I beg to move,
That this House has considered foreign direct investment into the UK in 2016-17.
It is a real pleasure to serve under your chairmanship, Mr Gray. You might be forgiven for thinking that foreign direct investment is rather a niche subject for a Tuesday morning, but it is vital, particularly in the context of Brexit and of course international trade more generally. I am delighted to have secured this debate. The timing is especially apt after last night’s vote on the European Union (Withdrawal) Bill and our consideration of the Finance Bill later on today and into this evening.
FDI refers specifically to cross-border investments made by residents and businesses from one country into another and—importantly—with the aim of establishing a lasting interest in the enterprise that is operating in a foreign economy. I hope that this debate will focus on inward investment into this country—into UK companies —by foreign companies and enterprises. I will explore several main themes, including investment in the UK in the context of Brexit. I will give specific figures on FDI and statistics for 2016-17, and describe how FDI is spread across the regions, which is certainly important for me as a Member of Parliament from the south-west. I shall also discuss opportunities for FDI after Brexit and put some specific questions to the Minister.
First, let me talk about investment in the UK generally. As The Economist points out this week, many people warned of a slump in our economy following last year’s EU referendum. The expectation was that investment would decrease and that FDI itself would dry up, but that has not happened. Companies such as Google, Nissan, Toyota, Amazon and even Snapchat have shown that Britain is still a great country in which to invest.
Toyota recently announced an investment into the UK of more than a quarter of a billion pounds for its plant near Derby. Nissan is increasing its production in Sunderland by a fifth, doubling the amount of parts that it sources from within the UK and stepping up production by about 20%. Importantly, as we look to the future and electric vehicles, Nissan is investing strongly in this country, particularly in Sunderland. Google has invested £1 billion in 3,000 more jobs, and Amazon recently announced that it was taking over 15 storeys and 600,000 square feet of a new building in Shoreditch, which is even more than it originally promised back in 2014. That shows that London really is the capital of research and development, certainly for Amazon, which is also increasing the number of jobs.
I congratulate my hon. Friend on securing this debate on a vital subject. He mentions London, but I would like to mention my home turf of Scotland. I am sure he is aware that Scotland was recently voted the most beautiful country in the world by the readers of a certain travel publication, but is he also aware that for the last five years in a row, Scotland has been the top location in the UK outside London for FDI? In fact, despite the warnings of naysayers and prophets of doom, 2016 was a record year, with 122 FDI deals done in Scotland during that year, which was up from the previous year. Does he agree that an industrial strategy with an emphasis on education and skills, combined with proactivity on the part of the Department for International Trade and business-friendly taxes, can help to make all the nations and regions of the United Kingdom irresistible to foreign investors? Should we not all be very positive about our future outside the European Union?
I completely agree that we should be positive about our future outside the EU. The whole purpose of the opening part of my speech was to show that, even after last year’s EU referendum result, the situation has not been all doom and gloom. I will talk about Scotland and the regions a little later in my speech, but my hon. Friend is absolutely right.
I congratulate the hon. Gentleman on securing this debate. Even though we are all a little tired after last night, many of us have turned up here today because this is an important subject.
I urge the hon. Gentleman not to be too optimistic. During my career in Parliament, I have spent a long time as chair of the all-party group on manufacturing and I have tried to encourage investment in this country. At the moment, proposals from Japan, China and America are very tentative. They think that, as we go through the Brexit process, some sensible solutions will be reached regarding our access to the European market, but nothing is definite yet. There are lots of things hanging. I have just come back from New York, and what I find is that nobody in financial services in New York will accept or even apply for a job in London at the moment—
Order. The hon. Gentleman is a very experienced Member and he knows very well that that intervention was too long. The previous intervention was from a new Member, the hon. Member for Stirling (Stephen Kerr), and he can be excused both for its being rather lengthy and for reading it, which is not something one would normally expect. I remind Members that interventions should be short, and they should be direct questions, not mini-speeches.
Thank you for that reminder, Mr Gray. I am grateful to the hon. Member for Huddersfield (Mr Sheerman) for his intervention. Last night was a late night and we can anticipate that tonight will be a late finish as well, but this is an important debate and I am very grateful that he is here in the Chamber this morning.
The hon. Gentleman is right—I am a glass-half-full, optimistic kind of person. However, we must not take a rose-tinted view, and I will say later that we should anticipate where there will be bumps in the road ahead. It is right that we do that, but where FDI is still happening in this country—even though the doomsayers said that it would not happen—that is a good early sign. Nevertheless, he is right that we have to look out for bumps ahead, and I will talk about the south-west region in particular.
Amazon is creating 450 new high-tech jobs in the UK, in addition to the 5,000 Amazon jobs that are already here. That is a real demonstration that Amazon and other companies believe that this is a good country in which to do business. I do not know whether you are on Snapchat yourself, Mr Gray—
If you are, perhaps we should all get on to Snapchat. It has opened its new global hub right here in London, which again shows that it believes in this country in a post-Brexit world. There may well be bumps ahead, but let us look at the facts and the evidence of what has happened so far, while also being cautious about the future.
Having looked at the general picture, let me give some specific details of FDI. The latest report on inward investment results from the Department for International Trade, which is from 2016-17, showed that there were more than 2,260 inward investment projects in the UK. The good news is that that is up by 2% on the previous year and the investments secured over 75,000 new jobs, which is a huge number. However, there is one reason to be cautious, on which I specifically challenge the Minister. We are told that the jobs figure is down by 9% from 2015-16, so I invite him to explain why that is. Obviously the number of projects being invested in is still rising, but why are the jobs figures not quite as high as before? Of course I welcome the jobs that are being created and retained; in the south-west region alone, there have been nearly 3,500 new jobs and I very much welcome them.
Let me turn to the specific regional figures. As one would expect, London and the south-east is the region of the UK that attracts the most FDI. My hon. Friend the Member for Stirling (Stephen Kerr) mentioned Scotland, which receives the next largest amount of FDI. Again, that shows the strength of the whole United Kingdom, which is good for our United Kingdom. However, I challenge the Minister specifically about the south-west, my own region—other speakers will no doubt champion their own region. Although I welcome the 3,500 new jobs in the south-west, I invite the Minister to ensure that there is sufficient FDI in the regions outside London and the south-east.
The hon. Gentleman will know that Northern Ireland has a land border with the Republic of Ireland, where corporation tax is 12.5%. We hope to neutralise that and have corporation tax at the same rate. Does he agree that although there is a lot of FDI in Northern Ireland, as we move forward after the vote last night, we will remain part of the United Kingdom out of the EU and the future is bright?
I am very grateful for that intervention. I will mention Northern Ireland in relation to the “Britain is great” project. The hon. Gentleman is absolutely right. As I said earlier, I am optimistic about the future of our country in a post-Brexit world.
