The UK has captured a large share of global services investment in recent decades, attracting more financial services investment than any other European country each year for the last 20 years. However, overall investment flows coming to the UK have declined in recent years and not recovered to pre-pandemic levels.
There is an opportunity for the UK to become more attractive to international investors by recognising the changing drivers of business investment and adapting its investment attraction strategy to accommodate them.
When deciding to invest, businesses still look for:
- ready access to customers and clients
- highly-skilled talent and a world class education system
- open trade and investment policies
- competitive tax regimes
- proximity to sector-specific technology providers and access to R&D incentives
- high-quality physical and digital infrastructure
- high-quality financial regulation
- an effective and efficient legal system.
Financial and related professional services businesses are also looking to locate in jurisdictions that:
- offer a pipeline of domestic green transition projects to finance and frictionless access to international investors looking to back green finance projects
- enable cross-border remote working
- provide an efficient regulatory system
- offer R&D incentives for services businesses as well as manufacturing businesses
- operate policies linked to international investment, like investment screening regimes, merger control, and subsidy control schemes, efficiently and transparently.
To attract more global businesses, the UK should improve its offer to investors by adopting new pro-investment policies and communicating them effectively, while continuing to articulate enduring UK strengths. The recommendations in the table below set out how to convey a more compelling investment proposition, and, if adopted, could see the UK position itself to capture a new wave of investment in high-value services and technology, grow as a global financial hub, benefit from more jobs and growth, and lead the global green transition.
Recommendations
Commercial driver of investment
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Current UK investment attraction offer
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New value propositions to be reflected in an updated UK investment attraction offer
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Mainstreaming green investment and R&D incentives for services
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- Green finance is an important niche area for investment
- UK R&D incentives largely aimed at manufacturing
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- Green investment should be fully mainstreamed
- R&D incentives should be broadened to cover the UK’s services sector and aid incentivise businesses to invest in projects that deliver on the green transition
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| Creating a global talent hub |
- Promote the availability and quality of talent in the UK
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- Ensure employees benefit from cross-border remote working by removing the need for overseas employees to obtain an intra-company transfer visa to conduct short-term work and adopting the findings of the Government’s Review on Hybrid and Distance Working
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| Designing the world’s best, and most efficient, regulatory centre |
- Keep regulation as proportionate as possible and consistent with overarching policy goals like financial stability
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- Drive regulatory effectiveness, consistency and efficiency by streamlining regulatory authorisation processes and requiring regulators to publish more performance data detailing the speed of regulatory execution
- Regulators should recognise their role as shaping UK competitiveness
- Enhance regulatory cooperation with other countries through establishing financial regulatory dialogues in trade agreements
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| Delivering a safe, reliable hub for global investment |
- Keep regulatory restrictions on foreign investment to a minimum
- Avoid intrusive merger control for investment through M&A
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- Ensure that the process for screening investments in the UK is efficient, transparent and well-targeted on policy goals by providing more detail on how investment screening call-ins are managed
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| Strengthening the UK as a global listings hub |
- No need to take specific policy steps to encourage companies to list on UK exchanges
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- Joined-up and proactive approach to promotion of UK exchanges as attractive venues
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| Sharing the UK’s proposition with the world |
- Broad promotion of the Great Britain brand globally leverages the UK’s strong reputation for stability, creativity, and predictability
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- Shape a new dynamic investment strategy, coupled with a disciplined communication effort
- Equip a global diplomatic network that actively engages with how global financial markets operate and can effectively deliver sophisticated investment messages to key global investors
- Devolve more power to local authorities and allow them to play a greater role in attracting investment to the UK’s regions and nations
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