The government is to launch a £1.4bn fund to attract more overseas investment into the UK economy, particularly in sectors such as life sciences and electric vehicle production.
In his budget announcement on Wednesday, the chancellor, Rishi Sunak, will also announce plans to lure highly skilled foreign workers and amend regulations to make it easier for international companies to relocate to the UK.
International companies with “strategically important” investment proposals will receive grants towards their schemes, after they have been assessed to ensure they provide value for the taxpayer.
“We want to make the UK the best place in the world to start, grow and invest in a business, as we continue to support enterprise, create jobs, and level up as we recover from the pandemic,” Sunak said.
The government last week hosted 200 business leaders at a global investment summit in London, including a dinner with the prime minister for the 20 most influential business leaders, followed by a reception at Windsor Castle with the Queen as it tried to woo multinational companies.
The lion’s share of the new Global Britain Investment Fund, more than £800m, has been earmarked to support investment in the manufacture and supply chain of electric vehicles in north-east England and the Midlands. A further £354m will go towards boosting investment in life sciences manufacturing, including preparing for future pandemics.
But Roger Barker, the director of policy at the Institute of Directors, said: “There must be conditionality associated with these grants to ensure that they are supporting long-term commitments into the UK, and its companies, regions and stakeholders. Most foreign direct investment currently disproportionately favours London and the south-east, and therefore these grants should also be used to support the ‘levelling-up agenda by encouraging investment outside of these regions.”
The government also wants to make it easier for companies to move to the UK through new redomiciliation rules, to bring it in line with countries including Canada, New Zealand and Switzerland, and is expected to launch a consultation.
As part of the package, the chancellor will outline plans to attract science and tech talent into Britain. A talent network team will work with UK businesses and other research institutions to pinpoint skills gaps, and offer support to skilled workers who want to move here from overseas universities, innovation centres and research institutions. This will launch first in San Francisco and Boston in the US next year alongside Bengaluru in India, before being expanded to other countries.
The CBI business group welcomed the initiatives. Rain Newton-Smith, its chief economist, said: “If the recovery is going to bed in for the longer term then we need to get businesses investing, so this scheme hits the spot when it comes to some of our most innovative industries in the UK. Businesses will be hopeful that there will be more to come from the chancellor to help get firms investing.
“The UK has always been an attractive location for top talent. With labour shortages biting in sectors from the lower-skilled to the high, this new network could prove a useful tool in some of our most exciting, higher-skilled industries alongside much needed funds to spur global investment into the UK.”
Two-thirds of UK businesses have urged the chancellor to focus the budget on attracting investment into the UK, and want him to encourage initiatives that will fast-track the country’s transition to a greener economy, according to the EY consulting group. Some 55% of the 1,000-plus firms surveyed said Sunak should use tax incentives to encourage green tech or carbon taxes, or both.
In the run-up to the Cop26 summit in Glasgow, businesses were asked which measures the Treasury should pursue to encourage a faster transition to a greener economy. Enhanced allowances for specific types of expenditure were the most popular choice, backed by almost half of firms. But 39% thought taxes should be raised to increase the cost of greenhouse gas emissions.
Separately, the Covid recovery loan scheme, which offers loans of up to £10m to businesses struggling because of the pandemic, is set to be extended to next June, and business groups welcomed this cautiously.
“The acid test for the scheme will be whether it is able to support the recovery by getting credit flowing to the firms who need it most,” said Suren Thiru, the head of economics at the British Chambers of Commerce.
Meanwhile, the UK Infrastructure Bank is to invest £107m in a project to transform part of the former Redcar Steelworks site along the River Tees and create a 450-metre quay to service the offshore wind sector, which will create 800 jobs.
It is the first investment for the bank, which launched in June to finance innovative infrastructure projects and tackle climate change.
The chancellor said: “It’s great to see the UK Infrastructure Bank is already doing deals and helping deliver on our pledge to level up and reach net zero. This is a vote of confidence in the Tees Valley economy and our new freeports that will help turbocharge Britain’s post-Brexit growth.”
The UK Infrastructure Bank’s chief executive, John Flint, who previously ran HSBC, said: “South Bank Quay will not only boost economic activity in the region but is a significant investment in the country’s future green technologies.”
The Bank has an initial £12bn of capital to deploy as well as £10bn of government guarantees to help unlock investment.