Boris Johnson has created a cross-government group to attract foreign investment in strategic projects as Downing Street works to bolster the UK’s post-Brexit appeal.
The Office for Investment will involve public and private sector experts whose job it will be to “unlock” complex schemes seen as crucial for wider government objectives such as infrastructure development and renewable energy.
Economists are concerned that the end of the Brexit transition period at the end of the year will hit the level of overseas investment coming into the UK. They fear foreign-owned UK-based manufacturers and service companies may reduce investment here after losing access to key markets in the EU.
The ONS found that foreign-owned businesses in the UK accounted for just over half of all exports in goods between 2016 and 2018.
The pandemic is also expected to undermine global levels of overseas investment.
The number of foreign greenfield investment projects into the UK dropped 35 per cent in the 12 months to September 2020 compared to the same period last year, according to fDi Markets data.
The British government wants the UK to be the most attractive destination in the world to invest, and sees the new body as a crucial bridge making it easier for overseas companies to commit.
It will be overseen by minister for investment Gerry Grimstone, the former chairman of fund manager Standard Life Aberdeen, and will sit within the Department for International Trade (DIT).
Mr Grimstone said the UK needed to “refocus and redouble our efforts to attract foreign investment, which will increase productivity, economic growth across the country, boost our exports and better our research and development environment”.
Foreign investment into the UK is predicted to fall by more than a third after the UK leaves the EU single market and customs union at the end of the transition period on December 31, according to a study by UCL and LSE economists.
As of 2018, the net value of foreign direct investment into the UK was worth £49.3bn, the report said, down from £80.6bn in 2017. Access to the EU single market has been the ‘cornerstone’ for additional foreign direct investment, it said.
Allie Renison, senior policy adviser at the Institute of Directors, said: “To unlock further opportunities, the government must do all it can to provide an environment that continues to offer stable footing on tax, trade and regulation. Landing a good deal with the EU will ensure we remain on that path.”
One person close to the group said it would be able to free up projects that were stalling owing to the need for planning permissions, for example, or where other departments were needed to help accelerate processes.
In 2019/20, more than 39,000 jobs were created in England through foreign direct investment projects, while the ONS found that foreign-owned businesses in the UK spent more on research and development at £13bn than domestically owned businesses in 2018.
Additional reporting by Valentina Romei