A YEAR after Britain chose to leave the European Union, foreign direct investment (FDI) into our country is higher than it has ever been.
The good news is that this is not just the case this year: Britain is consistently one of the world’s leading destinations for inward investment.
While the UK accounts for just three per cent of global GDP, we are able to attract up to 15 per cent – five times as much – of the world’s foreign direct investment.
We must always remember, however, that foreign direct investment is not just some financial statistic on a piece of paper. FDI creates real jobs – some 70,000 last year alone, of which 70 per cent were outside London. FDI raises productivity with new management practices. FDI drives innovation, which fuels our future prosperity.
Having spent my professional life before politics working with and investing in businesses from California to India, I know that while our future trading relationship with the EU will of course influence FDI decisions, it is important to put that one factor into proper context. The pages of the Financial Times may talk of little else these days, but it turns out that only 20 per cent of FTSE 100 annual reports even mentioned Brexit this year.
Imagine yourself in the shoes of a CEO of a global company deciding where to make your international investment. When you look at all the factors that drive that decision, you will soon see Britain is excelling in almost all the areas that are relevant.
When it comes to human capital and a research base, Britain is home to four of the world’s best 10 universities. When it comes to a competitive corporate tax regime, our corporation tax rate of 19 per cent is the lowest in the G7.
When it comes to supporting entrepreneurs, our enterprise investment scheme, seed enterprise investment scheme and entrepreneurs’ capital gains tax relief are second to none. When it comes to the regulatory costs facing companies, Britain is ranked by the World Economic Forum among the best large economies in the world. When it comes to getting a company the finances it needs, Britain boasts the most liquid capital markets anywhere in the world.
Lastly, when it comes to a legal framework that people can rely on to protect their investment, a third of the world’s population lives under the security of the English common law system.
Those are the key drivers of foreign direct investment, and I am proud to say that on every measure a Conservative Government have delivered, ensuring our universities are well funded, reducing corporate tax rates while increasing tax revenues, creating the SEIS and EIS programmes to fund hundreds of thousands of new businesses, and cutting pages and pages of red tape.
Today, almost half of Europe’s billion-dollar start-ups were founded here in the United Kingdom, and the World Bank ranks Britain as the best major economy in the world to do business in: better than in the United States, Germany and France.
Although taking Britain out of the EU on the best possible terms is, of course, an important task, more important still will be the task that lies beyond it.
Just as Britain never owed its success to Brussels in the past, we cannot expect Brexit to guarantee our success in the future. Staying at the world’s cutting edge will require constant dynamism from the Government. From my own experience, I point Ministers to three areas. First, at 1.7 per cent of GDP, our research and development investment is still below the OECD average of 2.4 per cent and half the rate found in Germany.
Secondly, our nation’s infrastructure, from mobile telecoms to runways and airports, has not kept pace with the growth of our prosperity, and, according to the World Economic Forum, deters investment. We rank very low among large growing economies.
Lastly, our skills base lacks enough young adults with technical qualifications. Only 10 per cent of adults hold such a qualification, putting us towards the bottom of the OECD league table. It is a shame that, among 16 to 24-year-olds, literacy and numeracy are no higher today than they are among people in their late 50s and 60s. I am confident that the Government understand those three challenges. Their new industrial strategy has the potential to keep Britain on the cutting edge.
However, we do not live in a static world. Everywhere we look, countries are innovating and looking at ways to attract human and financial capital and corporations to their shores. We need to look at smart regulations and infrastructure decisions that hold things up.
We must continue, in spite of the current climate, to support free enterprise, for it is the best way to ensure our nation’s future prosperity, raise living standards and pay for the public services that we value.
Rish Sunak is the Conservative MP for Richmond. He spoke in a Parliamentary debate on foreign investment. This is an edited version.