6 UKTI inward investment services
159. In the previous section we set out UKTI's role
in supporting UK exports. Its other key role is to support inward
investment to the UK. In its written evidence the Department told
us that UKTI played an important role in attracting foreign investment
in to the UK:
Evidence shows that help from UKTI can have significant
influence on investor decisions, resulting in a more than seven
fold increase in High Value Foreign Direct Investment (FDI) over
the past 4 years, helping to maintain the UK as a top location
in Europe for inward investment, and globally second only to the
USA. In 2009/10, UKTI played a role in securing 759 investment
projects into the UK—almost half the total UK figure of
1,619 and a 26.5% increase on the previous year. These projects
have helped create some 47,000 jobs (more than 32,000 new jobs
created and some 14,000 jobs safeguarded), a 61% increase on 2008/09.[191]
Over 70% of inward investors report some significant
influence from working with UKTI, most often through enabling
the inward investor to overcome barriers to accessing information
and contacts. Within this, 49% said UKTI had influenced their
decision to locate in the UK. Some 57% report significant business
benefits as a result of UKTI help enabling them to overcome such
barriers.[192]
160. UKTI stated its services in the area of inward
investment included:
- Segmentation and bespoke proposition
development - to ensure a tight focus on the needs of high value
investors in making global location decisions.
- Access to Government and other networks relevant
to the success of investment projects.
- Targeted marketing to cover subjects such as
the UK business environment, sectoral and sub-sectoral information,
and bespoke sales information: key information needed to reach
the final decision to invest in the UK.
- A systematic investor development programme to
ensure UKTI remains a high value-adding partner for those investors
growing their business in and from the UK. Foreign-headquartered
companies that have a UK presence can also avail themselves of
the full range of UKTI export services.[193]
161. The Trade White Paper stated that the Government
would be contracting out its inward investment delivery services.
On 4 April, Susan Haird, Acting Chief Executive of UKTI, wrote
to us confirming that the Inward Investment contract had been
awarded to PA Consulting Ltd in partnership with OCO Consulting
and the British Chambers of Commerce. No date was given for the
transfer of responsibility for inward investment to the consortia,
but the Department's expectation was that it would happen as early
as possible in the 2011-12 Financial Year. The Secretary of State
told us:
It is a £14 million contract over a three-year
period. Essentially, its remit is to replace the inward investment
promotion activities of the RDAs in the English regions other
than London. Because that original system involved quite a lot
of duplication, we think we can deliver a perfectly good service
with less resource. Incentives are built in—payment by results.[194]
162. Further details have since been released about
the contract. It is a £41.7 million contract and the contractors
role will be to:
- Co-ordinate and manage foreign
investment propositions on behalf of the UK with e prospective
foreign direct investors, working with local partners across England,
the devolved administrations and wider FDI network;
- Provide sufficient geographically dispersed resource
to support the FDI delivery arm for England;
- Provide direct relationship management and investor
development, in association with international, national and local
stakeholders to nominated existing investors in England as agreed
with UKTI.[195]
163. The UKTI strategy set out even more detail on
the Government's plans for inward investment and the role of the
contractors:
The private sector delivery partner will be incentivised
to attract high quality inward investment projects, on a "payment
by results" basis, to agreed service standards. The quality
of this service will be verified independently by customer surveys.[196]
In addition, the Strategy set the target of a pipeline
of around 750 foreign direct investment projects per annum over
the next five years, of which 500 would be characterised as "high
quality" by 2014-15 (up from an annual average of 630 and
280 respectively over the last three years).[197]
The Governments says that "high quality projects" are
defined by "respected academic research" as benefiting
UK economy through productivity spillovers, and by bringing new
ideas and ways of working, as well as valuable knowledge and technologies.
They are generally R&D intensive, promote growth and competition,
and are focused in sectors where the UK is strong because of its
comparative advantage.[198]
164. We welcome the Government's recognition of
the importance of inward investment. However, we are concerned
with the delay at announcing the contractor for regional inward
investment services in the UK. The Government needs to be more
proactive in attracting inward investment and the delay in awarding
the inward investment contract following the winding up of the
RDA's has not been convincing. In its response to this Report
we will expect to receive a detailed update on the structures
which will be put in place by the partnership arrangement with
PA consulting, OCO and British Chambers of Commerce to deliver
a high level service across the country.
