Speaker 1: Well, we've been putting a lot of money into the UK,
Speaker 1: so they have a lot of pockets of strength that
Speaker 1: they've been through a complex time politically, but if you
Speaker 1: look longer term, I think there are some interesting things
Speaker 1: going on here.
Speaker 2: There was a boss of Blackstone, one of the world's
Speaker 2: biggest private equity investors, headlining the government's flagship investment conference
Speaker 2: just a couple of weeks ago, trying to attract investment
Speaker 2: and get more money in the country.
Speaker 3: Hampton Court. No, last you were that, weren't you.
Speaker 2: He was very christmasy and cold.
Speaker 3: Everyone showed up.
Speaker 2: You had sovereign wealth funds, you had the guitarian investment
Speaker 2: authority of a well run show, and they actually got
Speaker 2: real money behind it.
Speaker 3: I remember having to do something for it at the
Speaker 3: one two years previously at the Science Museum, the first one,
Speaker 3: the inaugural. Yeah, it was quite awkward because I was
Speaker 3: asked to share something between the then Prime Minister Portions
Speaker 3: and Bill Gates and Boris announced the amount that Bill
Speaker 3: gwent Gates was investing in the country and he got
Speaker 3: it wrong. And I remember not knowing how to adjudicate
Speaker 3: between Boris getting Bill Gates's quantum wrong Bill Gates was
Speaker 3: furious that he had been kind of under sold and
Speaker 3: this was the beginning of the investment summits. So but
Speaker 3: that was you know, that was very slick and very
Speaker 3: good as well. Though there has been some commentary recently
Speaker 3: about it takes so long to get some of these
Speaker 3: amounts that agreed at the time, but still it takes
Speaker 3: a while to get them actually into the country.
Speaker 2: And I guess the UK still has structural problems right.
Speaker 2: It's not doing as well as it could in terms
Speaker 2: of productivity, in terms of worthy economies headed so you
Speaker 2: always have to make the case of why you'd invest
Speaker 2: in the UK instead of elsewhere.
Speaker 3: Yes, and the gentleman we're going to hear from in
Speaker 3: a second, Lord Harrington. What's interesting about his review is
Speaker 3: the amount of cross party support it does seem to have,
Speaker 3: and lots of the commentary from Bloomberg and others has
Speaker 3: been around. You know, this is a decent package, but
Speaker 3: why has it taken so long?
Speaker 2: Come to In the City Bloomberg's podcast, connecting you to
Speaker 2: the conversations and the stories shaping the world of finance
Speaker 2: and fronting like One our London studio with Alecrastratton and
Speaker 2: this week we speak with Tory peer Lord Harrington, who
Speaker 2: recently headed the government review into the UK's approach to
Speaker 2: attracting foreign direct investment.
Speaker 3: Not Harrington, you've been around Westminster and UK politics for
Speaker 3: quite a while. You've proposed these investment changes. Why, reflecting
Speaker 3: on the last few years, or indeed thirteen years, has
Speaker 3: it taken so long do you think for the government
Speaker 3: to give you the mandate it did well.
Speaker 4: I think government moves slowly. And the reality is capitalism
Speaker 4: has changed as far as investments concerned. From what I
Speaker 4: can see, it's moved from a belief in this country
Speaker 4: amongst certain sections of the Conservative Party that actually businesses
Speaker 4: not much to do with government. You move out the way,
Speaker 4: you reduce the taxes, and you provide an environment that
Speaker 4: the market will take care of itself. Well, the world
Speaker 4: has changed now. Every other capitalistic country Western democracy, will
Speaker 4: include the Eastern Western democracies are actively going out to
Speaker 4: bribe in the companies to come there. Actually bribe sounds dishonest,
Speaker 4: but you know, incent them to do it with a
Speaker 4: package of money, energy, a site you know will rent
Speaker 4: free site or packages are skills, visas and everything else.
Speaker 4: And we've been very slow to react to that.
Speaker 2: Hasn't it always been like that? I remember Emmanuel Macron
Speaker 2: rolling the red carpets for the banks in Paris.
Speaker 4: Well, Macron is the exemplar of the active head of state.