Foreign direct investment is important for a number of reasons. It is important for job creation, which I have touched on, and for growth. Businesses in receipt of FDI have been shown to be more productive. All those things raise living standards, and they are why I challenge and invite the Minister to ensure that all regions across the United Kingdom—the south-west in particular—benefit. It is right and proper that London and the south-east attracts FDI—it is to be expected that our capital city should be the largest recipient of FDI—but I ask the Minister to ensure that all regions are attractive.
I declare an interest as chairman of the all-party parliamentary group on youth employment.
Although foreign direct investment into Scotland has been increasing, the Scottish National party’s constant pursuit of a second independence referendum creates economic uncertainty, and businesses are loth to go into such an environment. Does my hon. Friend agree that if the SNP were to drop that desire, we would see more inward investment into Scotland?
My hon. Friend is absolutely right. We are always hearing about business certainty. What do businesses want? They want to be able to anticipate what is going to happen, to know about the future, and the prospect of another referendum hanging over Scotland creates uncertainty. We have heard comments in exactly that vein from businesses across Scotland, so I am grateful for that intervention.
Picking up on the point about a second referendum, the hon. Member for Dumfries and Galloway (Mr Jack) will be aware of the comments made by First Minister Nicola Sturgeon with regard to that, but he might also be aware that many businesses, including the London Insurance Group, to which I spoke recently, were looking favourably upon Scotland and the opportunity it offered because of Brexit and the threat it posed. He might also be aware that Mark Harvey, a senior EY partner in Scotland, said that according to recent research,
“the EU Referendum vote and its aftermath may be having an influence on global perceptions of…the UK”.
So Brexit, not a Scottish independence referendum, is the greatest threat to the UK’s competitiveness.
I beg to differ. In my speech I have shown that, even after the referendum, FDI and investment more generally are still coming into this country. What I heard in the intervention by my hon. Friend the Member for Dumfries and Galloway is that businesses in Scotland want the certainty of remaining part of the biggest single market which, as far as they are concerned, is the United Kingdom and not the European Union.
Before changing portfolios, the hon. Member for Livingston (Hannah Bardell) served briefly on the all-party parliamentary group on youth employment. Each month we track the job figures, and month by month in recent years they have looked very good. The youth unemployment figure is now 12.2%, which is within touching distance of record lows, and the global employment rate is at its highest since comparable records began.
I welcome those figures, which are great news for youth employment across the UK. Does the hon. Gentleman know and welcome the fact that Scotland’s youth unemployment figures are also at a record low? In my constituency, there is only 8% youth unemployment. Is that not something to celebrate?
I completely agree, and I very much welcome the hon. Lady’s intervention. The figures are a sign of strength in the United Kingdom, not in the separatist agenda that she and her party would pursue. I of course welcome all record levels of youth employment, whether in Scotland, London or my own region. I appreciate the short time that the hon. Lady spent on the all-party group on youth employment. I invite the Minister to consider how we can pull out all the stops to ensure that the figures keep going in the right direction. That is the challenge as we near full employment, or as full as we might be able to reach.
One of the most popular measures for boosting FDI are enterprise zones, in which companies receive preferential tax, planning and other financial incentives. That measure is most popular among non-UK companies, which have constantly advocated the creation of such zones. I am delighted that the Dorset Green Technology Park, just outside my constituency, was recently announced as an enterprise zone. Such zones promise the creation of engineering excellence, and this one will generate 2,000 new jobs and 20 new employment units as the result of a massive £2.5 billion investment. Although the park is just outside my constituency, I firmly believe that it will benefit the whole of Dorset, bringing an extra opportunity for attracting FDI into the region.
Northern Ireland was mentioned, and I want to hear from the Minister about his Department’s “Invest in Great Britain and Northern Ireland” campaign. As we look forward to the challenges and opportunities this country faces, the whole of the United Kingdom must go forward together. I invite particular attention to be paid to regions such as the south-west—and of course other regions represented by Members here today—where there is a risk of their being left behind or slipping behind.
I end on this point: to foreign investors, the United Kingdom is an attractive place in which to invest and with which to do business, but I strike a warning note for the Labour Front-Bench team. Foreign investors, just like domestic businesses, like our low rate of corporation tax. They like our country for a number of reasons, but one of them is the corporation tax rate, which at 19% is the lowest in the G7. That has not resulted, as some argued it would, in our having to compromise on the tax take, which is so important. In fact, the tax take in 2016 was £6.6 billion higher than in 2010. So we must also keep an eye on that and ensure that businesses keep investing in this country.
Much of the Brexit debate is about how we divide up the national cake. This discussion about foreign direct investment is about ensuring that our cake is even bigger in the first place. I firmly believe in the importance of FDI and the opportunities that Brexit can present to us, and I look forward to hearing from other hon. Members and the Minister in due course.
I congratulate the hon. Member for Mid Dorset and North Poole (Michael Tomlinson) on delivering such an excellent and comprehensive speech. Like he, I am a glass-half-full person, who looks optimistically towards the future, and the facts, as I hope to illustrate, will indicate that things are very bright. If we try to be positive and look forward we can find solutions and see the good things. It is not always good to dwell upon the negative things; it is good to be aware of them but not to dwell on them.
Northern Ireland, as such a small country, is somewhat reliant on foreign investment and it is clear that we have the expertise and knowledge to attract investment from all over the world. I want to give a Northern Ireland perspective, because the hon. Member for Mid Dorset and North Poole referred to the United Kingdom of Great Britain and Northern Ireland. I say that often; I have said it every day since I came into this House back in 2010, to emphasise that we are very much part of the United Kingdom and that we are all together—Scotland, Wales, Northern Ireland and England.
Northern Ireland secured 33 foreign direct investment projects during 2015-16—as the Minister knows, we have some good stories—which created more than 2,000 jobs. Despite the usual Brexit warnings that scream that FDI will be affected by our leaving the EU zone, I read a piece by an economist that states:
“From a Northern Ireland perspective, the type of inward investment we have been winning has been back office functions, which may not need the access to the single market, if its function is to serve a parent company. Investor motives for investing here would back that up, with a strong majority of investors citing the skilled workforce as the main reason for investing here.”
Backing that up, figures in yesterday’s press indicate that the region of the United Kingdom with the strongest growth rate is Northern Ireland. So there is an indication that we are growing and that Northern Ireland is, for once, leading the way.
Before the hon. Gentleman gets carried away with all these good feelings about the future, he would surely agree that our productivity is absolutely awful, looking carefully at UK performance. Many people who would like to invest in this country are worried about low productivity rates. Productivity is much higher in Yorkshire, which has a much bigger population than Northern Ireland and some of the places he has mentioned. We are doing very well and manufacturing is still alive and well. People would be much better off investing in manufacturing in Yorkshire than coming to Northern Ireland.
I am always happy to receive an intervention from the hon. Gentleman. He is definitely an optimist as he is a Huddersfield Town supporter, and that is an indication of optimism at its highest. I wish him well, although on Saturday I hope Leicester beat them. I digress slightly, but there are ways of doing better and we need to address productivity.