ACCOUNT MANAGEMENT OF INWARD INVESTORS
165. The CBI argued that UKTI needed to identify
and establish in-depth relationships with the highest value Foreign
Direct Investment (FDI) prospects, both from within the UK and
developed economies and from emerging economies. BRIC[199]
countries currently account for less than 6 per cent of all global
FDI; their increasing economic power makes it important to establish
the UK's credentials as a prime destination for investment.
166. The Plan for Growth announced that there would
be an enhanced service for major inward investors. Where the Government
identifies large-scale investors, UKTI will be tasked to provide
a "bespoke service" which will include "direct
access to UK ministers and speedy resolution of bureaucratic obstacles
to investment".[200]
As Lord Green noted, Ministerial involvement is not new, and the
Government's commitment to major investors is to be welcomed:
"I certainly would not want to imply that
nothing of this kind has been happening over the years. We all
know it has been going on".[201]
167. The UKTI strategy noted that "enhanced,
strategic relationship management of the most significant inward
investors, including institutions" would be at the heart
of its inward investment plans. As noted earlier in this Report,
the Government is setting up a new cross-government Strategic
Relations Unit based in UKTI. The strategy also stated that Ministers
would "play an important part in helping to develop and sustain
winning relationships with major investors, including institutions
such as Sovereign Wealth Funds". The Secretary of State explained:
For very large inward investors who could make
a really big impact on the UK economy, we would like to provide
what we call a bespoke service. A whole range of problems arise
with planning and visas. It is not suggested in any sense that
they will be given favoured treatment, but the bureaucratic obstacles
could be overcome. If you approach a potentially large inward
investor and discuss with them all the obstacles and make sure
they are resolved quickly, that provides a better service than
they are used to in other countries or that we have provided in
the past. [...] Ministers will be directly involved in making
sure that the obstacles are overcome.[202]
He went on to say:
I do not want to imply in any sense that people
are getting preferential treatment simply because they are big
and foreign owned; that is not the point, but there are companies
that make a major contribution to the UK economy. I already spend
quite a lot of time meeting their representatives as they come
through London. I see that as a key part of my job. In many cases,
for them to be able to feel that they are speaking to a secretary
or minister of state makes a difference. These are companies that
often bring 10,000 or more jobs to this country. They have to
be taken seriously, made to feel welcomed, and told that the country
is open for business and we want their relationship to be properly
managed.[203]
168. We recommend that the Government set out
its "rules of engagement" in the area of Ministerial
assistance to inward investors and the criteria under which companies
will be eligible to receive this enhanced service. In the spirit
of transparency, we also recommend that the Department sets out
the form of assistance and access it provides to major investments,
on a quarterly basis.
LOCAL ENTERPRISE PARTNERSHIPS
169. The UKTI's letter to the Committee regarding
the awarding of the inward investment contract also stated that
PA Consulting will be "working with local partners across
England" and "UKTI recognises the important role that
LEPs will have to play in support of FDI promotion".[204]
In the previous Parliament, UKTI worked alongside the Regional
Development Agencies to deliver inward investment. Early in this
Parliament, the Government announced the abolition of the RDAs,
to be replaced by Local Enterprise Partnerships (LEPs). In December
2010, we published our initial assessment of the role of LEPs.
That Report considered the involvement of LEPs in supporting inward
investment. The Government's initial position was described as
follows:
We are reviewing all the functions of the RDAs.
We believe some of these are best led nationally, such as inward
investment, sector leadership, responsibility for business support,
innovation, and access to finance.[205]
However, the Government's Local Growth White Paper,
published in October 2010, acknowledged that LEPs could have a
role to play as delivery bodies:
It is clear that effective delivery will require
strong partnership working between central government and local
levels. Local Enterprise Partnerships can play a key role in these
partnerships and may have a role in bidding to be a delivery agent
for nationally commissioned trade development support.[206]
170. It was made clear in evidence to us earlier
on in the inquiry that not all business organisations welcomed
this role for LEPs. The Institute of Directors argued that one
of the LEPs should not be involved in international trade and
investment matters and that responsibility should be retained
by UKTI as it was "far and away the most well regarded of
the information resources available".[207]
171. Andrew Cave of the FSB also highlighted problems
with the current patchwork of LEPs which he believed would create
inconsistencies across the UK:
There will be parts of the country where businesses
do not have the same access because the LEP does not take that
responsibility or is not strong enough in that area.[208]
172. There have been long-standing concerns that
even under the RDAs, a disproportionate number of UKTI inward
investment projects went to London and the South East. Historically,
London has taken around 40% of all inward investment projects.