Speaker 4: In fact, if I had fifty pounds for every person
Speaker 4: who told me that they've got Macron's mobile number and
Speaker 4: speak to him regularly about investment, I'd be a rich man.
Speaker 4: But I do exaggerate to make a point. You know,
Speaker 4: they've definitely been much more investment friendly, and I do
Speaker 4: think Rishi and is credit for this. I think he's
Speaker 4: done his best to try and counter that. For example,
Speaker 4: we had a very good global investment summit a couple
Speaker 4: of weeks ago at Hampton Court. It was impressive. But
Speaker 4: the reality is of companies that want to invest in
Speaker 4: the UK. And I say companies I include sovering, well funds,
Speaker 4: pension funds, financial institutions as well as multinational companies. They
Speaker 4: find us very disjointed in our approach. It takes too long.
Speaker 4: They get written offers from other countries in thirty days.
Speaker 4: I mean one company told me who wanted eighty million
Speaker 4: on a one point four billion investment. So actually on
Speaker 4: the scale of it not a lot that fourteen months
Speaker 4: later they hadn't heard whether you've got it or not.
Speaker 4: And this is the whole purpose for my report on
Speaker 4: foreign directing investment is to come up with a system
Speaker 4: of organization of government to make sure that doesn't happen.
Speaker 4: It's not just saying we'll throw a lot of money around,
Speaker 4: because we don't have a lot of money.
Speaker 3: So how confident are you that these changes will be
Speaker 3: becoming to affect asap?
Speaker 4: Well? All I can say is that Jeremy Hunt, the Chancellor,
Speaker 4: has assured me that they will. One of my main
Speaker 4: recommendations was an investment committee at cabinet level that that
Speaker 4: will convene in January. But it's all about reorganizing government
Speaker 4: in an investment friendly way. So the nearest comparison I
Speaker 4: could say to answer your question is that the first
Speaker 4: component is having a senior level investment committee kind of
Speaker 4: cabinet level, who is like the board of a bank,
Speaker 4: laying out an investment strategy. If that sits, which it
Speaker 4: is in January, I hope everything will flow from that
Speaker 4: because there's not that much politics in it, the opposition
Speaker 4: of being I've spoken to Jonathan Reynolds, who's the Shadow
Speaker 4: Business Secretary about it and Rachel Reeves, and they've said publicly.
Speaker 4: I think Jonathan Reynold spoke publicly a couple of weeks
Speaker 4: ago at PwC saying that they support it. So our
Speaker 4: hope this is not politically contentious.
Speaker 2: What happened to the UK? I've been living here more
Speaker 2: than twenty five years fifteen twenty years ago, all of
Speaker 2: European capital wanted to come to the UK. It's capital
Speaker 2: that wanted to be put to work because it had
Speaker 2: the rule of law, which it still has. I mean,
Speaker 2: it was just it made sense to put money here.
Speaker 4: We definitely start for the point you've made English language
Speaker 4: rule of law. People like to live here, kids go
Speaker 4: to school and those cliche stuff. Yes we are fifteen
Speaker 4: love up. But after that I'm afraid things really But why?
Speaker 4: Because the government's very old fashioned. It's not organized in
Speaker 4: a way. You know, each department has different policy objectives.
Speaker 3: The kind of elephant in the room or the department
Speaker 3: elephant in the room would be the Treasury, where I
Speaker 3: worked for a period. In my reflections are that they
Speaker 3: weren't hugely comfortable using UK public money when they thought
Speaker 3: that the private sector would do it. So I wonder
Speaker 3: whether you think that cultural change is possible.
Speaker 4: I think so. I mean treasury orthodoxy, of which Rishi
Speaker 4: is a proponent of, is basically it's a begging bowl.
Speaker 4: If you allow all this stuff, it's just a begging
Speaker 4: well for companies that would invest anyway. Yep, you know
Speaker 4: that's mantra number one. And it's not stupid. It's been
Speaker 4: born about from experience. But the reality is in a business,
Speaker 4: you have to do what your competitors do. You know,
Speaker 4: we are not big enough to be market makers, were
Speaker 4: market takers. It's not an insult. It's just we've got
Speaker 4: sixty million people and you know have got hundreds of million.
