Source · Select Committees · Public Accounts Committee
Recommendation 2
2
Acknowledged
Review major supported investments to assess actual long-term benefits and wider economic impacts
Recommendation
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
Government Response 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.
Government Response
Acknowledged
HM Government
Acknowledged
The government agrees with the Committee’s recommendation. with multi-national companies. Recognising that it is the companies themselves that make the decisions rather than the department directly, the department’s main focus is on landing, retaining and expanding their UK presence. The Gross Value Add (GVA) methodology is applied to estimate the economic benefits of the department assisted Foreign Direct Investment. Pipeline data – the data reflecting the investment projects in progress – is used to estimate outcome of the department’s investment work. However, specific details relating to the data employed to estimate economic impact is often missing early on, making it harder to accurately create performance expectations, and later performance evaluation, with a high degree of precision. However, the department welcomes the challenge to improve data quality and will seek to improve the department’s ways of working in this area.