UK Can’t Match US Firepower to Lure Investors, Review Chair Says

Joe Mayes
·2 min read
1

(Bloomberg) -- Britain should offer targeted support in priority economic areas to lure overseas investment because it cannot compete with the massive subsidies offered by the likes of the US and European Union, the chair of a review into foreign direct investment in the UK said.

Most Read from Bloomberg

“We haven’t got trillions and trillions of money to print like the Americans do,” Richard Harrington, a former business minister, said Tuesday in an Bloomberg TV interview. “But we can target what we’re good at.”

Harrington was commissioned earlier this year by Jeremy Hunt to conduct the review as the Chancellor of the Exchequer seeks to attract foreign investment in the face of fierce global competition. Amid sluggish growth, Prime Minister Rishi Sunak’s administration has faced questions over how it would respond to President Joe Biden’s Inflation Reduction Act, an enormous package of subsidies to support the net zero transition.

Harrington said Britain’s system of subsidies for investment is too disorganized across multiple pots and grants, and should be consolidated into a single facility. His recommendations also include creating a committee at the top of government to draw up a business investment strategy.

“We spend a lot of money on helping business,” Harrington said. “Our problem is it’s all over the place.”

The UK’s investment level as a share of the size of the economy has under-performed peers such as Germany and France in recent years, a gap which has contributed to Britain’s poor productivity. Harrington’s review said Britain’s competitors typically have about 12% of GDP in business investment, compared to the UK’s 10%, which amounts to a difference of about £50 billion ($63 billion) a year.

--With assistance from Anna Edwards and Tom Mackenzie.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.