Secure and rules-based – this is what makes the UK investible
27 January 2021: Certainty of contract, governance, standards and rules – these are what makes the UK attractive to foreign investors. We speak to ICAEW member Saqib Bhatti, MP for Meriden, about foreign direct investment into the UK and the prospects for trade.
The EU-UK Trade and Cooperation Agreement may have stolen the headlines, but the UK is still a potential foreign direct investment (FDI) magnet, says Bhatti. “Free trade deals are absolutely designed to encourage FDI.
“What we give is stability because there is legal recourse in the UK,” says Bhatti. “We shouldn't underestimate the value of legal certainty. It means if you come over to this country, as a foreign investor, and put your money here, it is secure.”
He continues: “But we also offer opportunity.” He says leaving the EU and its structures delivers the UK the independence to position itself differently on the international stage. He cites the Latin American countries, the United States, Canada, Australia and New Zealand as the new honey pots for trade.
“We've built ourselves, as a nation, on free trade. We are a small island and yet we have had so much influence, and we want to be able to reclaim that in a modern world,” says Bhatti, pointing also to the huge growth of the Asia Pacific markets. “We need to be able to show that we can hold our own in this environment so, if a foreign investor comes here, what they have is an opportunity to access those markets, while also having the advantage of a good stable UK market.”
Figures from the Department for International Trade published in July show the UK attracted 1,852 new inward investment projects in the 2019/2020 financial year, representing a 4% increase on the previous year. “We are incredibly attractive as a nation to investors. And Brand Britain is very strong – that got a bit lost over the last few years because of the debate that was happening.”
Talent: the secret weapon in the battle for investment
Stability and new markets aside, Bhatti points out that a secret weapon in the battle to win foreign investors is UK talent. “In the West Midlands, for example, where my constituency is, we have achieved the largest amount of FDI for many years thanks to a large number of start-ups,” he says. “We had a trade surplus with the United States and a trade surplus with China. We’re at the centre of Britain in the Midlands and, with the HS2 interchange being built in my constituency, there are great things happening.”
Bhatti continues: “An interlinked Britain, with a talented workforce, with strong fundamentals and stability is a really attractive proposition for a foreign investor. And part of that stability argument is the Chartered Accountancy profession.”
He describes himself as a businessman – and accountant – but is aware that the job of making the UK easy to invest in is down to politicians. “We have to make it as easy as possible for people to pursue their ideas, pursue their dream, for wealth to be created and, in that way, jobs to be created. That’s what investors will find very attractive,” he says.
Where there is stability, ecosystems follow and then comes the momentum that creates supply chains and workforces. Bhatti points out that out of heavy manufacturing comes specialist materials, precision engineering and new technology that will deliver net zero. All of that will be attractive to foreign investors.
The UK can market itself as world-class in plenty of other niches, he points out. “Most major economies in the world now are looking at the green industrial revolution. We've taken the lead on that and I believe it will be a Great British Export. It will unlock a whole arena of skills and investment, and the reward for that will be an ability to export that expertise all over the world.”
And biotech/pharma is also ground-breaking in the UK. “It was very good that there is a British vaccine. That will have done a massive amount for our reputation on the international stage. It will show what I've always known,” Bhatti points out. “Our roll-out of the vaccine has been very fast, I think that is because we're adaptable and we encourage innovation. We should have great pride in Brand Britain and greater faith in what we're able to achieve.”
Don’t overlook the fundamentals
But he urges us not to overlook the fundamentals, in particular, connectivity: “Physical connectivity really matters, which means access to markets: being close to London and being close to the rest of the world. But what also matters is connectivity of thoughts. It matters to be able to share ideas.”
Bhatti was previously President of the Greater Birmingham Chambers of Commerce and President and Honorary Chairman of the Asian Business Chamber of Commerce. He was also Director of the Greater Birmingham and Solihull Local Enterprise Partnership, responsible for business support.
“When I joined the local enterprise partnership, there were lots of business support programmes, so I mapped them. It was about linking them up and being a facilitator. People were naturally drawn in and it became obvious there was a niche developing over there in the jewellery quarter or there was a niche developing around culture and the arts. People became attracted to those niches and we started to get investment. It almost becomes a self-fulfilling cycle. Stability is the first principle, but you should also have mechanisms in place to encourage innovation and start-ups.”
He reminds us that COVID has demonstrated the importance of the digital economy. “One of the things that we are looking at is what happens to small businesses who are being forced to go online because of lockdown. What does that mean for the future? Does it mean we must train more people to code? I think we're going to have a whole new skillset, and these will be jobs that can be done from home. The labour market is going to change.” New types of investors will emerge off the back of this new thinking, he says.
Levelling up ‘more important than ever’
Turning to the need to level up the UK economy, Bhatti says levelling up is now more important than it's ever been. “What COVID has done is make the challenges much more visible. Skills are a key issue, so is unemployment. There are going to be strains on our high streets. There is going to have to be a period of reflection in terms of understanding what the impact of COVID has been,” he says. “Our challenge is to make sure that our talent pool is flexible and adaptive to the changing needs of the global economy.”
He is adamant that Chartered Accountancy is central to both recovery and economic development. “The role of the profession is really important because there is going to be a need for good financial advice. We need talented people coming through the profession,” he says. “Companies may have taken on a considerable amount of debt over the last 12 to 18 months … they’re going to need a lot of support.”
Returning to the EU-UK Trade and Cooperation Agreement and commenting on the mutual recognition of professional qualifications clauses, Bhatti is optimistic that mutual recognition will come. “I believe we're on the right path to that … the agreement basically sets up a framework for that. I'm a big believer in my own qualification and in the value of the ICAEW. I think we will get there.”