Transcript of PM's speech at the Global Investment Conference
The Prime Minister spoke and took questions at the Global Investment Conference 2013 in London.
Thank you very much, Stephen (Lord Green), and good morning and welcome everybody. It is absolutely great to have you back in London for this investment conference. Of course last year we had the Olympics; I’m afraid we haven’t been able to put that on for you all over again, but it’s great to have you back.
Since that investment conference last year, there have been around 1,500 major inward investments into the UK and we want to keep up the pace of that work. As Stephen said, we’ve got some great speakers here today and I’m proud of the fact that the debate about global growth and investment is taking place right here in London.
Now, I could today give you the standard speech of why you should invest in Britain; it’s easily done and every word of it is true. You can look at the natural advantages we have: the English language, a very handy time zone between east and west, brilliant universities, the City of London, the rule of law - so important, my colleague Ken Clarke often says if you want to know how fair a country is to invest in, ask how many times its government loses a court case, and I’m proud to say my government loses court cases all the time, because we have - frustrating as it sometimes can be. And the rule of law is one of the greatest advantages a country could have.
I could add those natural advantages to all the things this government has done to welcome business and inward investment. I think we are probably one of the most welcoming countries anywhere in the world. We’re thoroughly relaxed about foreign investors investing in utilities, in transport, in nuclear power and we pride ourselves on that openness. I would argue that this government has done almost everything that business has asked for.
Business wanted lowered corporate taxes, and we have cut our rate of corporation tax down to 20%. Business wanted lower personal taxes; we’ve addressed that issue. Business wanted our planning system reformed so it’s easier to build, easier to expand; we’ve cut our planning guidance from 1,000 pages down to just 50. Business said run more trade missions to the fast growing countries of the world; I have personally led trade missions to every single G20 country apart from Argentina.
But instead of making that speech, which is absolutely true, absolutely right and easily made, I thought today instead I’d just download, if you like, the five things at the top of my mind about how we get economic policy, how we get trade policy, how we get investment right. So less of a speech, more of a download, if you like.
The first thing I want to say is that I think countries like Britain should be absolutely clear about playing to our strengths. And one of our strengths we should be frank about is finance and the City of London, and I think it’s clear that this is an industry where we have a massive international, global advantage and we should be proud about that and speak up about that. That means that we shouldn’t spend our time in politics endlessly bashing banks and financial institutions. We want an economy to recover, if you want an economy to grow you have to play to your strengths.
And I think this leads to two quite important points that we need to make clear to our European colleagues. Ideas for a financial transactions tax, in my view, are not a good idea. Unless it is introduced in the same way all over the world, this is a mistake for Europe, and we will speak up very clearly about that issue, not just because we are a financial centre here in Britain, but we actually account for 40% of Europe’s financial services. This is an industry that serves not just Britain, but serves Europe. I think some European colleagues were surprised that we were prepared to stand up and oppose some of the rules that were being suggested on bonuses and on remuneration.
Well, look we’re not going to make Britain a fairer country, we’re not going to make Europe a fairer part of the world, if large parts of our financial services industry decides to relocate to Singapore or to Shanghai. So the first point I want to make is that we should play to our strengths, we should stand up for those strong businesses that we have; that is absolutely key to Britain’s economic future.
The second point, not in contradiction to that, but we should have and we do have a proper industrial policy here in Britain. While our financial services are strong, we do need to rebalance our economy and build up manufacturing, technology, aerospace, life sciences. And to me an industrial policy does not mean picking winners or massive government intervention, it just means working out industry by industry what can government do to help. What framework can we with you help to create?
And just to give you two examples where I think we’re making some real progress: one is the car industry, where Britain now has a net surplus in the export of cars. We have massive investment taking place by Toyota, by Nissan, by Jaguar Land Rover; I’m very proud of that and the government is right behind that industry.
Another example would be life sciences, where we have an incredibly active government strategy to help the life sciences industry, to help pharmaceutical businesses invest in Britain. We are introducing the patent box, so that if you invent something here in Britain and then go on and manufacture it here in Britain, you will pay a 10% rate of corporation tax. So a fully-fledged industrial strategy is what you are getting from this government.
Third thing on the top of my mind is infrastructure. Now we are having to make difficult spending decisions like every other European country, but we should really be getting behind massive infrastructure investment in our country. We have set out an infrastructure plan so you can see as investors all of the major infrastructure investments we need in our country. We have employed as our infrastructure minister Lord Deighton, who you’ll be hearing from earlier, who managed to deliver one of the only Olympics on time, on budget, beautifully built and delivered, who’s now working at the heart of government.
