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Next week’s International Investment Summit an important early test of the willingness of global investors to make available the capital required, but ministers mustn’t stop there, says Tim Figures
The Labour Government has made kickstarting economic growth one of its key missions. However, this growth clearly can’t happen without substantial amounts of public and private sector investment – making next week’s International Investment Summit an important early test of the willingness of global investors to make available the capital required.
This will only happen if the UK is able to demonstrate that it is truly open for business. While the UK continues to have many strengths – including a world-class science base, the common law system and a leading financial and professional services sector – it is also facing significant challenges such as soaring energy costs, creaking infrastructure and persistent low productivity.
Our own research at BCG‘s Centre for Growth shows that UK business leaders are almost twice as likely to cite high energy costs as having the biggest detrimental impact on their businesses compared to high interest rates or costs of capital. Energy costs have more than doubled in the last 20 years; one of the highest among the G7.
UK business leaders are almost twice as likely to cite high energy costs as having the biggest detrimental impact on their businesses compared to high interest rates or costs of capital
The UK‘s investment in infrastructure averaged just 19 per cent in the 40 years to 2019, according to our recent findings. Again, the lowest among the G7.
And today we’re burdened with high construction costs. In September last year they were 25 per cent higher than before the pandemic. Today it’s almost twice as expensive to build a kilometre of flat road in the UK than it is in France.
In addition, UK businesses have had to cope with a prolonged period of regulatory and policy uncertainty following Britain’s departure from the European Union. This is a particular challenge. If there is one thing that international investors look for above all else, it is certainty.
It’s also important to recognise that investors usually have choices to make about where they make their investments, carefully weighing up the risks and advantages of different potential locations, often across multiple geographies. This means that it’s not just the UK’s position relative to the past that’s important, but also the UK’s position relative to the other countries that it is competing against for the same investment.
How to make the International Investment Summit a success
So, for the International Investment Summit to be a success – and for capital to flow into the UK to kick-start growth – investors need to be confident that the UK is a stable, attractive place to invest. An economy where long-standing challenges around energy costs and infrastructure are being addressed. A country with a clear, sector-based industrial strategy which creates the conditions and incentives for government and business to work together. And a country with a clear vision of its future position in the global economy. If these things are achieved, then the UK will be well placed for success.
With this in mind, it will be really interesting to see what headline announcements come out of next week’s International Investment Summit and to ensure that they turn into reality on the ground. Looking ahead, the long-term goal should be a steady flow of investment underpinning renewed growth, meaning that in years to come we won’t need International Investment Summits at all.
Tim Figures is partner and associate director, global trade and investment at Boston Consulting Group