In response to a decline in foreign direct investment (FDI) in the UK, Prime Minister Rishi Sunak is facing calls to appoint an investment minister, according to reports. The Financial Times reveals that a forthcoming report, set to precede the Autumn statement, will propose several measures, including the establishment of a high-ranking minister overseeing a new FDI strategy. This minister is expected to hold cabinet rank, although the government is hesitant to introduce another secretary role following a recent reshuffle.
The report, authored by Conservative peer Lord Richard Harrington, suggests creating a cross-government committee chaired by the chancellor to formulate an investment plan aimed at attracting FDI. Additionally, the report recommends enhancing the powers of the Office for Investment, a government unit focused on bringing in significant FDI projects. This office would report directly to the proposed investment minister, according to an official briefed on the plan.
Recent parliamentary research indicates a concerning trend, with the value of FDI in the UK showing a negative figure of -£51.7bn (-$63.5bn) in 2021, down from £34.8bn in 2020. Negative flows occur when more money is leaving the country than entering, reflecting issues like disinvestment, liabilities discharge, or company dividends surpassing recorded income.
Despite an overall increase in inward FDI value to £2tn, regional disparities persist. London, accounting for nearly a quarter of Britain’s GDP, receives 34.9% of the country’s inward greenfield FDI. This concentration of investment in the capital underscores the need to address economic disparities and promote FDI in other regions.
Neil Rami from West Midlands Growth Company highlighted this regional imbalance, emphasising the importance of devolved economic decision-making. He noted that the uneven distribution of Investment Promotion Agency (IPA) autonomy across devolved governments, including Invest Northern Ireland, Trade & Invest Wales, and Scottish Development International, hinders some parts of the UK from effectively attracting investors.
In light of these challenges, the proposed measures seek to streamline the FDI strategy, enhance coordination through a cross-government committee, and empower an investment minister to oversee and facilitate a more inclusive and balanced distribution of foreign investments across the UK. The success of these proposals will depend on their effective implementation and collaboration among various government entities.