I will illustrate that point in some of my comments about Northern Ireland and how our economy, productivity and employment grow. In Northern Ireland, we have a skilled, dedicated workforce. Regardless of our place inside and outside of Europe, the fact remains that people are interested in investing in Northern Ireland and across the United Kingdom. The fact that we are world-renowned for our research, our cyber-technology and our skilled workforce means that we can attract the investment that we so need. We are already playing above our level in Northern Ireland. We lead the world with some of the technology we have developed, and some of that skill can be found in the constituency of my hon. Friend the Member for East Londonderry (Mr Campbell).
According to the figures, foreign direct investment projects into Northern Ireland were down 62% to just 15 in 2015, but at the time, the economic development agency Invest Northern Ireland claimed that the figures did not reflect the full picture. Invest NI said that the full picture is that there were 35 direct investment projects in that tax year, but because those projects had not started, they were not part of the figures. The original figures were wrong and gave the wrong indication. The new figures show that the investment, new jobs and new projects are significant.
No matter the predictions that come our way from economists one way or the other, our duty is to promote our abilities and industries and attract that inward investment. I seek to do that, and my colleagues and Members from all parties travel worldwide seeking to do that. Many from Northern Ireland do the same.
Does my hon. Friend agree that as we reach the era of the post-Brexit vote, where there will hopefully be less uncertainty, some of the regions of the UK—particularly Northern Ireland—will need to be able to avail themselves of the advantages that access into the EU as well as access beyond the EU provide? That is particularly so with the land border with the Irish Republic.
My hon. Friend concisely puts the issue into perspective. We need to have cognisance of our special relationship with the Republic of Ireland, but we also have to look at the advantages we will have elsewhere across the world. We are most effective when we are attracting investment in partnership with the Department for Business, Energy and Industrial Strategy and other Departments. It is always good to see the Minister in his place, and we look forward to his response to the points we are making. Will he touch upon some of the facts with Northern Ireland as well?
It is useless to brush over the changes that Brexit will bring. There will be changes, but the changes need not be bad. Opportunities exist in the new markets emerging in Asia—opportunities that my constituents, such as Lakeland Dairies and Glastry Farm ice cream, are already making use of. Lakeland Dairies had a meeting with the Minister about those opportunities at the end of July. It is trying to secure another contract for milk products and milk powder in China. We and the Minister are working hard, and we are moving forward. Such companies are successfully casting their net to the middle east, and our local economy is reaping the dividends.
The question we must ask ourselves is whether we are doing all we can to aid companies and support them in their quest to secure jobs and enhance their businesses. On Thursday last week, Glastry Farm ice cream, which is based in my constituency—it is a small firm that started as a farming enterprise, but is now up and running —secured a new contract with Heathrow and another contract in Dubai. It is moving into the middle east, which is real progress for a wee firm from outside Ballyhalbert on the Ards peninsula, and it has been helped by Government policy in this place and by the Minister responsible back in the Northern Ireland Assembly.
We cannot go into panic mode due to the uncertainty of Brexit and the way the Europeans will treat us as they continue—I say this respectfully—in unhelpful mode. We must focus on what can be achieved. We can secure and capitalise on other forms of foreign direct investment. The parliamentary briefing outlines that for UK investment abroad, the EU accounted for 43% of the total UK FDI stock in 2015, compared to 23% for the USA and 34% for all other countries, yet net investment flows from foreign investors into the UK were £21.6 billion in 2015, up from £15 billion in 2014. That shows the trend, success and positivity, and goes back to my comment about the glass being half full. The facts back that up, and that is what we want to say. Inward FDI flows from the United States were £20.1 billion, the highest recorded value since 2011. That is another positive fact. Inward FDI flows from Europe fell, with a disinvestment of £12.1 billion in 2015, compared with a disinvestment of £8 million the year before. Again, that is positivity. Net direct investment earnings generated in the UK by overseas investors were £47.9 billion in 2015, down slightly from £48 billion in 2014. The EU accounted for £18.8 billion of that, and the USA accounted for £17.5 billion.
I am aware that while the figures illustrate the issues, they are not the whole picture. There are a lot of figures out there, and they show me that as per usual we give more to Europe than we get out of it. We need to focus on our relationship with the USA and other trade partners. We need to look towards Asia, Australia, New Zealand, Africa, the middle east and South America, which have potential and possibilities. I have said it before, and I will say it again: the sky will not fall down because we leave Europe. It will not all be darkness and gloom, but it is our job in this Chamber to ensure that we play our part in securing investment from those who wish to invest and can do so. We have the skills, expertise and workforce, and that speaks a great deal more globally than saying we are a member of the EU.
It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) on securing this important debate. He made an excellent speech surveying the issues before us today.
We have already heard that, a year after Britain chose to leave the European Union, FDI into our country is higher than it has ever been. The good news is that that 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 3% of global GDP, we are able to attract up to 15%—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% 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% of FTSE 100 annual reports even mentioned Brexit this year.
Mr Gray, 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 company’s investment decisions, you will soon see that Britain is excelling in almost all the areas relevant to you.
My hon. Friend makes a valid point. When businesses look to relocate, they pay attention to corporation tax, but they also think about the tax that their employees will pay. Does he agree that it is a mistake for Nicola Sturgeon to make Scotland the most overtaxed society in the United Kingdom?
I could not agree more with my hon. Friend, who makes an excellent point. I am about to come to the various factors that drive such decisions. A competitive tax regime, particularly for employee taxation, is a key part of that.
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%, as we have heard, 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 unnecessary red tape. We can look at the outcome of all of that. 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% of GDP, our research and development investment is still below the OECD average of 2.4% 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% 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, I remind the Minister that 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, and we ourselves must constantly innovate. 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.
The $250 billion that overseas businesses invested on our shores last year were not brought here by Brussels decree. That capital came because international investors know that our citizens’ ingenuity, our Government’s leadership and our nation’s world-class institutions will always provide them with a return. I am confident that, under this Conservative Government, that will continue to be the case for many years to come.
It is a pleasure to serve under your chairmanship, Mr Gray. I welcome the debate secured by the hon. Member for Mid Dorset and North Poole (Michael Tomlinson) and the opportunity to discuss foreign direct investment from a Scottish perspective. It has been a record-breaking year, as it has for the UK. I hear much positivity about post-Brexit, but we must remember that nothing has actually happened yet and things are very much in a state of flux.
The hon. Member for Richmond (Yorks) (Rishi Sunak) mentioned universities. I do not know whether he is aware that last week Scotland was ranked as having five of the top 200 universities in the world, which is a huge achievement.
I welcome that fact, but does the hon. Lady agree that the Scottish Government could do more to improve access to those universities? She will be aware that students from poor and disadvantaged families are twice as likely to go to university in England as they are in Scotland, and that is something the Scottish Government should focus on fixing.
