At last week’s Investor Summit, the government presented its growth plans to the leaders of major global industries and investment firms. The aim was to create momentum for corporate investment in the UK. The atmosphere was positive, and the £63bn of investment commitments announced is impressive. But this is only one part of the growth agenda, and there are many questions still to answer.
Four elements of the growth agenda
Keir Starmer opened the Summit with a clear statement. The government’s first priority is growth, because if will create better lives for citizens, and better opportunities for business. This is to be achieved with four key objectives:
- Stability. Rejecting a politics driven by the day-to-day news cycle, he stressed the government’s commitment to long-term consistency, to enable investors to make decisions with confidence that the rules will not change next month or year.
- Strategy. He argued that the government’s clear parliamentary majority enables them to make long-term strategic investments, not in the old way of ‘picking winners’ but by building on Britain’s identifiable strengths. They can also afford to ride out some short term storms.
- Britain’s global standing. He claimed that this has been seriously undermined by the policies of the last government, following Brexit. By contrast, he presented Britain as an ‘open, outward-looking, confident, trading nation’. He rehearsed a long list of the UK’s strengths, from our academic research base to our stable legal system, from the largest tech sector in Europe to our education system.
- Regulation. He stressed that regulation is not, as some conservatives have argued in the past, always bad. Good regulation underpins a productive economy and a safe world. But he proposed that a review of regulation would judge regulations by their ability to contribute to the overall growth mission. “We will make sure that every regulator in this country, especially our economic and competition regulators, take growth as seriously as this room does.”
On regulation he highlighted an example from our region, the East Anglia 2 windfarm. This £4bn project, to generate 1 Gigawatt of electricity off the coast at Lowestoft, is critical to our net zero ambitions. But before approval, regulators required 4,000 documents, and after the Minister had finally given that approval, judicial review took a further 2 years.
Projects announced
To demonstrate that international investors are already making commitments to Britain, the event highlighted 22 investment projects recently committed, with a total estimated value of £63bn. These show that global investors have some confidence in the UK, and give some indication of the priorities, both of government and of investors.
Together these projects are expected to generate 38,000 jobs. They are of very different sizes, from Iberdrola’s investment of £24bn in offshore wind (including the East Anglia 2 windfarm) to Haleon’s £130m for an Oral Health Innovation Centre. They are also at very different stages of development, and many of the figures are inevitably approximate.
The list is heavily weighted towards energy, which accounts for 60% of the total, including £37.8bn for four energy generation projects, followed by £8bn from a consortium planning carbon capture projects across the North of England. There were also two large-scale electricity storage projects and one project plans to spend £350m on windfarm manufacturing on Teesside.
After energy, the second largest investment is in AI and the data centres to support it, with five projects worth £16.2bn. After that, two transport projects – expansion of Stansted airport and the London Gateway container terminal – account for £2.3bn, and there is then a diverse tail of smaller projects.
An industrial strategy
At the event the government launched a consultation on its industrial strategy, publishing Invest 2035: the UK’s modern industrial strategy. This is seeking views on priorities and approaches to growth. It identifies eight areas where it believes the UK already has a global lead. They are:
- advanced manufacturing
- clean energy industries
- creative industries
- defence
- digital and technologies
- financial services
- life sciences
- professional and business services
Most of these are broadly uncontentious, and several have featured in government economic plans over previous years. The difficulty will come in prioritising, and focusing on specifics within each field. For example, ‘clean energy industries’ includes the manufacture of batteries and windfarm equipment. The former is hugely expensive, and in the latter Britain is far behind global competitors.
The critique
Most of our readers will agree with Starmer’s four objectives, which set out to address some long-term economic weaknesses. Some are new, and some have been highlighted in previous economic strategies. However, as we move forward, there are number of concerns to be addressed. In some cases there are clear conflicts between policies, which will need to be negotiated.
- International v local. Is there too much focus on international, rather than home based, investors?
- Large v small. How much attention should go into established large firms, as against small and medium sized ones, which may be the giants of the future, including research-based start-ups fostered by universities?
- Competing priorities. How will the balance in regulation be struck between economic growth, other public priorities, and democratic and individual rights. For example, growth demands energy, which means unpopular pylon lines.
- Growth and workers’ rights. How can the government negotiate the tension between reform of employment rights and growth. One of the companies featured at the event was DP World, the parent company of P&O Ferries, whose past employment practices would be illegal under the government’s planned legislation on workers’ rights.
- Securing the skills base. How do we address the very long-standing challenge of developing and maintaining the workforce skills needed for a high growth economy?
- Adequate infrastructure. Is there adequate attention to the infrastructure to underpin these plans, notably the upgrade of the National Grid
- The public:private balance in investment. Can and will the government’s target of generating £3 of private investment from every £1 of government money be achieved?
Next steps
The government is taking on a massive challenge to reform the British economy, and international investment is only one part of this. Other initiatives include the National Wealth Fund, Great British Energy, Great British Railways, the Council of Nations and Regions.
The final investment strategy is to be published next spring, in the light of responses to Invest 2035. The ambition is great, and the pace is formidable. This event was only one strand of a very complex web of activity. We will see when the final strategy is published next spring how they propose to tackle some very long-standing challenges.
Last week was a good start, but the hard work is still to come.