Our energy policy is being recast and set in front of you today with an energy bill that will involve building conventional power stations, but also crucially renewing Britain’s nuclear power stations, which I’m confident will go ahead. And for the first time in our history, the Treasury has been prepared to give infrastructure guarantees – investment guarantees – for projects that wouldn’t otherwise go ahead. So I think the infrastructure piece of what the government is doing is absolutely vital.
Fourth thing at the top of my mind is the vital importance of these trade deals – bilateral and multilateral – that we are currently looking at. Britain is not alone in this situation. We have a very active monetary policy. We have obviously fiscal constraints in terms of what we can spend because of our deficit situation, and when you have those constraints the best place to find growth is through structural reform and trade deals.
So the EU-US trade deal: we very much hope we’ll see a real impetus to that this year, including at the G8 which I’ll be chairing in Northern Ireland. We’re confident of completing the EU-Canada trade deal, and we’re confident of taking reform of the European single market further and faster. This should be a major impetus for growth in the years ahead.
And let me just say this about the fiscal situation, because obviously this is important. We came to government at a time when Britain effectively had an 11% budget deficit. We have cut that by one third in the last three years. Now obviously we need to go on cutting that deficit; we cannot go on year after year adding to our national debt, reaching a dangerous level as a percentage of GDP. We’re not doing this at an irresponsible pace; we’re doing it a sensible and measured pace, but it absolutely has to be done and it will be done.
Fifth and final point at the top of my mind after playing to your strengths: proper industrial policy, prioritising infrastructure, making sure these trade deals really move. The fifth point I just wanted to share with you is the vital importance of making sure that Britain is as internationally connected as it possibly can be. As I’ve said, I think we are one of the most open economies in the world, one of the most welcoming economies in the world. But also we have a unique set of circumstances linking us to other countries in the world. I’ll say something about the European Union in a moment, but we are also leading members of NATO, we are leading members of the Commonwealth, we’re a Permanent Five member of the UN Security Council.
And while I know it has been contentious, our policy of keeping our promises on aid, but because we have kept our promises on aid Britain, I believe, is respected and trusted around the world as a partner, including right across Africa, which is now one of the fastest growing continents that there is. So keeping Britain internationally connected should be absolutely vital for our economic future.
And let me just say a word about the European issue. Clearly you will see there is a debate taking place in Britain about the future of the European Union. Frankly there is a debate taking place right across Europe about the future of the European Union, and that is hardly surprising when you see the stratospheric levels of unemployment that there currently are in countries like Spain and Portugal.
The difference with the debate here in Britain is that I have quite rightly brought it out into the open and said, ‘Look, Europe needs to change. It is not competitive enough, it is not open enough, it is not flexible enough, and it is not competing effectively with fast-growing parts of the world.’
Added to that, you have the European single currency which is driving enormous change in Europe because it involves the members of that single currency giving up large amounts of sovereignty about how they run their countries. And at this moment, when the single currency is driving such change, it is completely right for Britain to say we want to make some changes in our relationship with the European Union and we want to make some changes to the European Union itself.
The European Union is going to have to become flexible enough to include within it countries like Britain, that are not in the single currency and won’t join the single currency, and countries that are in the single currency. That is a totally logical, sensible, practical position. And I want to make sure that we get this right.
And I’m faced as I do so, if you like, by two groups of pessimists. There are some pro-European pessimists who say, ‘You have to in Europe simply sign up to every single thing that anyone in the European Union suggests. You sign every treaty, you agree everything; there are no alternatives.’ I think they’re completely wrong. They’ve been proved wrong. We didn’t join the single currency; that was a good decision. We’re not a member of the Schengen no-borders agreement; that was a good decision. But nonetheless, that is one group of pessimists.
The second group of pessimists are people who say there is no prospect of reforming the European Union, you simply have to leave. I think they are wrong, too. I think it is possible to change and reform this organisation, and change and reform Britain’s relationship with it.
But as I said, it is in Britain’s interest to remain a country that is uniquely well‑connected around the world. And that is why I have set out a plan for how we reform the European Union, and then we give Britain a choice about whether to stay in that European Union or not. That is the right approach. It is an optimistic approach rather than a pessimistic approach. But it is absolutely achievable and deliverable.
Final point from me is that I see all of this through a very simple prism, which is that Britain is engaged - as other countries are right now - in a global race. We see enormous shifts in wealth and power and influence in our world, as these fast-growing countries in the south and the east see huge changes and huge growth.
This is, if you like, for the west and for countries like Britain, a sink-or-swim moment, and I’m determined that Britain is going to be one of the success stories of this century. We will do it by being more competitive, by keeping our taxes down, by reforming our welfare system, by investing in education, by welcoming international business here to invest, and from the audience I see in front of me, from the investments you’ve already made and from what I know are exciting plans for the future, I’m confident Britain can be a winner in this global race. Thank you very much.