I thank the hon. Gentleman very much for that intervention. He knows that the scrapping of tuition fees in Scotland has meant access not only to university but to employment and to college. That has been welcomed across the board. A university place is not always the full picture. Youth employment in Scotland is lower than anywhere else in the UK because of the SNP Government’s investment in a youth employment Minister—the first in these islands—and making sure that students do not leave university with tens if not hundreds of thousands of pounds’- worth of debt.
If the hon. Gentleman does not mind, I want to make some progress.
Scotland has performed well in terms of FDI, so I will indulge in talk about some of Scotland’s unique opportunities. The combination of natural resources, a highly skilled labour force and a long-standing reputation for innovation make Scotland a prime destination for foreign direct investment. The SNP Scottish Government have taken action to grow our economy and ensure that Scotland remains an attractive destination for business, boosting investment to record levels. As a result, 2016 was a record-breaking year, and, outside of London, Scotland is the best place in the UK for FDI. Places such as Aberdeen, Glasgow and Edinburgh are in the UK’s top 10 cities for attracting FDI. Our attractiveness to international investors is recognised through investments in recent years from the US, with 43 projects; France with 14 projects; and Germany with seven.
The latest annual survey on the attractiveness of locations to international business by Ernst and Young shows that Scotland now takes more than one in 50 of all investment projects based in Europe. That is a clear indication that Scotland in Europe is vital, and that Scotland is firmly established as a location of choice for global investors.
I think we have to acknowledge that the Government are taking Scotland out of Europe against its will, which will be a wrecking ball not only to Scotland’s economy, but to the rest of the UK’s economy. When we have these debates and discussions in one or two years’ time, I will be interested to see where we are. It is important that Governments work together on things such as foreign direct investment. That is not to say that there has not been support from the UK Government—of course there has—but we also have to recognise the flipside of the coin. The hon. Gentleman spoke about his own constituency in Northern Ireland. He must surely recognise the challenges and issues that will come down the line for Northern Ireland as we go through the Brexit process, especially as Northern Ireland relies so heavily on foreign direct investment. Recent research suggests that people will look less favourably on the UK because of the message it has sent as a result of Brexit. That is surely a concern for him.
The wrecking ball was not the Brexit referendum; in Scotland, where the hon. Lady and I live, the wrecking ball was the independence referendum. Law firms went out of business, conveyancing stopped, the housing market slowed dramatically and businesses stopped moving to and investing in Scotland. I know people who were planning to come to open branches of their business who stopped immediately. People do not like the uncertainty and they see our being part of the United Kingdom as a strength, not a weakness.
I thank the hon. Gentleman for that intervention, but he will not be surprised that I completely disagree. The Scottish independence referendum in 2014 was one of the most open and engaging democratic processes that Scotland has ever gone through, in complete contrast, unfortunately—I know we digress, Mr Gray— to the Brexit referendum process, which was squashed into a short time period, with no proper engagement and no proper information. I am now talking to businesses across my constituency and across Scotland that are increasingly turning to the notion of Scotland as an independent country within Europe, because of the mess that this Government are making of the Brexit process, and the absolute devastation that it will cause to the Scottish and UK economy.
Global professional services firm Genpact plans to create more than 300 jobs in Glasgow over the next five years, following a decision to expand its European operations in Scotland. Those roles will encompass digital solutions, risk management, insurance claims, business process transformation and customer services. I recently met members of the insurance sector who were extremely concerned that, if they cannot remain in the single market and customs union and retain the ability to passport their services, services such as aviation and even household insurance will be under threat. Unless we have clear detail from the Government about their plans for a transitional arrangement, there is a real threat to the insurance sector, which will have a significant knock-on impact on businesses and sectors across the UK.
Welcome news on FDI comes with the caveat that many of those decisions were taken up to three years before last summer’s vote to leave the EU. A senior EY partner in Scotland has voiced caution over the longer- term outlook, saying:
“The research suggests that the EU Referendum vote and its aftermath may be having an influence on global perceptions of the UK’s medium to long-term attractiveness. Western European investors are twice as negative as Asian and North American investors.”
That should be of concern to us all. He continued:
“Decisions on the majority of investments made in 2016 would have been made up to three years ago, which helps to explain the UK’s solid performance last year, but signs of a slowdown are on the horizon.”
The Scottish Government released their programme for government recently. It is important to recognise the work that they are doing. The SNP Scottish Government have established a board of trade and are setting up innovation and investment hubs in Dublin, London, Brussels, Berlin and Paris. They are investing in Scotland’s future by setting up a multi-billion pound infrastructure plan and a £500-million Scottish growth scheme targeting growth, innovation and export-focused SMEs, and start-ups by young people.
Much has been made of youth unemployment. The low rate of youth unemployment in Scotland—only 8.2%; one of the lowest rates in Europe—is absolutely fantastic. It is good to see the rest of the UK following suit, but we have to ask ourselves what that will look like in one, two or three years’ time, as we go through the Brexit process.
The programme for government presented by the First Minister last week included bold initiatives to boost the Scottish economy, such as the creation of a Scottish national investment bank and the doubling of business enterprise expenditure in research and development, from £871 million in 2015 to £1.7 billion in 2025. The Scottish Government and Nicola Sturgeon are taking real, decisive action, but they are doing it with one hand tied behind their back. Foreign direct investment will continue to be hugely important to Scotland and the rest of the UK, but we need real answers on what this Government will do to support not only Scotland, but the rest of the UK as we leave the EU.
It is a pleasure to serve under your chairmanship, Mr Gray.
We should celebrate the United Kingdom’s long-standing success as the premier destination for EU inbound investment, but we should also be under no illusions about the scale of the challenge facing the UK in retaining current investment, let alone building on it. As research from Michail Karoglou, David Bailey and Nigel Driffield of Warwick Business School shows, of all relevant recent events only two positively affected the long-term trend for FDI: entry to the European Economic Community and entry to the single market in 1992. Only two events caused a reduction in the long-run level of inward investment flows: Britain leaving the exchange range mechanism under John Major, and Harold Wilson’s devaluation of sterling. After both those events, it took an average of four years for the level of FDI to recover. If anyone in this room or elsewhere thinks that there might be just a short-term blip or no blip at all, the evidence from history suggests that we need to think very carefully. The uncertainty caused by Brexit is cause for concern.
Let us look at some of the figures behind our FDI position. In 2016, the UK remained the premier preferred destination for inward investment projects, but despite a rise in the number of projects, the UK’s market share in Europe fell from 21% to 19%. Meanwhile, we are losing ground in emerging growth industries, high-growth markets and in the attraction of investment from emerging powerhouse economies such as China. Celebrating the number of investment projects is all well and good, but what really matters is the value of those projects and their wider contribution to the economy.