Speaker 4: So you do what your competitors do. And the competitors
Speaker 4: are incenting companies and foreign institutions to invest in them
Speaker 4: by offering them a package, some of which is money. Now,
Speaker 4: we're actually quite good at money, we really are. For example,
Speaker 4: when I was at Bays in twenty sixteen, we were
Speaker 4: spending about nine billion on research and development. We're now
Speaker 4: spending twenty nine billion. I mean, it's not that the
Speaker 4: money's not there, but it's all over the place. It's
Speaker 4: in pots. It's challenges it's in competitions, it's in grants,
Speaker 4: and you know, it's very confusing for a company, very confusing.
Speaker 2: But again it does the book stop with the Prime minister.
Speaker 2: So is it the political instability in the last five
Speaker 2: six years that means that business and investment were not
Speaker 2: top of mind when making government policy.
Speaker 4: I think that's a fair point, I think, and I
Speaker 4: can quote some examples where take for example net.
Speaker 3: Zero and just thinking about that mobile a.
Speaker 4: Very noble policy objective. We did a lot of work
Speaker 4: when we did the Industrial Strategy, which I helped write
Speaker 4: a lot of people out right, I'm not saying I
Speaker 4: wrote it. It's like a huge tone, but I was
Speaker 4: part of it for various sectors. Take automotive, and we
Speaker 4: met with all of the automotive companies, scientists, economists, modelers,
Speaker 4: everyone you can imagine, and came up with a consensus
Speaker 4: that twenty to fifty was the year for the end
Speaker 4: of you know, buying internal combustion engine cars, et cetera.
Speaker 4: Because the companies said they needed twenty odd years, et cetera.
Speaker 4: Lots of companies began to make programs around that for investment.
Speaker 4: Four years later, in twenty twenty, Boris and Grant Shafts
Speaker 4: at some conference announced that we were changing it to
Speaker 4: twenty thirty Again. It may be a noble policy objective,
Speaker 4: but from an investment point of view.
Speaker 3: Forward to twenty years in a sentence a.
Speaker 4: Few weeks ago, Rishi in a speech changed its twenty
Speaker 4: thirty five. Now again, I'm not saying that there's arguments
Speaker 4: for those policies, but from an investor's point of view,
Speaker 4: there's a complete lack of consistency. So I think that's
Speaker 4: a sort of waffly way of saying I agree with you,
Speaker 4: because I don't think it's been The investment consequences of
Speaker 4: policy decisions have been at the top of the agenda,
Speaker 4: and I think they should be.
Speaker 2: Does the UK have to work harder because of breaksit?
Speaker 4: Well, when I was asked to do the job by
Speaker 4: Jeremy Hunt, I mean my first thought was, oh, it's
Speaker 4: because of Brexit, because it's gone down since twenty sixteen,
Speaker 4: significantly address product investment. And then other people on perhaps
Speaker 4: other side of the political spectrum said, oh, no, it's
Speaker 4: all corporation tax. If you knock down corporation tax, they'll come.
Speaker 4: But in fact I found the evidence we took from
Speaker 4: more than two hundred companies and foreign institute severing, well funds,
Speaker 4: pension fans, et cetera. Was Yes, in some cases it
Speaker 4: was Brexit if it was pure market access, you know,
Speaker 4: perhaps a heavy manufactured product that required frictionless movement of
Speaker 4: components and finished product. Yes, Brexit was a point, but
Speaker 4: actually I found it less significant than I thought. That's
Speaker 4: not it's easy for me, So it's Brexit, but I'm
Speaker 4: not saying it wasn't a fact that. Similarly with corporation tax,
Speaker 4: take Big Farmer for example, you know AstraZeneca who took
Speaker 4: a decision to go to Ireland and not US. It
Speaker 4: wasn't really the difference in corporation tax because they don't
Speaker 4: because it is so much research and development that they
Speaker 4: get all the allounces, et cetera. So I'm not saying
Speaker 4: they're not factors, but they're not as significant as a thought.
Speaker 3: Do you think that the recent announcements are the right
Speaker 3: ones to take on the American Ira?