Question
Prime Minister, you listed five areas, and they all in themselves sounded compelling, but one critical topic is access to innovation and technology. What role do you see the government playing in encouraging and fostering innovation in this country? And if you think about, for example, Tech City, do you envisage more of those around the country, or is this something that will just be a London phenomenon?
Prime Minister
Well, thank you very much. First of all, I think Tech City is a fascinating phenomenon. This is, you know, a part of our capital city where there was a growth in tech businesses. To start with, there was simply a handful. We didn’t invent it, but what government did was see something good happening and help to get behind it. And I think you can see with Tech City now a massive cluster of top technology businesses, a really big inward investment opportunity for investors and businesses around the world.
So where we find something like that, we should nurture it. We shouldn’t believe we can just create it at the stroke of a bureaucrat’s pen. What government I think can do is build on a really big strength we’ve got in this country, which is our universities. I think we’ve got absolutely some of the world-class universities, not just in Europe, but the whole of the world. What we’ve done to help that is make sure they’re properly funded. Now, at a time when government doesn’t have any money, that’s meant some tough decisions about introducing proper tuition fees repaid by the students themselves. And I think that’s been absolutely crucial to giving the universities a firm foundation for the future.
We’ve also got to do better at linking universities with businesses and innovation, and also looking at our health service. Britain has, as you all know, a National Health Service, which I’m very passionate about in terms of the quality of its treatment. But it’s also got a unique advantage; because it is a National Health Service, it can produce large amounts of data that can fundamentally transform the fortunes of pharmaceutical companies and life science businesses.
And so we need to marry up our universities, our NHS and the data that it has and these businesses, and I think we’re making some real progress in doing that; including, for instance, in Britain, the country that unravelled DNA, we’re now going to be the country that sequences hundreds of thousands of genomes, so we have that expertise here in Britain and can attract all sorts of pharmaceutical companies to come and invest - invest here. That’s one example of where active government is putting together NHS, universities and businesses to lead to I think quite a transformative set of things that can help further growth in the future.
Question
Prime Minister, I absolutely welcome the UK focus on competitiveness, not only for financial services, but also for - in general. Actually, the fact that pushed us to enter the UK market some years ago already was precisely its openness and support for new competition. The fact that we have grown our SME lending and market share from 1 to 5% over the last four years I think is - is testimony to that.
However, over the last three years, we have seen the UK also sometimes proposing to move faster than the rest of Europe in setting new capital and actually credential requirements. Some have called that we should move faster than the rest of Europe; for example, on leverage. Given the potential impact that this could have - is likely to have on lending and more importantly on SME lending, would you agree that we should be cautious about this approach?
Prime Minister
I think this is a very good and a very difficult question, because to be fair to the banks and to be fair to businesses, sometimes politicians can give two rather contradictory pieces of advice. On the one hand, the politicians are saying, ‘Get out there, lend more money, help our businesses, finance the recovery,’ and I absolutely agree with that. But at the same time, we’re also saying, ‘Look at the dangers of what is happening in other European countries with the very high bond rates of the past. Look at the dangers of this and make sure you’re properly provided for against dangers in those countries. So there are two messages that we’re giving out at the same time.
I think the best thing to do is to have a proper debate with the new regulatory authorities, with the Bank of England, so that we get this - this balance right. And what I would say is, I would commend the Bank of England for their funding-for-lending scheme, because I think that has been an effective scheme of actually saying, ‘Right, let’s get the money out of the Bank of England into the banks and into the hands of people who want to take out a first-time mortgage or finance themselves to build a house.’ That is I think being effective. But we’ve got to get the balance right between these two things, and I think we should have an ongoing debate about it.
Question
Prime Minister, you mentioned about car manufacturing. One of the sectors we have is truck manufacturing and commercial vehicles, buses. We are the fourth largest in the world. We are still happy with the Leyland brand, which we have been able to make it sell well. But one of the problems what we are facing is how should we keep the wages competitive? Because the cost of production in UK is higher.
Recently we acquired a company called Optare to synergise it with India so that we can export to third countries with low cost. So something has to be done to create some special economic zones where some concession should be available if we really want the manufacturing to go up.
Prime Minister
Well thank you very much, and thank you for the investment you make in Britain. Look, I think we are seeing positive signs of some reindustrialisation of Britain, not least in the area of automotive. I mean if I look at the British car manufacturers, it’s not just those Japanese companies - the Toyotas, the Nissans, the Hondas - it’s also Jaguar Land Rover. There was the very positive announcement by General Motors also in Ellesmere Port. So I think there’s been a series of positive announcements and also quite a lot of supply chain coming back onshore here to the UK.