Figures from fDi Markets investment monitor suggest that in the 10 months before the referendum, investment flows were $42.7 billion, and in the 10 months after, the figure dropped dramatically to $28 billion. If we are to evaluate fully the vital work that the Department for International Trade undertakes, we need to see the economic value—really drill down into those figures and look at the value of the projects for each financial year, notwithstanding commercial sensitivities that might prevent the release of information on a case-by-case basis. It might be an idea to see exactly how the Department allocates investment projects to specific annual statistics, so we can avoid what happened in January this year, when the Secretary of State was widely ridiculed for including projects unveiled years ago.
The Government will concentrate on the success stories, but it is important to learn from the failures as well. The recent decision by Nestlé to relocate some 300 jobs making Blue Riband biscuits to Poland is a case in point—I have pointed out elsewhere that failure to find £1 million to save 300 jobs. The fall in the value of sterling has of course made it cheaper to invest here, but as Nigel Driffield and his colleagues point out, the benefits of a favourable exchange rate are set against the uncertainties of changes in our access to the EU. Their research also shows that investors like to return profits to their home countries, so a low-cost investment may be of less interest than might appear at first glance.
The UK has traditionally been seen as a relatively easy place to do business, ranking seventh in the latest World Bank Doing Business ranking. That is in part due to a skilled and educated workforce, the dominance of English as the global business language, a robust regulatory framework, a strong legal system and a wide array of supporting service industries, but the main reason in recent decades has been our access to the largest free-trading area in the world. The big challenge, therefore, is to maintain our attractiveness as we leave the EU—hence the need for strong transitional arrangements, the avoidance of a cliff edge and a seamless move to post-transitional arrangements. A link with trade policy and a robust industrial strategy are also essential.
The hon. Gentleman talks about maintaining our attractiveness to international investors after we leave the EU. Does he think that Labour’s proposed 50% increase in our corporation tax rate to 26% would make it more or less likely that international investors would want to invest here in the UK?
The evidence is mixed on whether the fall in corporation tax since 2010 has had benefits in attracting inward investment. Under our proposals, we would still have the lowest corporation tax in the G7. Although investors like the idea of a low-tax economy, they equally dislike the consequences. Recent research by the London School of Economics shows that the downside implied by a low-tax economy of poor public services is profoundly unattractive. The approach that the Prime Minister set out at Lancaster House may be the preferred route for many Conservative MPs who want to shrink the state, but as well as continuing to damage our NHS, schools and pensions, such a policy will restrict the Government’s ability to deliver the very infrastructure and skills that foreign investors want and need.
The view of our investors is set out starkly in EY’s UK attractiveness survey. EY said that it has been a “mixed year” and that it is
“difficult to make a clear assessment of the UK’s performance attracting foreign direct investment and maintaining its appeal to investors since our 2016 attractiveness reports, because every positive indicator is offset by an equivalent negative development.”
It added that,
“the UK’s share of European R&D projects slumped from 26% to 16%, its lowest since 2011. With software projects also slipping despite a Europe-wide increase, these results raise concerns over the UK’s future performance in key growth sectors.
Europe was the leading origin for projects into the UK…Cross-border investments in Europe grew in 2016, with Central and Eastern Europe becoming an important area for higher value-added FDI such as R&D. As European value chains become increasingly integrated, investors appear concerned about the UK’s future access to these value chains.”
The EY 2017 global survey of investors’ perceptions
“reveals a split between current plans and future expectations…Some 31% of investors expect the UK’s FDI attractiveness to decline over the next three years, while 33% expect it to improve.”
Before we get too excited about the net positive figure, EY states that those figures are
“significantly worse than the long-term average, and 50% of investors based in Western Europe expect the UK to become less attractive.”
I have listened carefully to the hon. Gentleman’s speech. If I may say so, it is a rather glass-half-empty sort of speech compared with some of the other contributions. He is absolutely right about some of the notes of caution in EY’s attractiveness survey, but does he accept that there are also positive noises coming from it, including that the UK remains hugely successful in attracting FDI?
I read out the key point about the mixed picture. We must do everything we can to retain our existing successes as well as build new ones—that is the thrust of what I am saying—but there is no point in the hon. Gentleman or any of his colleagues pretending that there are not great challenges and causes for significant concern. I was tempted to say in response to his earlier comment that he has rose-tinted glasses half full. [Interruption.] It is too early in the morning for that, isn’t it? That one is a work in progress—I will leave it in the locker.
The hon. Gentleman is quite right about a positive attitude; I do not disagree with him. Of course we have to be positive and do everything we can—some of my questions for the Minister are along those lines—but it is worrying that the EY report shows a sharp fall in how global investors rank the UK’s attractiveness on key criteria, such as education, transport infrastructure, local labour skills, political stability and access to the European market. There has been a year-on-year decline of up to 30% in some of those criteria, which is unprecedented in the past decade. Bank of England Governor Mark Carney said just last month, as the Bank reduced its growth forecasts, that Brexit uncertainty was holding back investment. Of course, in the past year we have grown more slowly than our competitors—a fact that supports that comment and some of the other analysis I have described.
Mr Carney’s comments go alongside AIB’s decision to suspend investment in the UK due to uncertainty about the UK’s future. Two Japanese banks are establishing European bases in Frankfurt, and reports suggest that JP Morgan and Goldman Sachs are considering relocating significant business operations. Japan is a major investor in the UK, with some 1,000 UK businesses under Japanese ownership generating an estimated £72 billion of turnover last year. The Japanese ambassador estimates that 10,000 Japanese firms operate in the UK, employing 140,000 people. Many of those jobs are in the UK’s flagship automotive industry with big players such as Nissan, Toyota and Hitachi.
At a meeting with a firm this morning, I spoke to someone who attended a conference in Japan at which the UK and Japan looked at Brexit and how they could work together. For the record, he told me that there were positive contributions with respect to Brexit from firms in the United Kingdom and firms in Japan. They see possibilities and opportunities, and that should be recorded in Hansard.
The hon. Gentleman is absolutely right to raise that point. Japanese firms have already invested here, as have other foreign firms. They need to do everything they can to maximise their existing investments and to be in a position where it makes sense for them to build on those investments. That comes back to what the Minister has to say and what the Department has to do to enhance our position so that those investments continue to deliver and attract additional investment.
The hon. Gentleman is making a detailed and informed speech. To counter the point made by the hon. Member for Strangford (Jim Shannon), Mitsubishi, which is a major employer in my constituency, has significant concerns about its ability to continue to invest and grow in Livingston and across the country, due to issues such as market access and the continued employment of EU nationals. Does the hon. Gentleman share my concern that companies such as Mitsubishi should be able to continue trading in Scotland and across the UK?
Yes. I am grateful to the hon. Lady for showing that there is a balance between two viewpoints: our foreign investors’ desire to continue their investments, make the most of them and build on them is set against their very real concerns. I am glad that she touched on the challenges with respect to skilled workers’ ability to come here and stay here, given that we have such serious skills shortages.