Speaker 4: I don't think we can take on the American Ira.
Speaker 4: The American Ira is based on printing a lot more
Speaker 4: money than we ever will be able to, and I
Speaker 4: don't think we should try and compete with it. So
Speaker 4: what I'm talking about and what some of the announcements
Speaker 4: have been are targeting investments stuff. So the purpose of
Speaker 4: having a business investment strategy that I'm proposing would be
Speaker 4: saying we can't do everything, but let's take things where
Speaker 4: we have a competitive advantage. Good quote, say, for example,
Speaker 4: take aircraft wing manufacturing. We're good at it. Airbus employed
Speaker 4: load of people there. If you ask the complaints of
Speaker 4: air Bus or Tyota in Derby or whatever, it's why
Speaker 4: don't the suppliers come here? We're having to import all
Speaker 4: these components. Can't you give them incentives like other countries do.
Speaker 4: So there's a cluster around Derby or a cluster around
Speaker 4: brought in in North Wales, and governments need to help
Speaker 4: with that because we need to seduce foreign manufacturing companies
Speaker 4: in this case to come over here and say here's
Speaker 4: a package, a bit of money, make sure that there's
Speaker 4: a suitable site at a certain level of price, energy
Speaker 4: connection skills, you know, getting skills set up in the
Speaker 4: area visas that you want. It's a package. And this
Speaker 4: is what a proactive investment strategy would do. We can't
Speaker 4: say we'll do it for every company everywhere because we
Speaker 4: just don't have.
Speaker 3: You call it a concierge service or something like that.
Speaker 4: Yes, well, yes there's not a person standing at the
Speaker 4: front of government in a nice.
Speaker 2: Uniform, but maybe there should they Maybe they should be.
Speaker 4: Yes, that's right, Yes you get your Foi grab and delberty. Yes,
Speaker 4: it's a nice way saying the other cliche is one
Speaker 4: stop shop, but it's really saying that prospects have an
Speaker 4: account manager like they would in a business who's there
Speaker 4: to find out what it takes to incent them to
Speaker 4: come here, what we need to offer them and that
Speaker 4: so they wouldn't have to troop around different departments because
Speaker 4: at the moment you know they have to. They go
Speaker 4: to transport, they go to healthy, whatever it is in
Speaker 4: their field, and the business department it's very confusing. So
Speaker 4: if you're a big multinational, it's easier because you've got
Speaker 4: a room full of people you hire ex civil servants
Speaker 4: and what have you that know these things. But for
Speaker 4: people that don't already invest here, it just makes it
Speaker 4: very difficult for them.
Speaker 2: So where is this money that could have gone to
Speaker 2: the UK going.
Speaker 4: In no particular order. We've lost business to Spain, We've
Speaker 4: lost business to Ireland. Singapore is the sort of course
Speaker 4: celebra of a very very proactive government which is really
Speaker 4: insenting big money to people. We're losing things now to
Speaker 4: Abu Dabi the Middle East because they can offer them
Speaker 4: free energy and visas. Of course not a problem, but
Speaker 4: it is. It's a general picture. The United States we
Speaker 4: are losing a lot to but that's a global policy.
Speaker 4: We can't because they're basically saying, if you want to
Speaker 4: supply the American market, then you've got to be located here.
Speaker 2: That's I'm sure, right, Yeah, that's.
Speaker 4: A protectionist policy, which has its good points and bad points,
Speaker 4: but that's something you can't compete with.
Speaker 3: How quickly do you think you're the benefits of what
Speaker 3: you're proposing will come about? They sometimes and we've read
Speaker 3: your document. Is it is it ten years time? Is
Speaker 3: it a couple of years time? It's certainly not sort
Speaker 3: of three or four months as I.
Speaker 4: No, it's definitely not three or four months. I think
Speaker 4: because the reason this is a real politicians answer, because
Speaker 4: it's a bit of a waffly answer. I don't know,
Speaker 4: of course, who knows.
Speaker 3: I don't think many politicians say I don't know. Actually,
Speaker 3: question of recovering.
