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I beg to move,
That this House has considered the role of the Office for Investment.
It is an honour to serve under your chairmanship, Mr Paisley, and a real pleasure to be able to debate this issue, which is of huge importance to, and presents huge opportunities for, our country’s future growth. I am especially pleased to be having this debate not only because foreign direct investment—FDI—is so important to the national economy, but because it is so relevant to many of my constituents. We in Hertford and Stortford are part of the world-renowned innovation corridor, and our local life sciences sector is one area of particular opportunity and attractiveness to foreign investors.
The Government unveiled their plans for the Office for Investment in November last year, specifically designed to attract FDI into the UK. The aim is to connect public and private sector expertise in order to drive investment into all parts of the UK. I am particularly pleased that that has such strong and specific support from the Prime Minister in No. 10 and the Treasury. It is a Government priority at the highest level. We have long been a global centre of FDI in this country. FDI stock levels reached £1.6 trillion by the end of 2019. We have traditionally been the top FDI destination in Europe, and according to the World Bank we are second only to Denmark in offering the best business environment in the world. That has been so crucial to the success of our start-up ecosystem, and it is why so many businesses want to come here.
We have maintained our FDI leadership in Europe when many thought that we could not, or would not, post the EU referendum. FDI markets reported that between July 2016 and September 2020 foreign investors announced nearly 5,000 UK projects, more than Germany and over 50% more than France over the same period. The impact that that success has had on UK venture in particular has been huge. It has helped to fuel a world-beating venture sector that has insulated the UK’s start-up and scale-up communities from many of the global shocks of the past decade. Interventions of the past decade to usher in new FDI have made major contributions to our world-renowned and highly enviable start-up and small and medium-sized enterprise ecosystem, which has in turn nurtured and enabled so much growth in new, and sometimes brand new, parts of our economy.
However, covid has taken its toll on FDI right across the globe, including here in the UK. There was a 49% global drop in FDI flows in the first half of 2020, which will already have had profound consequences for our economies and prospects for future growth, but it is true to say that negative trends had already started to emerge before the outbreak. Between 2018 and 2019, the UK’s FDI flows had already fallen by £6 billion, well before we had even heard of covid. We cannot blame covid for all of a trend that had already begun, and we have to respond with purpose. That is fundamental to the short-term health and recovery of our economy, as well as to our long-term growth prospects. Central leadership is needed to unblock the most complex cases and put FDI at the top of the UK’s agenda. The Government have set out how this new office will provide that leadership, and I am sure the Minister will confirm that the Government will ensure that the Office for Investment is given the necessary prominence to make a real difference and command the authority to work with Departments beyond the Department for International Trade to truly work across Whitehall, catalysing activity across all Departments.
The UK’s overall history of FDI is a story of success. Even now we are competing well, despite a recent dip, but a closer look at data reveals a divided country, which poses problems for the UK’s future. Since 2016, London and the south-east has increased its share of total FDI projects to more than 51%. That clearly has an impact on regional inequality and the spread of opportunity—an issue that I know the Government and the Minister are well aware of and are determined to address. Could the Minister explain how the Office for Investment will use its influence to guide investment to different parts of the UK? Data also shows that devolved Administrations have an advantage in securing FDI, compared with English regions outside London. I should be very interested to hear how the Minister intends the office to work for the entire country, to elevate areas previously left behind and provide a coherent, co-ordinated strategy.
Bringing new investment to all parts of the UK is at the heart of the Office for Investment’s purpose. I am keen to use a little more time to discuss the importance of a regional approach to FDI, because it is in the regions that we will discover the most untapped new potential. Most new wealth over the next few years will be created through emerging industries such as green energy; it will not come from the already saturated markets that make up most of today’s FTSE 250. London’s market simply does not have as much capacity for new growth as those of the regions. Off the back of the pandemic especially, we have a great opportunity to develop new powerhouse regions to match the might of London. Right now, the gap between the most and least productive local enterprise partnerships is growing, but a balanced FDI strategy can help reverse that trend and level up our economy and regions.
It seems obvious that FDI is one of the keys to scaling the success of the many positive and innovative announcements made in the Budget last month, such as the super deduction and freeports. For every FinTech hub in London we need a thriving life sciences sector somewhere else. With better levels of FDI in regions, skills will follow investment, providing new opportunities to retain the best talent and attract it from afar.
It is equally important to recognise that FDI is not just vital for the start and scale-up sector of business. The biggest and most established companies also seek opportunities to expand and invest around the globe. We are right to demonstrate our ambition and commitment to get them investing here, where their FDI will create more jobs, improve productivity and unleash research and development investment.