I think what we can’t do is think that the way we’re going to compete in that sort of manufacture is by having lower wages. You know, that’s not going to - we’re never going to compete on the basis of our wages. We have to compete on the basis of our productivity, on the basis of our expertise, on the basis of quality. But I think that the car industry shows that we can do that and we can actually employ more people in those industries. And part of that is welcoming the overseas investment.
You know, the interesting thing about the British car industry is how much it has benefitted from this massive overseas investment into the UK. And when you go to Jaguar Land Rover, it’s absolutely clear that they - that brand has not been bought by a business that simply wants to try and run out some existing models. They are spending billions on designing absolutely state‑of‑the-art new models, whether that is Jaguars or Land Rovers. So I think this is the answer: to be welcoming, to concentrate on skills and quality but not to think we’ll do it through lower wages.
We do have some special economic zones. We have enterprise zones around the country. All of them are up and running and open for investment, and they of course give you some advantages for instance on rates and on capital allowances for investment.
Question
Thank you very much Mr Prime Minister. It was a very inspiring speech. You mentioned infrastructure and it is very interesting for sovereign wealth funds and long-term investors. There’s a - there is a scheme just called Pension Infrastructure Platform, which is - has been launched last year but it’s moving quite slow. Do you think about a similar vehicle for sovereign wealth funds that could be investing in infrastructure in Britain on the same idea?
Prime Minister
Absolutely, I think that - I don’t see any reason why sovereign wealth funds shouldn’t invest in the same way that we’re hoping pension funds will. I mean Britain in the past has led the way in terms of public/private investment partnerships into infrastructure. I think we need to try and now lead the way on the next wave of things.
Now I’ve mentioned energy where I think we’ve set out through the energy bill a whole series of investment opportunities. For instance, you know in Britain if you build an offshore wind farm, if you build it before 2017, you know exactly what you’re going to earn for the next 20 years. Now how many other, you know, opportunities are there like that in business where the returns are absolutely laid out by the government that far in advance?
But I recognise we need to do more to try and open up these opportunities into transport and other parts of the public sector, and Lord Deighton (who’s sitting one in front of you) is the man to grab for a bilateral to make sure that he’s seeing to your needs.
Question
Prime Minister, I agree with you when you talk about the attractiveness of inward bound investment into the UK but I’d be interested in your thoughts on UK companies, particularly mid‑market companies, expanding their businesses overseas because this is the other part of UKTI’s mandate. Now, I’m based in China. I think there are huge opportunities for mid-market companies to actually expand their businesses in China.
Prime Minister
No, I think absolutely right. I think this is our weakness, if you think about it. Almost every country I go to, leading these trade missions, you find that Britain is the number one or two inward investor in terms of actual investment going in. You find that we’ve got some superb large-scale companies, whether it’s banks, or construction businesses, or BAE Systems, or others who - or our oil and gas majors, you know, who’ve got longstanding relationships and huge investments going in.
I think the weakness for Britain has been we haven’t done enough to encourage small, medium-size and sort of mid-cap countries - companies to carry out this investment. It’s a figure I’m fond of using that if we went from one in five of our small companies exporting to one in four, we would wipe out our trade deficit in one go. So I think this is a big area where we need to do - we need to do more.
UKTI has been - has got extra resources, changes in management and changes in the way it works exactly to try and incentivise that to happen. We also need to work with the banks to make sure that finance and assistance is available. I think we need to make it much more simple for companies to do this. And government can also help by funding - as we did in the budget - some simple consultancy services so that companies can get a - if you like, a growth voucher to find out about what steps they need to take to think about exporting.
So I think it is the gap. It’s the gap we’re absolutely committed to filling. I think you’ll be hearing from UKTI here later today, and I think it’s where we need to catch up with some of the best-performing European companies. I see absolutely no reason why we can’t crack this. We have got a good set of companies in that space who’ve got the technology and products that the world wants.
I think we have to be even more active in recognising that the European market is going to be tough for the coming months and years and so we have to look at the fast-growing markets of the south and east. And I will certainly continue in running these trade missions that I’ve been doing for the last three years. And I think on those trade missions we need to up the percentage of companies that haven’t exported before or haven’t exported to those markets before, because I think there’s a real opportunity to give them that sort of foothold.
Can I thank you very much indeed for coming today? Can I wish you well for the rest of this conference? And I’ll be seeing you all this evening as we have a meeting with the Prince of Wales. I think you’ve got a fantastic set of speakers here today and I’m really proud as Prime Minister to welcome so many big investors, so many big businesses and financial institutions right here to the UK. Thank you very much indeed.