Foreign direct investment (FDI) is critical for nations like the UK. It creates jobs and drives economic productivity. Last week the Department for Business and Trade published data on the number of FDI projects in the UK. The numbers show that projects from overseas investors are close to a 12-year low. The number of jobs created by FDI has also fallen by 10% year on year.
These figures are disappointing — but unsurprising.
Political instability in Europe will be one factor playing on investors’ minds. In the UK, we knew that a general election was going to happen this year, and that we might have our first change in government in fourteen years. We just didn’t know when. While many commentators questioned the rationale for calling a snap election, I think some businesses welcomed it as an opportunity to escape this period of limbo and move towards some much-needed stability.
Whoever wins the election, it is critical that we make the UK an attractive place to do business, and an important part of this is talent. Businesses need people, and so we need to ensure that we have an immigration policy that is attracting world class talent not only from Europe, but the rest of the world too.
The good news is that people want to live in the UK. I know I’m biased but I think London is the best city in the world to live in. We have the ACE factor – Arts, Culture and Education – and there’s very few cities around the world that have it too. Paris is one of them, New York is another.
People are only part of the story – so what else is holding us back? We are an island off the coast to Europe, our biggest market. In this regard we are similar to Singapore and how it serves the rest of Asia and how Dubai serves the Middle East. It’s time we took a leaf out of their book — starting by cutting the amount of red tape.
The most obvious example is trading with the EU. It’s been more than four years since the UK left the European Union and the government still hasn’t found a solution to streamline the process. Importing and exporting remains expensive and the reporting that is required only adds to the administrative burden. Our clients tell us this and we know it’s true of the wider industry. Two thirds of respondents to a British Chambers of Commerce survey say that trading with the EU is now more difficult to do than it was a year ago.
Conversely, one of the benefits of leaving the European Union is that we have an opportunity to drive new efficiencies and create our own rules that will help businesses to thrive. An example of this was the UK government’s decision to increase audit thresholds to spare medium sized businesses from having to carry out the audit process. By contrast, the EU is not planning to raise this threshold.
This is just one example of how the next UK government should use its autonomy to make pro-business decisions.
This could include lowering taxes, or introducing new reliefs that will encourage overseas investment, or simply working with the banks to ensure that simple tasks like setting up a bank account can be quicker and easier for businesses.
Whatever government next comes into power needs to be effective. We need a clear roadmap of how we will boost inward investment into the UK, and more importantly, we need to stick to it.
Russell Nathan is Senior Partner at HW Fisher. He works with business leaders from a variety of organisations both in the UK and overseas from a wide range of sectors, helping them to nurture and develop their companies and achieve their potential. You can get in touch with him here.
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