As important as a regional approach to FDI is to the future of our economy, equally important are the sectors that the Office for Investment will target. To compete globally in 10 and 20 years’ time, we have to pinpoint the right markets that will one day lead the world. It may be that the FTSE is stocked with establishment banks and oil companies at the moment, but it will not be those industries providing the high-growth success stories of the next decade and more. New wealth will rely on fledgling, disruptive sectors—some growing now, some to be established and some just dreamed of. Could the Minister explain how the Office for Investment will better enable the UK to attract FDI in those strategically important sectors for our long-term growth ambitions?
I was extremely pleased to see that we have secured the new sovereign investment partnership with the United Arab Emirates, announced last month. From the Government’s £200 million investment in life sciences we have leveraged a further £800 million, giving a total investment inflow of £1 billion, all negotiated through the Office for Investment. This is a blueprint for success, which is so impressive and so important.
As a cricket fan I have used cricket analogies before, but I feel it bears repeating today that the role we play in this place to secure future FDI in growth in strategically important sectors is somewhat akin to that of a cricket groundsman. As I see it, we are the groundsmen and women whose job it is to prepare the wicket for our batsmen to thrive. Cricket fans will recall how England’s batsmen felt the wrong end of a rough wicket at the hands of Indian groundsmen recently; the groundsmen prepared their wickets to suit their bowlers and make life harder for our batsmen. In much the same way, it will be the job of England’s groundsmen to prepare our wickets to suit our own batsmen, not their bowlers, during the return fixture. That is the home advantage principle, which we should be applying in this place too. It is our job to set up advantages for our businesses, communities and regions by preparing a wicket to suit our ambitions. Admittedly, we are on quite a sticky wicket at the moment, but with every rough patch that emerges, there is an opportunity for the most creative of spinners to take advantage of the new landscape.
That is what I believe the purpose of this office should be, and indeed is, and I read with great interest the initiatives that are being rolled out by the Office for Investment to that end. The foreign investment summit will, I believe, be the largest gathering of investors to meet in the UK ever. Its focus on clean technologies is a clear signal that the Government understand where their attention should be focused in order to capitalise on the biggest future growth opportunities.
When I worked in corporate and international banking, my role was to engage senior investors with high value opportunities, so I understand how important a statement this summit makes in telling the world that the UK is open for business and in nurturing and developing strategically important relationships. We cannot overestimate the huge dogfight for FDI currently taking place across the world. Global competition for FDI has never been fiercer as countries try to recover from covid-19. It is for this reason that I believe now is the time to prepare our wicket effectively, to make sure that the UK is on top of its game. The Office for Investment and set pieces such as the foreign investment summit can be a central plank of that ambition. With that in mind, would the Minister expand on the single front door strategy, and explain how the Office for Investment will be given the prominence and capacity it needs to lead this work and navigate the UK through the currently incredibly competitive climate?
I welcome the establishment of the office and what it says to the world about the UK’s priorities for the future. We are a country that is open for business on a global scale and inviting of others to add value to that endeavour. Given the title the Office for Investment, I wonder whether we might even be practical and prudent to extend or replicate the UK’s domestic investment centre. So much wealth is already under management in the UK: nearly £10 trillion worth of assets. To challenge the US as the best place to grow new innovation and technology, we need to encourage more FDI, but we also need to encourage more domestic investment at an earlier stage to catalyse growth.
A relatively small proportion of the £10 trillion-worth of assets under management in the UK is ever directed at UK venture, and yet we still have one of the world’s largest venture markets: $13.2 billion was invested in UK venture in 2019, making it the fourth-largest market in the world by inward investment. Imagine, though, how much potential could be catalysed if we were to channel a larger portion of assets under management into venture. A domestic version of this office, to include examining changes to the domestic regulatory landscape, could encourage a greater flow of capital into UK-backed venture. Various Government-led initiatives could be considered that encouraged or even obliged the biggest investors in the UK, such as institutional pension funds, to include venture as an asset class in all they do. That might fall outside the Minister’s current purview at the Department for International Trade, but I would be interested in his thoughts on the potential of a dual approach, to look at foreign and domestic investment.
This is a very positive step forward for the UK’s FDI strategy. It will provide clear leadership in Government and a clear and obvious door for foreign investors to go through. The office has my full support and I look forward with great optimism to the foreign investment summit, which I believe will help to position the UK as the natural choice for foreign investors.
It is a pleasure to serve under your chairmanship, Mr Paisley.
