Recommendations & Conclusions
8 items
2
Recommendation
Fifty-Sixth Report - Supporting investm…
Acknowledged
The Department focuses more on securing investment deals in the short term, rather than understanding the long-term economic benefits from investment. Inward investment can support economic growth and local economies by developing new infrastructure and skills, creating jobs and by developing robust supply chains, and the Department’s analysis suggests that …
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The Department focuses more on securing investment deals in the short term, rather than understanding the long-term economic benefits from investment. Inward investment can support economic growth and local economies by developing new infrastructure and skills, creating jobs and by developing robust supply chains, and the Department’s analysis suggests that every £1 spent on supporting investment leads to £5-£6 of additional GDP. However, investments are long-term projects, and while some may start well, investors may choose to move their operations elsewhere if the environment changes or if things go wrong. The Department reports on the number of investments it has supported and estimates how many jobs those investments may lead to. It says that these statistics do not capture secondary impacts in other parts of the UK if the investments help build stronger supply chains. However, the Department does not routinely follow up projects to establish how many projected jobs were actually created, whether they still exist, or whether there were other economic benefits. The Department agrees that there would be value in evaluating projects after five to ten years, albeit that it needs to balance that with the costs involved in following up prior-year projects. Recommendation 2: The Department should review major investments it has supported over the last five years to check the current position on forecast benefits and wider economic impacts and use this to inform future work. It should also implement a structured approach to monitoring and evaluating progress with achieving benefits, for high-value investments in particular. 6 Supporting investment into the UK
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Government response AI summary
The government agrees with the recommendation and acknowledges challenges in accurately estimating economic impact and evaluating performance due to missing data. It states it will seek to improve data quality and ways of working in this area.
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HM Treasury
1
Conclusion
Fifty-Sixth Report - Supporting investm…
Acknowledged
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business and Trade and its Office for Investment about supporting investment into the UK.1 In February 2023, the government created the Department for Business and Trade (the Department), bringing together the …
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On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Business and Trade and its Office for Investment about supporting investment into the UK.1 In February 2023, the government created the Department for Business and Trade (the Department), bringing together the business functions in the Department for Business, Energy & Industrial Strategy and the Department for International Trade.2
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Government response AI summary
The government agreed, outlining its strategic ambitions and existing use of official statistics for measuring investment outcomes. It committed to exploring the feasibility of expanding investor surveys, including those who abandoned plans, and will define a timeframe for this within 12 months, as it continues …
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HM Treasury
10
Conclusion
Fifty-Sixth Report - Supporting investm…
Acknowledged
The Department records potential long-term benefits of inward investment such as the salary level of the jobs expected to be created and export potential, and reports its forecasts of the number of new and safeguarded jobs that are expected to be created or retained over the following three years as …
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The Department records potential long-term benefits of inward investment such as the salary level of the jobs expected to be created and export potential, and reports its forecasts of the number of new and safeguarded jobs that are expected to be created or retained over the following three years as a result of investment from FDI projects.21 After our evidence session, the Department wrote to tell us that an estimated 1–1.5% of supported investments drop out in the first 12 months of concluding and that this will have an impact on the Department’s estimates of jobs created or retained over the three year period.22 In addition to jobs directly resulting from investments, the Department told us that there will also be second-order impacts across the UK from building supply chains. But it explained that these impacts are not captured in its statistics because they are very difficult to measure.23
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Government response AI summary
The government agrees with the observation and acknowledges difficulties with data quality in estimating economic benefits and second-order impacts. It commits to seeking improvements in its ways of working to improve data quality in this area.
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HM Treasury
11
Conclusion
Fifty-Sixth Report - Supporting investm…
Acknowledged
In some cases, there may be fewer long-term benefits from inward investment than originally forecast if, for example, foreign investors choose to move parts of their operations, jobs and skilled UK staff overseas.24 We heard about the cases of Japanese-owned chip designer Arm, and Irish buildings materials group CRH, who …
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In some cases, there may be fewer long-term benefits from inward investment than originally forecast if, for example, foreign investors choose to move parts of their operations, jobs and skilled UK staff overseas.24 We heard about the cases of Japanese-owned chip designer Arm, and Irish buildings materials group CRH, who both announced, in March 2023, plans to move their stock market listings from London to New York. The Department noted that if a company’s listing moves, its headquarters would not necessarily follow, but agreed that there is a risk of this happening.25 The Department subsequently wrote to tell us that the British Business Bank and its subsidiary, British Patient Capital, play a role in ensuring that innovating companies can access the growth capital they need to scale and stay in the UK.26
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Government response AI summary
The government agrees with the observation that long-term benefits may be fewer than forecast. It states its focus is on landing, retaining, and expanding UK presence, and commits to seeking improvements in data quality for estimating economic impact.