Nissan’s car plant in Sunderland employs 6,100 staff and an estimated 24,000 additional jobs are linked to it through the domestic supply chain. That fact and the hon. Lady’s point about Mitsubishi demonstrate just how important Japanese investment is for our car industry. The previous Labour Government helped to establish the Automotive Council UK, which turned around the struggling UK car sector and has contributed so much to making it a success story. Labour intervened to boost that vital industry—the 2009 car scrappage scheme played a key part in increasing demand for new cars. In contrast, the Government’s current inaction is a serious threat to the industry’s ability to compete.
The threat to UK car industry jobs is very real, and is compounded by the recent sale of Vauxhall to PSA Group, with the possibility of job losses as a consequence of any restructuring of UK operations. The Prime Minister is alleged to have told PSA that her Government are committed to the UK car industry, but the investment figures show a very worrying picture and serious concern on the part of investors. Figures from the Society of Motor Manufacturers and Traders quoted in the Financial Times suggest that investment in the UK car industry fell to just £322 million in the first half of 2017, compared with last year’s £1.66 billion.
The Secretary of State has repeatedly referenced the UK’s service sector in his various speeches and appearances before the House, but the Government have been largely silent on how they intend to ensure the future strength of this sector, which is vital to our economic success. The passporting regime is critical to the ongoing ability of UK-based banks to engage with EU-based customers, and it has been essential to decisions by US and Swiss banks to use London as a centre of operations, but uncertainty about its future continues; as a result, decisions are being taken to relocate to the continent.
The Government have finally decided to produce a trade White Paper in advance of the upcoming trade Bill. The fact that they have taken more than a year to do so may well have had a significant impact on investment appetite—often, decisions are made years in advance of committing capital to investment projects—and the trade White Paper must address the critical issues faced by domestic and foreign investors alike. Investors need to know what the Government will do to encourage investment across the United Kingdom, including the devolved Administrations and regions; whether the Government intend to prioritise support for certain industry sectors in preference to others; to what extent those industries will be able to continue to operate within global and, in particular, intra-EU supply chains, and what impact the rules of origin regulations will have on their capacity to continue to participate therein. Furthermore, what trade defence mechanisms do the Government intend to introduce and how will they use trade remedies to address any unfair practices undertaken by foreign competitors? What efforts will the Government make to ensure that standards are maintained in order to prevent unfair market distortion as a result of imports from markets with less stringent regulations and standards? What efforts will the Government make to maintain regulatory equivalence with key markets? What investment dispute settlement mechanisms does the UK intend to pursue in future trade agreements?
Labour has been clear about what our trade priorities will be and how we will seek to ensure that all of Britain benefits. We have addressed that in our manifesto. We recognise that the UK’s ability to continue to be a premier destination for FDI is essential to our future prosperity and to creating the jobs and economic growth we need. Now the Government need to minimise uncertainty and set out how they will reassure and support investors and deliver an attractive strategy that encourages foreign investors to continue to come here and to invest more.
Many investors come here precisely because of our access to the EU. The Government need to set out how they will maintain that access in financial and professional services, in manufacturing and across the economy. Time is fast running out. Investors are worried—remember those SMMT figures for the car industry and the actions of Japanese banks. Those are not isolated examples. Businesses want to know how their investments will be supported and enhanced; they need to know that trade policy is linked to an industrial strategy. Piecemeal deals for one business at a time are not an industrial strategy, however much they are welcome to the businesses, workers and communities in which such businesses are located. The future of FDI is vital to our national interest. The Government must intervene now.
I thank my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) for securing the debate. It is encouraging to see him coming along, and he has been supportive of the work of the Department for International Trade since he became a Member of Parliament.
The Prime Minister has been absolutely clear about this Government’s ambition to build a global Britain, which is about being the most passionate advocate for free trade in the world. That means championing British business in global markets; remaining a hub for global inward investment and a source of outward investment; and building a competitive trade policy for when we leave the European Union. I have been struck by one thing in the debate, which is that everyone across the House seems to believe in that idea of global free trade and a global Britain. It is encouraging to have no protectionist dissenters among us in Parliament, and that is a good thing for this country.
For the first time since 1983, a Department dedicated to international trade exists to drive forward that global ambition and meet the global challenges that face us. Personally, I am delighted that, following a departmental reorganisation, I am now the Minister for Investment, covering foreign direct investment and a renewed emphasis on overseas direct investment out of the country. Responsibility for FDI, which was previously held by UK Trade and Investment, now falls directly under the remit of the Department for International Trade—we are the Department responsible for going out and harvesting opportunities from around the world and bringing investment to the UK.
We intend to leverage our presence in 108 markets around the world—we are in 179 diplomatic posts in 108 countries—where we will harness the capabilities of the most revered diplomatic network to bang the drum for UK plc to overseas investors. Trade and investment is a key pillar of the Government’s industrial strategy, and I will convene colleagues from across Government to ensure that we target investment in the right areas and build an economy that works for everyone throughout the UK, including in all our devolved regions.
As we have discussed, FDI creates jobs, develops our skills and makes us more innovative. Global investors do not simply provide capital, but facilitate the transfer of technological know-how and new ideas, which increase our skills base and our productivity. Billions of pounds have poured in since the referendum from the likes of Toyota, Facebook and Google. To respond to the point about Japan made by the shadow Minister, the hon. Member for Sefton Central (Bill Esterson), FDI from Japan actually rose in 2016-17, with new jobs provided from Japan rising from 2,600 in 2015-16 to more than 3,500. Global investors therefore continue to see opportunity in the UK. They realise, as the Government have said all along, that Britain remains open for business.
The Department for International Trade was established just over a year ago. As I said, this is the first time since 1983 that we have had a Department dedicated exclusively to promoting trade policy and investment. That was as a consequence of the EU referendum result. Our purpose is absolutely simple: to turn the UK into the most passionate advocate for free trade.
We have heard a number of people speaking about the changes brought about by Brexit. I for one was a very passionate remainer; I campaigned fervently to stay in the European Union. As a Minister in the Department for International Trade, however, I absolutely recognise that we have enormous opportunities around the world that we must go out and seek. As last night showed us, we must not disrupt the will of the electorate and try to frustrate the Brexit process. We must realise that the remain side lost and that we must get on with this, embrace the opportunities, and not hold back and come up with a fudge that prevents us from striking new free trade deals with countries which we could not otherwise do.
The DIT promotes the UK as a destination for investment by providing specialist support for foreign investors in 60 markets worldwide. In 2016-17 we supported the creation or safeguarding of more than 91,600 jobs through our work with foreign direct investors. That equates to nearly 50 new and safeguarded jobs per project that we undertake. A key part of our investment approach is to leverage the power of the GREAT Britain campaign, the Government’s flagship international marketing and branding platform for the UK. It represents the whole of the UK and is present in more than 144 countries. The GREAT campaign effectively signposts the wealth of opportunity in the United Kingdom, including Northern Ireland.