The Office for Investment will bring a real focus on delivery and inward investment. Evidence shows a direct correlation between job creation and foreign investment. If there ever was a time for that to happen at pace, it is now. Let me draw a loose parallel between the Office for Investment and directly elected Mayors. When they were first proposed in the early 2000s, I was set against them. In most ways I was wrong. I saw the whole thing as a replication of a failed tier of government—county councils—but the proof of the pudding has been in the eating. In the West Midlands we have had a dynamic Mayor in Andy Street. He makes things happen. A straightforward example of that was his intervention in the demolition of a large derelict block of offices known as Cavendish House in Dudley—a blight on the Dudley landscape for 15 years, which nobody was seemingly able to remove.
The creation of the Office for Investment under the leadership of Minister Lord Grimstone, working hand in hand with No. 10 to attract investment, is absolutely key. In some respects, it is a similar functional role—a supermayor, if I may suggest it, although Members of the other place would never think that of themselves. So much depends on the quality of the individual selected. We need only look at London to see the stark difference between the dynamic former Mayor that we used to have and the depressing failed existing one.
The other focus that the Office for Investment can bring is the strategic nature and application of investments around the country. Opportunities in technology, advanced manufacturing, services, green research and development and digital are all strong areas of growth that are aligned with Government priorities for productivity and a greener economy, and their development across the country is key. That brings opportunities to areas where there has been relentless decline over many years—forgotten areas such as mine in Dudley and the Black Country—levelling up.
The Office for Investment has a big job to do and it has my full support. It represents a single front door to the UK for investors, who can confidently look at the UK with deliverability and speed of return at the heart of their investment in UK plc.
It is a pleasure to serve under your chairmanship, Mr Paisley. I spoke to the Minister before the debate, but I would like to put it on the record and congratulate him and our Government on their sterling efforts with the Office for Investment. It has created some 2,000 jobs in Northern Ireland. We are eternally grateful for that, because those jobs have been in technology, in the cyber sector and others. As well as my encouragement, I am sure that you, Mr Paisley, as an MP for Northern Ireland, will look forward to seeing how that develops. Some 3,000 jobs were created in Scotland, so Northern Ireland is punching above its weight. We have had opportunities in the past to discuss this issue with the Minister, so I look forward to what he has to say.
In Northern Ireland we are fortunate to have low rates and high skills, particularly among young people, who are eager and progressive in their outlook and wish to succeed. This is an opportunity for them. How can we increase those jobs beyond the 2,000? All these points make Northern Ireland the ideal place, with the best people, for increasing jobs, opportunity and investment.
I am very keen to know what the UK-wide strategy will be, as Northern Ireland is ready and waiting and has delivered in the past. There are many young people, and those who are of a middle age as well, who have the wherewithal to be part of the increase in investment jobs through the Office for Investment. The hon. Member for Hertford and Stortford (Julie Marson) is right that jobs and skills follow investment. We want to make sure that Northern Ireland is part of that. Perhaps the Minister could indicate in his response how Northern Ireland will be part of that great strategy for all of the United Kingdom of Great Britain and Northern Ireland. Obviously, as an MP for Northern Ireland and particularly Strangford, I want to see jobs coming to us.
It is a pleasure to serve under your chairmanship this morning, Mr Paisley. I am grateful to my hon. Friend the Member for Hertford and Stortford (Julie Marson) for securing this debate and for all the contributions, which were focused on the importance of investment to the livelihoods, the prosperity and quality of life of people in Members’ constituencies and beyond. It is a privilege for me to be able to speak about the role of the new Office for Investment, a joint venture between No. 10 and the Department for International Trade, to cement the UK as a global hub for investment.
The UK’s approach to investment is driven, and needs to be driven, for the reasons that my hon. Friend the Member for Hertford and Stortford laid out, from the top—from the Prime Minister—who is showing the world that the UK is open to investment, and that Global Britain is a vision and a reality, not just rhetoric. As we seek to build back better in the wake of covid-19, we have to use our newfound freedom to go further and faster than ever to drive jobs and growth across the country.
The Government are determined to secure more investment opportunities in order to level up every region and nation of the UK with new jobs and businesses. The Office for Investment is very much focused on the levelling-up agenda, as the whole of Government needs to be.
We do not in any way want to surrender the power, attraction and magnetism of London and the south-east. When I was Minister for Investment, the majority of investments into the regions came as a secondary investment from companies that had previously invested, often, into London and the south-east. This is about keeping the best of what we have. As my hon. Friend the Member for Hertford and Stortford said—she may even have understated the point—not only are we the leading investment destination in Europe, but by size we are probably the most attractive foreign direct investment economy in the world. Only the United States and China-Hong Kong have higher levels of FDI. We know that the FDI tends to lead to more research and development; it leads to more exports; and it leads to higher wages, which we would all support.