The fear of a number of our witnesses was that this disparity
would only be enhanced as a result of the uneven spread of LEPs.
[209]
173. However, Susan Haird asserted that LEPs could
make a positive contribution to attracting inward investment:
[LEPs] would bring a huge amount of local knowledge
to the inward investor, both as the inward investor is seeking
something in the UK for the first time, and as the inward investor
then seeks to grow out of the UK base. The kind of things that
are important for inward investors to do, and to have help with,
can be very local in their dimensions. They can be to do with
access roads, local transport in terms of services and that sort
of thing, as well as bigger issues that also are local. We shall
be working very closely with them.[210]
174. Adam Marshall, representing the British Chambers
of Commerce, agreed that LEPs could provide valuable local knowledge
and should be used to introduce potential investors to the local
area:
When a foreign investor does come calling in
a city or town around the UK, to take that investor by the hand,
show them around the area, why it's dynamic, why they should be
there, etc. It's really the service on the ground here in the
UK where the LEPs may have a role in making sure that a potential
investor has seen the best of an area.[211]
175. The UKTI strategy stated that:
UKTI, with the private sector delivery partner,
will actively explore with each Local Enterprise Partnership how
they can most effectively help to land new investments - in particular,
by building relationships with investors and providing local knowledge
and information on why their offer to investors is internationally
competitive. They may also help investors deal with local issues,
such as planning, site locations and utilities, and have an important
role in sustaining relationships with investors once a project
is up and running.[212]
176. Local knowledge is important and we recognise
the value of involving LEPs in giving an informed local view for
investors. However, until there is an established and comprehensive
coverage of LEPs across England, the Government will need to ensure
that valuable opportunities are not being missed by areas which
have yet to establish a LEP to promote their locality. There needs
to be greater clarity of what is expected of LEPs with regard
to attracting inward investment and their interaction with PA
consulting, the Foreign Direct Investment contractor. Although
PA Consulting holds the contract, it is for Government to set
the parameters for LEP involvement. We recommend that the Department
sets out in its Response a detailed explanation of the level,
range and extent of LEP involvement in delivering inward investment,
alongside the costs and resources necessary for them to carry
out this role.
191 Ev 133 Back
192
Ev 133 Back
193
Oral Evidence taken before the Business, Innovation and Skills
Committee on 27 April 2011, HC (2010-12) 945-i, Q 25 Back
194
Oral Evidence taken before the Business, Innovation and Skills
Committee on 27 April 2011, HC (2010-12) 945-i, Q 25 Back
195
UK Contract Awards, UK Government News, 29 April 2011 Back
196
UK Trade & Investment, Britain open for business, May
2011, p 26 Back
197
UK Trade & Investment, Britain open for business, May
2011, p 26 Back
198
UK Trade & Investment, Britain open for business, May
2011, p 26 Back
199
BRIC countries are: Brazil Russia India and China Back
200
HM Treasury and Department for Business, Innovation and Skills,
Plan for Growth, March 201, para 151 Back
201
Q 514 Back
202
Oral Evidence taken before the Business, Innovation and Skills
Committee on 27 April 2011, HC (2010-12) 945-i, Q 21 Back
203
Oral Evidence taken before the Business, Innovation and Skills
Committee on 27 April 2011, HC (2010-12) 945-i, Q 22 Back
204
Ev 145 Back
205
Business, Innovation and Skills Committee, First Report of Session
2010-12, Local Enterprise Partnerships: An Initial Assessment,
HC 434, p 55 Back
206
Department for Business, Innovation and Skills, Local growth:
realising every place's potential, Cm 7661, October 2010,
p 17 Back
207
Q 108 Back
208
Q 109 Back
209
Institute of Directors, FSB, CBI and FPB Ev 28-34 Back
210
Q 438 Back
211
Q 26 Back
212
UK Trade & Investment, Britain open for business, May
2011, p 26 Back
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