In January we launched the Invest in GREAT Britain and Northern Ireland international campaign to promote the UK as a natural choice for overseas investment. Since its launch, the campaign has generated more than 600 inquiries, which have so far resulted in 89 qualified leads for investment into the UK. The campaign’s focal point is a new website—invest.great.gov.uk. One of the key aims of the marketing activity is to direct traffic to the website, where prospective investors can find out more about the UK as a destination for investment.
We have a strong global footprint. The UK leads Europe in foreign direct investment and is third in the world for inward FDI stock. DIT welcomed a record-breaking number of FDI projects to the UK in 2016-17, at 2,265—up 2% on 2015-16. The level of FDI stock in the UK is currently at £950 billion. Inward investment into the UK is estimated to have created and safeguarded nearly 108,000 jobs in 2016-17 alone.
According to official figures, just 1.1% of registered non-financial businesses in the UK are owned by foreign investors, but they account for 34% of annual turnover and 38% of gross value added. Only one European country featured among the top six individual countries of origin for foreign investment projects in 2016-17. The USA was our largest source of investment. American FDI stock in the UK stands at £252 billion and accounts for 27% of inward investment stock. The whole of the UK continued to attract FDI, with parts of England and Scotland seeing growth above the national average. I am pleased to tell my hon. Friend the Member for Mid Dorset and North Poole that the south-west had one of its strongest annual results in 2016-17, with a 13% rise in FDI projects to 101.
Although those figures look very good, it has been said that the jobs numbers are not keeping pace with the increase in the number of investment projects. It is fair to say that we need to do more work to analyse how those numbers are collected. The data are collected on the basis of investment projects. If, for example, somebody invests in a new factory in the midlands costing £50 million, they would have the same representation as somebody opening a chip shop in Barnsley for £50,000. We need to do more work to understand exactly how much money is coming in and how many jobs are being secured.
More productive businesses coming to the UK will not necessarily employ more people. Higher productivity does not necessarily increase the number of people employed, but we see different patterns, from one year to the next, with different types of business coming to the UK. Ultimately, we want to create the wealth of this country, which includes good, high-paying, productive jobs; that is absolutely crucial to what we do. Moreover, and I will return to this point later, we are keen to spread that activity throughout the entire region—most people say from John O’Groats to Land’s End, but I say from the Scilly Isles to Shetland. We are absolutely determined to ensure that that work leaves no part of the United Kingdom untouched.
Global investors repeatedly say that the strength of the UK’s economic fundamentals is the reason they choose the UK. They cite our political and regulatory stability, our transparent rule of law, our low regulatory environment and our low-tax economy, including some of the lowest business tax rates in the G20. We have some of the best universities in the world—and now the top two—feeding a highly skilled workforce and fostering world-leading R and D hubs across the country. We speak the international language of business, and the UK offers a perfect time zone for global trading, where someone can do business with China in the morning and with the US in the afternoon. There is also our cultural diversity and quality of life—but not, sadly, our weather. Those economic fundamentals mean that the UK is now considered one of the easiest countries in the world with which to do business. It is ranked seventh, according to the World Bank. At the start of 2016, the UK had 1 million more small businesses than it had in 2010—a total increase of 23%—and our tax system ranks in the top 10 most business-friendly in the world.
The prospect of taxation was raised, and the shadow Minister responded to the prospect of a Labour Government introducing higher taxes. He was absolutely right that if he adheres to the manifesto pledge from the recent election, the business tax rate would merely rise back to where it was at the beginning of the coalition Government.
Indeed, lower. A really important point is that businesses look not necessarily at absolute numbers, but at the direction of travel. One of the things behind businesses coming to this country is the fact that the direction of travel for businesses taxes—which, frankly, raise only about 8% of total taxation—is downward. That creates a greater opportunity for business. If businesses see that direction of travel reversing and taxation going up, they will not know where it will stop. The problem is the direction of travel, not the absolute numbers.
I do not want to wander too far from FDI, but most businesses I talk to tell me that improving the incentives in taxation is more important to them than dealing with the taxation of the results and successes. It is the tax level in business rates that needs reform, not the rate of corporation tax. Does the Minister agree?
The hon. Gentleman is right that taxation is not simply about the headline corporation tax rate. It includes, of course, business rates, and businesses that operate factories do not necessarily pay the higher business rates for retail spaces, which are calculated per square foot. It is also about national insurance and various other taxes, so we need to bring together a package. Taxing a population too much stifles growth and investment into that economy. The whole package has to come together to ensure that the businesses that invest in the UK can be confident that the Government recognise that those businesses’ taxes—not just business rates, corporation tax and national insurance, but all the money that gets paid to workers, who then pay tax and spend money and pay VAT—buy the hospitals, schools and public services that we value so much in this country. It is vital that we get the business environment right and attract businesses to this country to ensure that we continue to provide the public services that all of us, across the whole of the House, hold so incredibly dear. We do not want to lose any of them.
The hon. Member for Livingston (Hannah Bardell) talked about business certainty and the uncertainty of Brexit, and so far people like me, the remainers, have been proved wrong—thank goodness, because none of us wants anything to go wrong with our economy, and we are very keen that things progress. The prospect of a second independence referendum, which the Scottish National party could put forward, although Westminster would not necessarily recognise it, is creating more uncertainty. Businesses need to know what is going to happen. One thing we can say about Brexit is that it is a quantifiable uncertainty: we know that, in the worst-case scenario, our trading relationship will go to World Trade Organisation rules.
What was not decided and resolved during indyref 1 was the fundamental issue of what currency Scotland would use. I think it will be very difficult for businesses to invest in Scotland if they do not even know in which currency they will do their accounts and charge their customers. I do not want to castigate the SNP; I want to work hard with Scotland—and, indeed, Northern Ireland, Wales and all the regions—to ensure we are working together to the benefit of the whole of the country. We see Scotland not as a different part of the United Kingdom but as our friends, whom we want to support. I am incredibly proud, as Minister with responsibility for the food and drink sector, that I spend a lot of time dealing with the Scottish Whisky Association, which generates £3.9 billion-worth of exports and benefits all of us in this country. That is fantastic. We are going to do whatever we can to support the devolved Administration in their efforts to boost investment in Scotland. We do not see Scotland separately; we will always be there to help, and we are doing as much as we can to ensure investment comes into Scotland.
My hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) raised our industrial strategy, and said that we need to look at science research and innovation, the skills agenda and infrastructure. The industrial strategy is about delivering those incredibly important things, and we need to look at supporting business to grow—also in the industrial strategy—and several other areas. My hon. Friend referred to three important and fundamental points, and the industrial strategy is part of the package. In some respects, the Department for International Trade is the sales force of the country. We are the hard-working salesmen with a trolley bag behind us going through airports around the world making sure we are banging the drum for British business. At the end of the day, the product that is being sold is the industrial strategy, plus a number of other items. We are out there. Of course, we feed back and say what the international world is saying; that is very important.