The Office for Investment lies at the heart of making that happen, by identifying and tearing down the barriers faced by top-tier investors. It sends a big signal, which is important, and it is tied to the Prime Minister, but the aim is not that it should grow into a behemoth. It is a very small, strategic group, working, through my colleague Lord Grimstone, with DIT, which, in various guises over the years and now as a dedicated trade Department, has been at the heart of delivering the offer to investors. The Office for Investment is bringing that signal, with the imprimatur of the Prime Minister. By being at the top of Government, it brings the convening power that only the Prime Minister’s Office has across the rest of Whitehall. As colleagues have suggested, this is about having a coherent offer. It is pointless to have a great initiative here if a very slow response elsewhere ruins the pitch, which should be carefully crafted and prepared, as my hon. Friend the Member for Hertford and Stortford pointed out.
It is estimated by industry that in the first three months of 2021 alone, the UK FinTech sector—my hon. Friend highlighted the importance of venture—raised more than £2 billion in more than 100 investment deals. How are we going to be successful in the long term? It seems to me that science, innovation and technology—and I would include education in the piece—are at the heart of how we shall deliver competitiveness for the UK in the longer term. That is at the heart of our offer. Venture is so important. Even last year, in the pandemic, we saw another rise in venture investment into the UK. It is creating that science, innovation and culture here, and having a strong educational offer that brings in the brightest people from around the world, that all adds to the UK having a uniquely favourable role to play. Then what is needed is to put in place the funding to make this the best place in the world from which to start one of those businesses and grow to scale.
We want to put in place those factors and the finance. I think that NASA called the growth path for businesses the “valley of death”. We want to ensure that we have all the steps covered going forward. That is why it is so important that we look to partner with others—the Office for Investment plays a critical role in that—and that the Treasury and others show flexibility in the new sovereign investment partnership with the UAE, as my hon. Friend the Member for Hertford and Stortford rightly highlighted. It is precisely in order to put such funds in place to support UK business that the OFI can deliver in a way that we have perhaps not seen before.
The Office for Investment will help drive forward our recovery to the benefit of people up and down the UK. It comprises a crack team of specialists who are working hard to land big investment opportunities. The OFI is there to help influence the overall environment but, in terms of particular projects, it is aimed at the top end. The aim is not to fall. It is working hard to land those big opportunities, while continuing to uphold the highest standards in scrutiny and security. As has been said, officials report directly to my good friend Lord Grimstone, in his role as joint Minister for Investment at the Department for Business, Energy and Industrial Strategy and the DIT. The Office for Investment will bring together the best in the business from across Government and around the country to drive forward our investment-led recovery.
The Office for Investment is already delivering results. It was great to hear from the hon. Member for Strangford (Jim Shannon) about the thousands of jobs that have been created in Northern Ireland, but we want to go further. That is why we are setting up a DIT trade hub in Belfast to ensure that Her Majesty’s Government are working closely with Invest Northern Ireland in a more effective way, to ensure that the global reach of the UK Government and the staff we have in more than 110 countries can maximise the investment that comes into Northern Ireland.
We have seen the UAE investment. We hope we will also see investment from other high-growth markets. If I had to think of what DIT’s fundamental role is, it would probably be hitching or aligning—whatever word we choose—the UK with the fastest growing parts of the world. That is what we have the opportunity to do, and we have to use our flexibility. In the same way that that flexibility has allowed us to lead Europe in vaccines, we have to ensure that every time we make the same brave judgments and create the conditions to deliver success.
I should give my hon. Friend the Member for Hertford and Stortford a minute to reply, but are there any questions I should pick up on?
Okay. I think I have touched on the levelling-up point. It is facilitating and helping to package the offer around the country. That is why we have our high potential opportunities scheme, whether that is rail in Doncaster or life sciences in other parts of the country.
I think we have dealt with the fledgling sectors and their importance. I entirely agree with my hon. Friend the Member for Hertford and Stortford. She was right to say it is beyond my purview to set out domestic policy, as DIT is entirely internationally focused. However, I am sure colleagues have heard her recommendations of creating frameworks that incentivise more UK investment in those ventures. My hon. Friend asked how the single front door will be resourced. The OFI will continue to be small, elite and strategic, not a big organisation. It relies for most of the work on DIT and BEIS and other Departments across Government, but has that convening and co-ordinating power, with the authority of the Prime Minister behind it.
I think that is enough from me, Mr Paisley. I am delighted to participate in this debate, and it is fantastic to see colleagues getting behind the Office for Investment and all the opportunities it brings to raise livelihoods and the quality of life across the nation.
As much as I would like to give the Member, Julie Marson, a minute to wind up, I am not able to under the rules for the 30-minute debates. I know she is more than happy with that and does not take it personally from me in the Chair.
Question put and agreed to.