, But I do think that a lot of the stuff I recommend is really cross party and is not political and won't be pushed around.
As an electoral labor. Yes, I have brief Jonathan Reynolds and Rachel Reeves on this. I felt I had to because the last thing I wanted was Jeremy Hunt saying that the autumn statement we were accepted and them saying no. And he's spoken publicly Johnny at PwC, I think a couple of weeks ago, which he was very encouraging about it. So I have. But the only caveat that I'd say is that I've learnt in election years, I always say, nice people become horrible people because there is this mad
frenzy of attack. And I just hope this doesn't get sucked into it. I don't think it.
I don't think it will.
You know, you can imagine next year we'll have, Oh, I'm sure Conserves will come up with an anti Kire smear campaign. They'll come up with tons of stuff about Rishi and the midillionaire banker and this and that. I mean, it's pathetic, but that happens in election years, and I just hope this doesn't get swept.
I think I think that the omens are decent for you because both sides of the divide need to grow the pie we keep calling it, but they need They need to increase the amount of money that the UK can make, fundamentally in the labour's case, so that they can start to spend in a way that a labor government would like to and the you knows same with different values for the Tory side of things. So I think you are probably protected.
I'm hopeful, but I guess the problem is what you're talking about is operationally, I have to get money from A to B and get quick answers. You also have a structural problem with the economy, which is low productivity. It's difficult to find jobs and those are huge barriers to actually big investors come now.
But conversely, investment will help cure those problems.
It's a catch twenty two, it.
Is, and that's why the government has to upfront resources to do it, because you know the spin off is very significant and it isn't I call it foreign direct investment simply because that's what Jeremy Hunt asked me to do. It's all investment. If you if your GSK or something, your pound is as good in any country in the world, as it is here. The fact that you're located here just as coincidental. So it is. You know, we have
we have rough figures. You know, we invest, including domestic and for in about ten percent of our GDP in investment other countries in the g whatever it is about twelve percent. The difference is fifty billion pounds a year. Well, if a third of that comes from extra foreign investment or half, it's very significant.
When you speak to a lot of big investors, they just ask, well, what's going on with Randa? I mean, how do you answer? Again? You can, you can have all the best systems in place, but if investors don't really understand the longer term policy of a country, is that not impossible to then adjust and attract investment.
Well, but why is Ruanda relat to? I know you asked the questions, I'm supposed to answer it, But why is Ruanda relevant to?
They don't understand? Because they don't understand.
And I think it adds to a sense that the government cannot do what it wants.
It's very valid to say anything that leads to instability will lead to investment decisions. You know, big companies told me that because of Liz Trusts episode, they were factoring in a risk factor in their calculations, which they've never done for this country before. Plenty of countries they do, you know, they do their projections and they put in a percentage risk, a bit like an insurance company would, and they were the first time in the history they've
done it for this country. I had hoped that the combination of Rishi Sunak and Jamie Hunt would have stopped that and it returned to normal. But if there are stuff like Ruanda, maybe the election itself, even though if Labour's saying the kind of things they are about business and investment, and I have every reason where they are publicly, maybe that will be okay. Whereas Corbyn, of course, there was a total fear.
Do you think that the UK is held to higher standard than other countries in Europe to attract investment?
No, I don't think so. But one of the things that I absolutely amazing is that other countries have political turmoil. We've had it here within well, we've had three changes to policy, a lot within one political party. But other countries who have it much worse than us, like Spain, for example, who people generally they don't have a government, or it's a minority government, or there's some political problems. Yet they managed to keep the business strategy the investment
strategy separate. So no one that looks at Spain thinks there's a political risk. Look at Ireland, you've got what I read, every possibility of shin Fein, basically a revolutionary party taking over the country. But no one's saying in the Irish Investment Agency, oh, there'll be a change of it. The leader of chin Fein makes one speech saying, look, it's business as you. As far as that's concerned, everyone's
fine with it. But with us there is because of what the political turmoil, the lack of consistency in policy, and fear of anarchy, which was in the case of Liszt trusts and quality. I'm afraid not that's what they intended, but that's what came. There is this fear of lack of consistency that does affect investment.
Yeah, but the UK is meant to be best in class. I mean, the southern countries, Spain, Greece to the all had economic crisis. The UK should be better, I hope.
So I no, it should be better and it can be better, but government has to organize itself in a much more investment friendly way.
Thank you so much, thanks for listening to this week's in the City. We'll be back next week, but in the meantime, if you like our show, please head on over to wherever you listen to podcasts and rate, review and subc It does help people find the show. This episode was hosted by me Francine Laquis and Alegra Stratton. It was produced by Samersadi and Tiffany Schoy. Additional editing by Blake Maples and special thanks to Lord Harrington.