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HM Treasury
12
Conclusion
Fifty-Sixth Report - Supporting investm…
Acknowledged
The Department does not routinely monitor what outcomes have been achieved, whether they are higher or lower than forecast, or whether investments have led to any economic disbenefits.27 We asked the Department how many of the jobs it forecasts at the outset are still there five years later. The Department …
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The Department does not routinely monitor what outcomes have been achieved, whether they are higher or lower than forecast, or whether investments have led to any economic disbenefits.27 We asked the Department how many of the jobs it forecasts at the outset are still there five years later. The Department told us that it does not have a long-term evaluation of individual projects in place. It said that it needed to balance the costs involved in following up prior-year projects. However, it agreed that the question of evaluating its long-term impact over five to ten years was a good one which it should look into.28 19 Qq 58–61 20 Q 61 21 C&AG’s Report, para 3.14, Figure 1 22 Letter to the Chair of the Public Accounts Committee from Gareth Davies, DBT Permanent Secretary, 20 March 2023 23 Q 27 24 Q 34; C&AG’s Report, para 3.14 25 Qq 16–17, 34 26 Letter to the Chair of the Public Accounts Committee from Gareth Davies, DBT Permanent Secretary, 20 March 2023 27 C&AG’s Report, para 12 28 Qq 23–25 12 Supporting investment into the UK Digital capacity
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Government response AI summary
The government agrees with the observation that long-term outcomes are not routinely monitored. It acknowledges issues with data quality in estimating economic benefits and commits to seeking improvements in its ways of working in this area.
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HM Treasury
23
Conclusion
Fifty-Sixth Report - Supporting investm…
Acknowledged
The Department said the Office for Investment was set up to improve cross-government coordination on high-value strategically important investments, as the government recognised this was an area for improvement. It said that the Office for Investment was able to leverage the brand and authority of Downing Street through its links …
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The Department said the Office for Investment was set up to improve cross-government coordination on high-value strategically important investments, as the government recognised this was an area for improvement. It said that the Office for Investment was able to leverage the brand and authority of Downing Street through its links with the Number 10 Business Unit, both for bringing together other departments to support investment projects, and to demonstrate to investors that the government values them.57 It gave the example of BioNTech, which had recently signed an agreement with the government to do clinical trials in the UK over the next ten years, and is expected to invest several hundreds of millions. The Department explained that the Office for Investment had helped support the investment by arranging a meeting between the BioNTech founders and relevant senior stakeholders from across the health service, relevant government departments and regulators. The Department told us that it had received very positive feedback from BioNTech though it recognised the meeting likely had a marginal impact in terms of influencing BioNTech to choose the UK for its investment.58
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Government response AI summary
The government agrees with the observation, stating it actively engages with investors through existing fora like the Investment Council and annual surveys. It acknowledges the need for further steps to coordinate investment promotion and will implement relevant recommendations following the Harrington Review.
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HM Treasury
24
Conclusion
Fifty-Sixth Report - Supporting investm…
Acknowledged
The NAO report found that the Department had strengthened how it worked with other government departments to present a more coherent UK offer to investors, including through the creation of the Office for Investment, but that there were opportunities to develop this further. The Department told us that it tried …
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The NAO report found that the Department had strengthened how it worked with other government departments to present a more coherent UK offer to investors, including through the creation of the Office for Investment, but that there were opportunities to develop this further. The Department told us that it tried to make sure other departments were aware of how their proposed policies may impact investment and that it highlights potential barriers to investment to other departments.59 The Department said there were some inevitable policy tensions which limited what it could do to reduce barriers to investment. For example, investors have said opening a UK bank account is challenging but this is due to anti-money laundering regulations which are in place for good reasons.60 However, it said that in some cases it was hard to influence other departments to change or adopt policies to support investment where other departments were focused on their own agendas, such as on business visas where the Department would like the Home Office to make it easier for businesses to come to the UK.61 55 C&AG’s Report, Figure 6 56 Q 77 57 Qq 1, 10, 12 58 Q 10–12 59 Q 31 60 Q 35 61 Qq 64–66 16 Supporting investment into the UK
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Government response AI summary
The government agrees with the observation, highlighting existing engagement mechanisms like the Investment Council and annual investor surveys. It acknowledges that further steps are necessary to improve cross-government coordination on investment promotion and will implement relevant recommendations following the Harrington Review.
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HM Treasury
25
Recommendation
Fifty-Sixth Report - Supporting investm…
Acknowledged
We received written evidence from investors who wanted more long-term clarity on government policy. For example, the Global Infrastructure Investor Association said there should be greater focus in government on setting out route maps for investors against clear timelines, particularly for new technologies.62 We asked the Department about its relationship …
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We received written evidence from investors who wanted more long-term clarity on government policy. For example, the Global Infrastructure Investor Association said there should be greater focus in government on setting out route maps for investors against clear timelines, particularly for new technologies.62 We asked the Department about its relationship with the Treasury, given the need from investors for stability and consistency from government.63 The Department told us it had good relationships with the Treasury and that it worked closely with the Treasury on economic policy in relation to businesses. However, it said it would like more influence with the Treasury than it currently has, though it acknowledged that the Treasury was open to listen to well-evidenced proposals for new policies to support investment into the UK.64 We received written evidence from industry and investor representatives who wanted the government to engage more with industry and investors to identify measures to make the UK more attractive to investors.65 For example, BP suggested that the government should set up a forum with foreign investors in the UK to discuss how to make the UK more attractive to other global investors.66 Supporting the UK’s attractiveness to investors
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Government response AI summary
The government agrees with the recommendation and states it actively engages with investors through existing fora like the Investment Council and annual surveys. However, further steps to coordinate investment promotion and set out route maps will be determined and implemented following the conclusion of the …
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HM Treasury