Speaker 4: Yes, that's right, because the reason I don't know is
Speaker 4: because a lot of it is changing sentiments. The perception
Speaker 4: overseas investors of this country is actually not as good
Speaker 4: as it should be. But when they see a business
Speaker 4: investment strategy, when they see a senior investment minister, they
Speaker 4: might think, well, they mean business now, and we're invited
Speaker 4: to good events here and things are beginning to change.
Speaker 4: And I'm afraid Boris did not help matters. Theresa did
Speaker 4: not help matters because she had to be obsessed with Brexit.
Speaker 4: Boris had other priorities. But it's the cliche of turning
Speaker 4: the oil tanker. It's not turning it on. It's not right.
Speaker 4: Here's the bank, it's open, come and get it. Children.
Speaker 4: It's not like that. And I think you know these
Speaker 4: things take time.
Speaker 2: But I guess the problem is the timelines, because you
Speaker 2: don't know what the next regime is. Given how far
Speaker 2: behind the Conservatives are in the poll, that it makes
Speaker 2: it difficult over the next six months, eight months, nine
Speaker 2: months to attract more money.
Speaker 4: You're not suggesting the Conservatives might lose the next election.
Speaker 2: Surely, am I.
Speaker 5: It's very choppy outside outside, But I do think that
Speaker 5: a lot of the stuff I recommend is really cross
Speaker 5: party and is not political and won't be pushed around.
Speaker 4: As an electoral labor. Yes, I have brief Jonathan Reynolds
Speaker 4: and Rachel Reeves on this. I felt I had to
Speaker 4: because the last thing I wanted was Jeremy Hunt saying
Speaker 4: that the autumn statement we were accepted and them saying no.
Speaker 4: And he's spoken publicly Johnny at PwC, I think a
Speaker 4: couple of weeks ago, which he was very encouraging about it.
Speaker 4: So I have. But the only caveat that I'd say
Speaker 4: is that I've learnt in election years, I always say,
Speaker 4: nice people become horrible people because there is this mad
Speaker 4: frenzy of attack. And I just hope this doesn't get
Speaker 4: sucked into it. I don't think it.
Speaker 3: I don't think it will.
Speaker 4: You know, you can imagine next year we'll have, Oh,
Speaker 4: I'm sure Conserves will come up with an anti Kire
Speaker 4: smear campaign. They'll come up with tons of stuff about
Speaker 4: Rishi and the midillionaire banker and this and that. I mean,
Speaker 4: it's pathetic, but that happens in election years, and I
Speaker 4: just hope this doesn't get swept.
Speaker 3: I think I think that the omens are decent for
Speaker 3: you because both sides of the divide need to grow
Speaker 3: the pie we keep calling it, but they need They
Speaker 3: need to increase the amount of money that the UK
Speaker 3: can make, fundamentally in the labour's case, so that they
Speaker 3: can start to spend in a way that a labor
Speaker 3: government would like to and the you knows same with
Speaker 3: different values for the Tory side of things. So I
Speaker 3: think you are probably protected.
Speaker 2: I'm hopeful, but I guess the problem is what you're
Speaker 2: talking about is operationally, I have to get money from
Speaker 2: A to B and get quick answers. You also have
Speaker 2: a structural problem with the economy, which is low productivity.
Speaker 2: It's difficult to find jobs and those are huge barriers
Speaker 2: to actually big investors come now.
Speaker 4: But conversely, investment will help cure those problems.
Speaker 2: It's a catch twenty two, it.
Speaker 4: Is, and that's why the government has to upfront resources
Speaker 4: to do it, because you know the spin off is
Speaker 4: very significant and it isn't I call it foreign direct
Speaker 4: investment simply because that's what Jeremy Hunt asked me to do.
Speaker 4: It's all investment. If you if your GSK or something,
Speaker 4: your pound is as good in any country in the world,
Speaker 4: as it is here. The fact that you're located here
Speaker 4: just as coincidental. So it is. You know, we have
Speaker 4: we have rough figures. You know, we invest, including domestic
Speaker 4: and for in about ten percent of our GDP in
Speaker 4: investment other countries in the g whatever it is about
Speaker 4: twelve percent. The difference is fifty billion pounds a year. Well,
Speaker 4: if a third of that comes from extra foreign investment
Speaker 4: or half, it's very significant.
