UK Economy: Inward Investment (Hansard, 18 February 1997)

§ The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie):
My Lords, the stock of inward investment into the United Kingdom from non-European Union countries rose from £42 billion in 1987 to £81 billion in 1994 (the latest year for which figures are available). Although not all of them are quantifiable, we gain a wide range of economic benefits from inward investment including increased exports, the creation of new jobs, the introduction of new products and processes and the creation of local supply chains.

§ Lord Hooson
My Lords, does the Minister agree that this is a significant contribution to the well-being of our economy which has largely come about because we are a fully participating member of the European Union? How seriously have the Government taken on board the suggestion by Toyota that, in the event of our ceasing to be what can be described as a fully participating member of the European Union, it might withdraw its investment and transfer to another part of the European Union? How significant a factor would that be if other companies followed that suggestion?

§ Lord Fraser of Carmyllie
My Lords, I must say immediately to the noble Lord I am grateful that he, if no one else on the Opposition Benches, has recognised the enormous success of this Government in securing this extraordinary rate of inward investment into the United Kingdom. There are many reasons other than exchange rates for that inward investment locating in the United Kingdom—there is our low corporation tax, our established industrial infrastructure, our established enterprise culture and, I am pleased to say, a skilled and adaptable workforce. Joining the EMU would not of itself give rise to more inward investment. I understand that following the remarks of a member of the management of Toyota, which were widely publicised and which were delivered off the cuff, Toyota has spent a considerable amount of time indicating that what he said was taken out of context and that the significant investment it has in this country will continue.

§ Lord Boardman
My Lords, can my noble friend give us some indication of how many new jobs have been created directly or indirectly by this inward investment to which this Question refers?

§ Lord Fraser of Carmyllie
My Lords, at a rough estimate over the past five years it is estimated that 352,432 jobs stemmed from inward investment.

§ Lord Paul
My Lords, how much inward investment shall we lose because of the high level of the pound at present? What money incentives have we given to bring in that inward investment which were not available to the domestic industry?

§ Lord Fraser of Carmyllie
My Lords, clearly there is always some concern when the pound rises. However, it would appear that British industry, including those industries which located here as a result of inward investment, has become more sophisticated as regards hedging against movements in exchange rates.
A point well worth raising is that sometimes there is the misapprehension that most of the inward investment is attracted to this country because of grants in one form or another. In fact only about 26 per cent. of inward investment projects in the United Kingdom receive any grant from the Government.

§ Lord Clark of Kempston
My Lords, does the Minister agree that over 40 per cent. of all the inward investment into the European Union comes to this country because of our competitive position? Does he also agree that, if one takes into account the benefit of inward investment, last year our invisibles rose to over £12 billion? That must be a help to the economy.

§ Lord Fraser of Carmyllie
My Lords, my noble friend is absolutely right. We are the number one location in the European Union not only for United States and Canadian investment but also for Japanese and Korean investment. We are doing extremely well in that regard. It clearly makes a significant improvement to our economic performance. It is equally important that something like 42 per cent. of our exports are from companies which originally located in this country as a result of inward investment.

Lord Penton
My Lords, will the Minister ask his noble friends whether they will let me have the planted Questions so that I can look up the answers at the same time? I should be terribly sympathetic, as he is, to their needs.
I assume that the Minister saw a report in yesterday's Financial Times—his officials would have advised him of it—saying that Britain is now no longer the most favoured destination for non-European Union countries to invest in but that France is. Research seems to indicate overwhelmingly that that is precisely because we are members of the European Union and for none of the other reasons that the Minister put forward. Without prejudging what will be in the national interest in a few weeks time, while joining the EMU might not be helpful 550 to inward investment, surely the evidence indicates fairly strongly that not joining the EMU will be immensely deleterious to this country.

§ Lord Fraser of Carmyllie
My Lords, I do not accept that. As I acknowledged in answer to an earlier question, our presence within the European Union is clearly a factor that makes us an attractive place in which to invest inwardly.
If there were a planted question, I have to say to the noble Lord that it would be the one that he put to me. I saw the report that France was receiving more inward investment than the United Kingdom. I understand that that calculation is based on flow figures and does not represent the value of the stock at the plant established within the United Kingdom. In our view it would be preferable to look to the investment stock in this country. In the figures that I gave to your Lordships—the noble Lord may have noted that—I gave 1994 as the most recent figure. The reason is that we take our data from the governments of the countries investing here. We believe that that is a far more reliable basis. If anything, those flow figures demonstrate one rather interesting feature of our inward investment that we had not realised; namely, capital being so readily raised in the United Kingdom may be a further reason for people investing here. That would certainly seem to be the case in relation to the Siemens project in the north east of England.