Recommendation 2

HM Government Acknowledged

As the Committee notes, the Government’s open approach to inward investment has resulted in significant benefits to the UK economy. It provides a substantial contribution to business turnover and job creation across the UK and will be essential in delivering on the Government’s wider objectives including levelling-up, clean growth, innovation, and job creation. Since 2010/11, the UK has been the recipient of over 16,000 Foreign Direct Investment (FDI) projects. The UK has the second-largest inward FDI stock in the world after the United States (US) and is ranked eighth among 190 economies for the ease of doing business by the World Bank. The Department for International Trade (DIT) found that inward FDI created over 56,000 new jobs in the UK (across all sectors) in 2019/20. Studies suggest that FDI is also associated with increases in Gross Value Added and economy- wide productivity. Foreign involvement in the UK defence supply chain has offered access to international programmes, high-end technology and partnerships that deliver capability for our Armed Forces and opportunities for UK industry, and the defence supply chain has significant overlap with civil sectors and applications. Over recent years, the UK’s defence and security industrial sectors have increasingly internationalised and several defence and aerospace companies founded in the UK now have significant global reach. For instance, BAES’ turnover in the US in 2019 was £8.6 billion, representing 43% of their total sales against 19% in the UK, and the majority of its employees are now overseas. Other examples of companies with significant overseas operations and sales include Rolls-Royce, Martin Baker Aircraft and Ultra. At the same time, overseas based companies have chosen to move parts of their businesses into, or invest in, the UK. Notable examples include: Leonardo, with its headquarters in Italy, which employs over 7,500 people in the UK; Thales, a multinational aerospace and defence company headquartered in France, which operates nine key sites and employs over 6,500 people across the UK; and Airbus, a European firm headquartered in the Netherlands, which operates more than 25 sites in the UK with a workforce of 12,500. All the top five US-based ‘Primes’ (Northrop Grumman, Raytheon Technologies, Boeing, General Dynamics and Lockheed-Martin) have invested in sites in the UK. International joint ventures also can play a significant role: one of the most successful being MBDA, a joint venture of Airbus, BAES and Leonardo, which employs over 11,500 people across France, Germany, Italy, Spain and the UK. Multinational firms operating in the UK can bring investment in skills and new technology, thereby strengthening our industrial base and generating prosperity benefits including exports. Through our relationships with international allies and major global companies, we look to create opportunities for the UK supply chain. This includes reducing barriers to trade and initiatives such as the prosperity agreements with companies such as Boeing and Lockheed Martin. Fifth Special Report of Session 2019–21 3