The UK has set out plans to plug gaps in the ability of its cities and regions to bring development projects to market and turn the tide on laggard levels of direct private investment.
On March 19, the UK treasury launched a ‘new strategic public investment forum’ for the CEOs of government-backed financial institutions including the National Wealth Fund (NWF), British Business Bank, UK Export Finance and Innovate UK.
The forum, which includes Homes England, the Crown Estate and Great British Energy, aims to foster greater collaboration between public finance bodies and government to support investment in strategic sectors.
In the three years to 2022, the UK has had the lowest level of business investment as a share of GDP in the G7, according to OECD data analysed by the Institute for Public Policy Research. Official data shows that FDI projects across all eight ‘growth-driving’ sectors outlined in the UK’s industrial strategy plan have also declined from a peak in 2016-2017.
Lorna Pimlott, managing director of the NWF’s local authority function, told fDi that “capacity and capability is a big challenge” for local authorities in their ability to structure investable projects and bring in private capital.
“Local authorities can have great ideas, but they really struggle to push them through and certainly get them to market, because they don’t have that capacity,” she said on the sidelines of the Connected Places Summit in London on March 19-20.
As one example, Ms Pimlott cited EV charging networks. “If they don’t have the in-house capability, they ultimately end up paying for that advice, and they actually don’t have the money to pay for that advice, so often they operate without the advice and hope for the best to some extent,” she said.
The UK treasury has asked the NWF to provide “independent and impartial advice” to local authorities, helping them “develop their commercial modelling to make the project as attractive to the private sector” as possible, added Ms Pimlott. On March 13, the UK government also presented a new planning and infrastructure bill aimed at reducing bureaucracy that has been a frustration for foreign investors.
UK chancellor Rachel Reeves reiterated on March 19 that the NWF, which has a budget of up to £27.8bn by the end of the current parliament, would focus on investments in clean energy, advanced manufacturing, digital technologies and transport. The Labour party had originally proposed in its manifesto for a standalone SWF-type vehicle, but instead renamed the UK Infrastructure Bank as the NWF and expanded its remit.
Greg Clark, chair of UK innovation accelerator Connected Places Catapult, argues that the NWF’s mandate to invest in larger capital-intensive projects and infrastructure is necessary to create a conducive environment for the private sector.
“One of the constraints on FDI into the UK is that we’ve had too few high performing regions … The long-run policy ought to be to make all regions just generally more attractive,” he said, citing ingredients such as higher productivity, more skills availability and better infrastructure.
But he added that the UK remains one of the most financially centralised countries in the OECD, where most policy levers and financial incentives for investors “still lie at the national level and [are] only just beginning to emerge at the regional level.”
fDi