Speaker 2: When you speak to a lot of big investors, they
Speaker 2: just ask, well, what's going on with Randa? I mean,
Speaker 2: how do you answer? Again? You can, you can have
Speaker 2: all the best systems in place, but if investors don't
Speaker 2: really understand the longer term policy of a country, is
Speaker 2: that not impossible to then adjust and attract investment.
Speaker 4: Well, but why is Ruanda relat to? I know you
Speaker 4: asked the questions, I'm supposed to answer it, But why
Speaker 4: is Ruanda relevant to?
Speaker 2: They don't understand? Because they don't understand.
Speaker 3: And I think it adds to a sense that the
Speaker 3: government cannot do what it wants.
Speaker 4: It's very valid to say anything that leads to instability
Speaker 4: will lead to investment decisions. You know, big companies told
Speaker 4: me that because of Liz Trusts episode, they were factoring
Speaker 4: in a risk factor in their calculations, which they've never
Speaker 4: done for this country before. Plenty of countries they do,
Speaker 4: you know, they do their projections and they put in
Speaker 4: a percentage risk, a bit like an insurance company would,
Speaker 4: and they were the first time in the history they've
Speaker 4: done it for this country. I had hoped that the
Speaker 4: combination of Rishi Sunak and Jamie Hunt would have stopped
Speaker 4: that and it returned to normal. But if there are
Speaker 4: stuff like Ruanda, maybe the election itself, even though if
Speaker 4: Labour's saying the kind of things they are about business
Speaker 4: and investment, and I have every reason where they are publicly,
Speaker 4: maybe that will be okay. Whereas Corbyn, of course, there
Speaker 4: was a total fear.
Speaker 2: Do you think that the UK is held to higher
Speaker 2: standard than other countries in Europe to attract investment?
Speaker 4: No, I don't think so. But one of the things
Speaker 4: that I absolutely amazing is that other countries have political turmoil.
Speaker 4: We've had it here within well, we've had three changes
Speaker 4: to policy, a lot within one political party. But other
Speaker 4: countries who have it much worse than us, like Spain,
Speaker 4: for example, who people generally they don't have a government,
Speaker 4: or it's a minority government, or there's some political problems.
Speaker 4: Yet they managed to keep the business strategy the investment
Speaker 4: strategy separate. So no one that looks at Spain thinks
Speaker 4: there's a political risk. Look at Ireland, you've got what
Speaker 4: I read, every possibility of shin Fein, basically a revolutionary
Speaker 4: party taking over the country. But no one's saying in
Speaker 4: the Irish Investment Agency, oh, there'll be a change of it.
Speaker 4: The leader of chin Fein makes one speech saying, look,
Speaker 4: it's business as you. As far as that's concerned, everyone's
Speaker 4: fine with it. But with us there is because of
Speaker 4: what the political turmoil, the lack of consistency in policy,
Speaker 4: and fear of anarchy, which was in the case of
Speaker 4: Liszt trusts and quality. I'm afraid not that's what they intended,
Speaker 4: but that's what came. There is this fear of lack
Speaker 4: of consistency that does affect investment.
Speaker 2: Yeah, but the UK is meant to be best in class.
Speaker 2: I mean, the southern countries, Spain, Greece to the all
Speaker 2: had economic crisis. The UK should be better, I hope.
Speaker 4: So I no, it should be better and it can
Speaker 4: be better, but government has to organize itself in a
Speaker 4: much more investment friendly way.
Speaker 2: Thank you so much, thanks for listening to this week's
Speaker 2: in the City. We'll be back next week, but in
Speaker 2: the meantime, if you like our show, please head on
Speaker 2: over to wherever you listen to podcasts and rate, review
Speaker 2: and subc It does help people find the show. This
Speaker 2: episode was hosted by me Francine Laquis and Alegra Stratton.
Speaker 2: It was produced by Samersadi and Tiffany Schoy. Additional editing
Speaker 2: by Blake Maples and special thanks to Lord Harrington.