Thank you for asking me here to speak on such a valuable topic for the UK.
FDi is one of one of the UK’s big success stories. The current stock of foreign direct investments in the UK is over £1 trillion, creating over 100,000 jobs and generating the economic growth this country badly needs.
As you may know, I’ve been Economic Secretary for 5 months now, and before that I spent 4 years on the Treasury select committee and 25 years in banking and finance.
So I’ve had many years in which to appreciate the vital need for investment flows.
And I’m now very fortunate to be in a position to help shape the policies that give investors the opportunity to flourish.
Often when we think about fDi we think only of foreign direct investment coming into the UK. And I will talk about what we are doing to promote this.
The UK is one of the biggest beneficiaries of fDi in the EU, and as a government minister I want to keep it that way.
But, fDi should also include British business expanding overseas and, I will also cover what support we are giving to them and how the UK can respond to international competition.
There are still voices in this country that claim there’s a legitimate future in pulling up the drawbridge and retreating from the rest of the world.
But this ignores the great benefits that investment in this country carries with it.
For example, the 1,773 inward investment projects during 2013/14 brought with them over 66,000 new jobs and secured 45,000 existing ones.
Our first challenge should therefore be to provide consistency and clarity about the fact that the UK is truly open for business.
The government has introduced a wide range of supply-side measures to attract inward investment. We have:
- an increasingly competitive tax system
- established enterprise investment schemes to help businesses to start up and grow
- set up Enterprise Zones, to boost specific regions
- created the Regional Growth Fund to match private sector investment
- carried out reforms to improve the skills and flexibility of our workforce
But also to demonstrate our commitment in this area we have taken a number of other steps:
First we have increased the budget of UK Trade and Investment by £70m a year.
Second, we have created a new Strategic Relations Team in UKTI to manage bespoke relationships between government and major inward investors.
This team is dedicated to making it easier to invest, by encouraging better coordination across government, providing greater support for investors and strengthening our relationships with major investors and exporters.
Third, the government has established a Global Entrepreneur Programme, which has exceeded expectations in helping entrepreneurs and start-ups relocate their strategic hubs to the UK. So in the 2014 Budget we doubled its funding.
Fourth, we’ve set up inward investment teams in Eastern Europe, South America and the Gulf. We are involving the private sector– as demonstrated by the trial of a contract-based model with PwC.
This is to ensure we have the best expertise on board, whether that comes from the public or the private sector.
And finally, we’re developing teams to deliver intensive support to individual sectors such as life sciences, healthcare and financial services. We did this with the hugely successful Tech City – so that’s why we are rolling it out further.
To build on these initiatives we have worked hard to strengthen our relationships with key partners.
Just two weeks ago I joined Chinese Vice Premier Ma Kai at the UK-China Financial Roundtable. We celebrated the progress our two countries have made on financial cooperation and where we should focus in the future.
The Vice Premier’s visit was in support of the 6th UK-China Economic and Financial Dialogue, where we saw significant progress:
- we announced our intention to issue the world’s first sovereign offshore RMB bond outside of China
ICBC was granted approval to open a wholesale branch here – the first by a Chinese bank in decades
We also held the inaugural China-UK Bilateral Investment Conference, where £3.9 billion worth of deals were signed. A big step towards strengthening economic ties between our countries.
These are positive signs of trust, cooperation and friendship.
Chinese inward investment is making flagship developments in the UK a reality and helping deliver the infrastructure we need.
Chinese investment has brought:
- £1 billion towards the regeneration of the Royal Docks in the East End
- £800 million for the Airport City project in Manchester
- £790 million for the redevelopment of the Nine Elms zone in Battersea
Over the coming years, it is in infrastructure that the UK will be seeking significant inward investment.
As demonstrated by the valuable contributions made by CGN and CNNC to invest in the nuclear power station at Hinkley Point C.
The objectives for this fDi forum are to “discuss the challenges and opportunities that companies face as they expand into new markets around the world”.
So I thought it worth sharing with you a little about what we’re doing to help businesses such as many represented here to access new markets.
Obviously there are two ways to do this. You can produce goods and services in the UK and send them abroad – as exports. Or you can actually open offices and factories oversea – outward FDI.
For both exports and outward fDi, UKTI has an important part to play. The fact that we have upgraded its workforce and expanded its budget is putting it well on track to doubling the number of businesses it helps, from 25,000 in 2011-12 to 50,000 in 2014-15.
Firstly, on outward fDi:
The UK is already one of the world’s most successful outward investors, with the largest outward stock of fDi in the world after the US.
A report by UKTI in 2014 reviewed the evidence on the effects of this and concluded that it provides significant economic benefits – mostly through increased access to opportunities that would otherwise not be available, as well as increased productivity, profitability and competitiveness.
Other evidence shows that outward fDi also benefits our economy through its effect on innovation and employment.
One of UKTI’s largest projects has been supporting Jaguar Land Rover’s global growth and expansion, in particular their investments into China and Saudi Arabia.
This help has not only promoted these important investments for Jaguar Land Rover as it builds its global footprint – it’s also supported Jaguar Land Rover’s soaring sales to these markets, leading to direct benefits for the UK supply chain.
Secondly, on exports:
Our ambition is to double annual UK exports to £1 trillion by 2020, and to deliver this partly through increasing the number of exporting SMEs in the UK from one-in-five to one-in four by the end of the decade.
And we have demonstrated our commitment through UK Export Finance (UKEF), which provides crucial services like loan guarantees and payment insurance to help UK exporters win contracts overseas.
Since 2010, we have expanded the services that UKEF offers, and targeted them towards small and medium sized businesses.
We have introduced a scheme to share risk with banks on letters of credit, contract bonds, and working capital for exports.
We have extended the Export Insurance Policy, so that it is better for smaller companies.
Thanks to these developments UKEF now supports a huge variety of exports to over 70 different countries, including for example exports of cheese to Greece; showers to the Gulf; and hovercraft to India and New Zealand.
To help make UK exports more competitive we have set up a £3 billion direct lending scheme which provides loans for buyers of UK exports at the most competitive interest rates allowed by international agreements. We’re guaranteeing securities issued in capital markets to refinance loans. And our export refinancing facility helps banks provide those long-term loans.
We expect the first loans to be made under the direct lending scheme very soon.
All this has provided financial support for over £12bn of UK exports since 2009-10.
So if you are seeking finance for exporting, UKEF should be your first port of call.
The last thing I want to talk about today is the future of international trade:
Growth in emerging markets significantly outstrips that of established markets such as the Eurozone. Thirty years ago the G7 countries accounted for around 55% of world GDP. They are now only around 40%. There is clearly a need to focus more on the emerging countries GDP for future growth.
At the moment, however, 44% of our exports go to fellow EU member states, where our real export success has lain.
But as you know, trade is not a zero sum game.. That’s why the UK has been such a strong voice in calling for big, comprehensive, ambitious trade agreements which span the globe.
In the EU we have concluded free trade agreements with both Singapore and South Korea – following the agreement with Korea UK exports there grew by 82% in a single year.
We have launched the most wide-ranging free trade negotiations of all with the United States, the Transatlantic Trade and Investment Partnership (TTIP) – estimated to bring in an extra £400 per year for the average family.
And in China last year, the Prime Minister called for an ambitious EU-China Free Trade Agreement.
These are all opportunities for growth, and there’s no doubt we need to embrace these opportunities wherever we find them.
You already work hard for your shareholders and the government is focused on doing its share of the heavy lifting for the sake of all the people of the UK. By working together we can make sure that we lead the way in this is global race.