Foreign Direct Investment (Hansard, 24 June 2003)

§ Lord Evans of Temple Guiting
My Lords, latest Eurostat figures show that in 2000 the UK had 52.9 per cent of the stock of foreign direct investment from outside the European Union. That was a drop of 2.1 percentage points on 1999. We do not have more recent comparable figures as other countries in Europe are not as prompt as we are in delivering their figures.
Ernst & Young's project-based figures for 2002 make it clear that the UK continues to attract more investment than any other country except for the US. The Government are determined to see the UK retain its position as No. 1 in Europe and will continue to pursue economic policies that will ensure that.

§ Lord Watson of Richmond
My Lords, I am most grateful to the Minister for that reply, and congratulate him on his additional responsibilities. However, I am sure that he will confirm that one statistic brought to his attention was that published at the beginning of the month by the European Commission data office. It made it clear that, since the introduction of the euro-zone, our share of foreign investment from outside the European Union has declined from 48 per cent to 25 per cent. In the light of that startling and worrying trend, would he not confirm that any advocacy of ruling out membership of the euro-zone in perpetuity would be something of a suicide note?

§ Lord Evans of Temple Guiting
My Lords, I am grateful to the noble Lord for that question. I do not recognise the statistics that he gives. The statistics that I have from government sources and Ernst & Young paint a quite different picture. For example, the latest figures from the Office for National Statistics show that foreign direct investment stock in the UK in the fourth quarter of 2002 was at a record level of £396.2 billion, an increase of £15.6 billion, or 4 per cent, on the same quarter in 2001.
The Government are confident that a successfully operating economic and monetary union, and UK membership of the euro on the right basis, would boost inward investment over the longer term. However, there is a risk that the longer the membership of the euro is delayed, the longer the potential gains in terms of increased inward investment are postponed.

§ Lord Lamont of Lerwick
My Lords, would it not be unfortunate if anyone attempted to talk down the British economy simply in order to try to make a case 129 for the euro? Is it not the case that, for the past three years, Britain has had more foreign inward investment than either France or Germany? Even if our market share has declined—that would not be surprising as the figures are very volatile—it is certainly the case, as Patricia Hewitt said the other day, that Britain is and remains the No. 1 location in the ELI for inward investment.

§ Lord Evans of Temple Guiting
My Lords, I am very grateful to a former Chancellor for paying tribute to the way in which the present Chancellor has looked after the British economy. I absolutely agree that no one should run down Britain's contribution, because we have done a most extraordinarily good job and will continue to do so.

§ Lord Lea of Crondall
My Lords, my noble friend said that he did not recognise the statistics cited by the noble Lord, Lord Watson, and implied that there might be some contradiction between them and those of Ernst & Young. From what has been said this afternoon, there is no contradiction, as one talked about total inward investment and the other about inward investment to the UK from outside the euro-zone. Is it not quite plausible to suppose that people outside the euro-zone would be increasingly worried about non-membership of the eurozone by Britain, because they have double exchange rate jeopardy as they invest in Europe and, in particular, in Britain?

§ Lord Evans of Temple Guiting
My Lords, my noble friend makes a very good point. With sterling and the euro, if a big firm is interested in investing in the UK there is always the problem of coping with the exchange rate. As to his first point—that there may not be a contradiction between my statistics and those given by the noble Lord, Lord Watson—I shall have to look at those statistics afterwards.

§ Baroness Williams of Crosby
My Lords, further to the Question of my noble friend, his source is the Financial Times, which is widely recognised in this House and outside to be a wholly reputable newspaper.

Noble Lords
Oh!

§ Baroness Williams of Crosby
My Lords, if it is not so recognised by some Conservative Members, I think that the great spectrum of opinion in this country is that it is a newspaper that can be relied on. I am rather surprised that anyone should think otherwise.
There was a considerable play on words, in that the absolute amount and the proportion are two different things. My noble friend pointed out that the proportion of foreign direct investment from outside the euro-zone and the European Union into Britain has just about halved. That is serious, even though the absolute figures may have increased. It is not to 130 anyone's benefit to pretend that the facts are other than they are, and I thank the Minister for addressing the issue as he has tried to do.

§ Lord Evans of Temple Guiting
My Lords, I am not in any way pretending that matters are not as they seem. I merely say that I was presented with a set of statistics that are at variance with the material that I have been given.
I am afraid that I do not agree totally about the Financial Times. A big article yesterday on regional selective assistance—that has a bearing on foreign investment in our country—had inflammatory headlines. On reading the text, one found that things were not quite as bad as the headlines suggested.
I say again that I shall look at the statistics. I do not think that there is a great difference between my position and that of the noble Lord, Lord Watson: we are both basically on the same side.

§ Lord Peston
My Lords, will my noble friend really stick to his guns, which I take it are that the figures are extremely difficult to interpret and that it would be foolhardy to jump to any conclusions about something that happens in the very short term? However, does he agree—I speak as someone who would join the single currency—that the exchange rate question is beside the point? If an American firm is thinking of investing here, it is concerned about sterling against the dollar. If it is thinking of investing in France, it is concerned with the euro against the dollar. In both cases, there is an exchange rate risk. From that point of view, the exchange rate is neither here nor there.

§ Lord Evans of Temple Guiting
My Lords, the variance in statistics may have something to do with the difference between stock and flow, which is not a matter that we ought to get into this afternoon. Other than that, I agree with everything that my noble friend said.

§ Lord Saatchi
My Lords, speaking of figures that can be relied on, did not the Chancellor recently assess foreign investment and trade in his 18 studies? Did he not come to the conclusion that our trade could increase by 50 per cent if we joined the euro-zone? Will the Minister remind the House which particular currency unions the Chancellor studied to arrive at that conclusion? Were they not Angola and Mozambique, Burkina Faso and Chad, Vatican City and San Marino, and Tuvalu and Tonga?

§ Lord Evans of Temple Guiting
My Lords, I shall certainly not write to the noble Lord! That question is very wide of the Question on the Order Paper. We have here a great British success story. We attract massive inward investment. Every party should do everything it can to support that. What we should not do is to quibble over issues that are not relevant to the Question that I am answering.