1.Investment involves the acquisition of assets in the expectation that they will yield profitable returns, by means of appreciation in value or the generation of some form of future income. Where persons or organisations from one jurisdiction undertake such activities in another jurisdiction, this is referred to as international, or cross-border, investment.
2.For nearly two decades after 1990, during what has been called “the golden age of globalisation”, the scale and scope of such investment increased dramatically. International investment was said to have “spearheaded globalisation”, growing twice as fast as international trade did during 1990–2008. Since the world financial crisis of 2008, there has been a long-term trend of only “anemic growth” in worldwide inflows of Foreign Direct Investment (FDI—where an overseas investor has ownership of, or a controlling stake in, a business). Nevertheless, cross-border investment remains a major factor in the global economy; and the UK has long been both a leading source and destination for overseas investment.
3.As we heard, it is well evidenced that foreign-owned companies in the UK are more productive and more likely to export than UK-owned firms; and foreign take-overs of UK firms can save jobs and productive capacity, lead to the transfer of knowledge and technology, and provide links to global value chains. Successive British governments have recognised the importance for the UK economy of international investment and have pursued policies accordingly. Under the present Government, primary responsibility for policy relating to international investment rests with the Department for International Trade (DIT). This area of the Department’s work is of considerable importance—both in its own right as well as in terms of its close linkage to trade. As a result, we launched this inquiry in May 2018 to scrutinise DIT’s performance in this area.
4.The role of government in relation to international investment encompasses the following four policy aspects, each of which we have addressed in this report:
Some of these functions have been inherited by DIT from a previously existing government body, UK Trade & Investment (UKTI), while others relate to powers that will be repatriated to the UK from the EU after Brexit.
5.As well as looking at these areas, we also examined how international investment is defined and measured, given its relevance to policy making (see Chapter 2); and how inward investment into the UK should be regulated (see Chapter 5). In addition, as well as examining the role of DIT in relation to international investment, we have looked at the part played by other official bodies, both within central government and outside it, including the Office for National Statistics (ONS), other government departments and the Devolved Administrations (DAs).
6.At an early stage of our inquiry, we received a very helpful informal briefing from officials of DIT and the ONS, along with Dr Lauge Poulsen, of University College London. Over the course of four evidence sessions, we heard from 21 witnesses, including the Minister for Investment, Graham Stuart; the Directors General for Investment and Trade Policy at DIT; and the Deputy National Statistician and Director General for Economic Statistics at ONS. Our witnesses also included academic experts, business representatives and non-governmental organisations. In addition, we received 22 submissions of written evidence. We would like to thank all those who took the time to provide us with evidence.
7.In connection with the inquiry, we undertook in October 2018 a visit to Japan and the Republic of Korea in order to understand the perspectives both of those investing in the UK and countries that receive UK investment. In Japan, we met: investors and trade association bodies from the Japanese automotive, financial services, ICT and Life Sciences sectors; the British Chamber of Commerce Japan and leading UK businesses; Fujitsu; GSK; the Komeito party (a partner in the governing Coalition); the Ministry of Economy, Trade and Industry; and a number of large trading houses and other capital investors. We also attended a reception held by the British Market Council. In Korea, we spoke to: the Korea Trade-Investment Promotion Agency; Samsung Electronics; the Trade, Industry, Energy, Small Businesses and Start-ups Committee of the National Assembly; Samsung Construction & Trading; and the Korea District Heating Corporation. We would like to record our thanks to HE Paul Madden and HE Simon Smith, HM Ambassadors in Tokyo and Seoul respectively, and to all the staff of DIT and the Foreign and Commonwealth Office (FCO) at both embassies, whose hard work ensured that our visit was successful and enlightening. We are also very grateful to everyone who took the time to meet us in Japan and Korea. The discussions we had during the visit provided us with invaluable insights which greatly informed our subsequent taking of evidence from witnesses.
1 , The Economist, 24 January 2019
2 , speech by Angel Gurría, Secretary-General of the Organisation for Economic Cooperation and Development, 2 June 2009
3 UN Conference on Trade and Development, World Investment Report 2019: Special Economic Zones, June 2019, p 14
Published: 30 July 2019