The industrial strategy is about building an economy that works for everyone, improving living standards, creating good jobs for all and cultivating the conditions for competitive, world-leading businesses to start and grow. Encouraging trade and investment is one of the key pillars of the industrial strategy. The right investment in the right areas builds world-leading sectors and develops our skills base. Targeted investment also strengthens our supply chains, putting UK companies in a better place to work together and present a “Team UK” offer for some of the biggest global contracts.
The industrial strategy will use our record investments in infrastructure to unlock and drive growth in every part of the country and it will use major new investments in research to support innovative businesses across the country. I want to reiterate the point that we are a Department for the whole of the UK. We will look to attract investment across all of the English regions, all of the devolved regions, including Greater London, the midlands engine and the northern powerhouse, and, of course, the south and south-west. We will also work with our partners in the devolved Administrations, because investment in one part of the UK has a positive knock-on effect for all of us in every part of the UK.
In March, I launched the midlands engine investment hub, which acts as a focal point for FDI. Its priority is developing and articulating a pan-midlands FDI offer. The northern powerhouse investment taskforce was established in 2016 as part of the cross-Government northern powerhouse strategy, of which trade and investment is one of the main strands. FDI into the northern powerhouse continues to rise. In 2016-17, it grew by 5%, attracting 348 projects and creating nearly 15,000 new jobs.
I think it is fair to say that the south of England looks to the super-region, and quite a significant amount of FDI comes into the region near London because London is a natural hub. However, I have recently been to visit boat-builders as far afield as Falmouth, just about 20 miles from the end of the country, where we see truly global brands such as Pendennis yachts building luxury yachts for oligarchs and big investors around the world. It is a great topic of ridicule: those who have yachts and those who have not. None the less, those who build yachts provide jobs. It is important to remember that building those luxury boats brings in a lot of money. There are some fantastic businesses down there—Rustler Yachts is another—and we are all about promoting every one of those businesses. It is important that my hon. Friend the Member for Mid Dorset and North Poole can take back to his constituents that we are working hard on that.
The shadow Minister also made a great deal of reference to the Automotive Council UK, the car industry and what is going on in terms of investment. It is right to highlight the car industry, which is an amazing example of a great success story in the UK. By the way, we can look at the experience of Jaguar Land Rover as a historic example. It has always been a great British brand that has built some fantastic cars, but it is the Indian production techniques that have turned it into a truly profitable and successful business. The foreign direct investment coming into JLR and continued investment of the UK demonstrates more than anything else how productivity and jobs are increased by FDI.
The Minister is right about JLR, the value of the FDI from Tata and the partnership between Government and investor in achieving that. Is he aware of comments from the head of JLR last week who said that, should we end up paying the tariffs implied by the WTO, that would cost his business £1.1 billion extra a year? Does he share my concern? I urge him and his colleagues to do everything they can to avoid ending up in that situation.
Absolutely. I met the chief executive of JLR and he shared those concerns with me. We have concerns—actually “concerns” is the wrong word. We are striving to have a Brexit that feels, in every commercial sense, exactly the way things are at the moment.
It is worth bearing in mind that the history of trade negotiations has been one where we have started with a bad position and tried to work out how to go forwards. People go into a negotiating room and say to the two people across the table, “This is how we trade”—let us say it is under WTO terms—“How are we going to improve this?” What is fascinating about the proposed free trade arrangement with the European Union is that, for the first time ever, people are suggesting that we will have negotiators going into a room, saying, “We have the best outcome that we could want in terms of free trade. How are we going to make this worse?”
It is in everyone’s interests to maintain the trading relationship we have, whether we be in the UK or the European Union. It is a different dynamic, but from the conversations we have with people and businesses in the European Union—bear in mind that we also talk to them about what they want from Brexit—it is crystal clear that no one wants to run into a position where WTO tariffs are being charged. We are doing everything we can to ensure that we get to a tariff-free and customs-free outcome of Brexit.
On tariffs, does the Minister share my concerns and those of others, including business, about the comments made by the EU negotiators that no progress has been made because issues such as the border in Ireland and the position of EU nationals have not been sorted out, and trade agreements cannot be struck until that point? Similarly, his boss has said that the UK Government do not have the capacity to strike trade deals. Surely that is of significant concern to him and to others.
The hon. Lady is mixing up a couple of things. The Department for International Trade is doing trade deals, but not the one with the European Union; that is being done by the Department for Exiting the European Union, which does have the capacity to strike that trade deal.
On the wider piece, we are currently having conversations with 15 countries where we are looking potentially to strike trade deals. It is worth bearing in mind that America finds running three trade negotiations at a time slightly taxing and would not want to do more than that. We are trying to do 15, and we are getting on with it. We have 350 trade negotiators and have taken on Crawford Falconer, who has an extraordinary amount of experience. We have therefore upskilled to do that.
To return to the automotive industry, the shadow Minister is right. Since Brexit, we have seen Nissan commit. We have also seen Toyota commit, and we have seen BMW commit to build electric motors in Cowley. That is significant. On the question, “Is Brexit holding this up?”, it is not.
It is widely agreed that FDI has a positive effect on the host country, especially when the supportive business environment is strong. That increases productivity. The Department for International Trade will lead the way in convening the whole of Government to ensure that the UK remains an attractive destination for FDI in Europe and one of the most attractive in the world. A global Britain will always welcome foreign investment for the innovation it spurs and the skills it brings.
As a vital part of the Government’s industrial strategy, inward investment will fuel science and innovation, upgrade our infrastructure and cultivate the world-leading sectors that will allow our businesses to thrive on the global stage. The debate has demonstrated the important role that foreign investment plays in building a stronger and more sustainable economy that works for all. While we have one or two differences of opinion, it seems that the House is united behind the idea of a global Britain.
I thank all hon. Members who took part in the debate. The hon. Member for Strangford (Jim Shannon) talked about his optimism and about strength and growth in Northern Ireland. My hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) talked about his business background and what a good place this country is to do business in. He also set out some challenges and constructive suggestions as to how we can improve our productivity and attractiveness.
We heard some notes of caution from the hon. Members for Livingston (Hannah Bardell) and for Sefton Central (Bill Esterson), who both cited EY’s attractiveness survey. The hon. Gentleman did accept that it was a mixed picture but that there was some positivity there. I urge him to look to that positivity: the UK remains hugely successful in attracting FDI and has clear potential and opportunities to sustain that success in a post-Brexit world.
I am grateful to the Minister for his words, particularly in relation to my region, the south-west. My constituents will be reassured. My remaining challenge to him and his Department is to ensure that they look out for all the regions—as he said he would in his speech—and continue to do that as we go forward, forging new trade deals.
Question put and agreed to.
That this House has considered foreign direct investment into the UK in 2016-17.