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Making the UK the best place to invest. CBI publishes its wishlist

19 April 2011

With public and consumer spending constrained, business investment will play a critical role in driving the recovery. But foreign investment in the UK has fallen significantly during the global recession, from $186.4bn in 2007 to $45.7bn in 2009, and the UK’s reputation as a good place to invest is under threat. Last week, the CBI called on the government to bolster the UK’s attractiveness to investors, warning that without action, investment and jobs will be lost to other countries.

In a new report called Making the UK the best place to invest, the employers' organisation identifies the main drivers and blockers for investment, based on research from 400 companies, including interviews with senior business leaders. The report suggests that much more needs to be done to improve the investment landscape to retain companies based here and attract fresh inward investment.

It follows a CBI and Deloitte survey of 121 senior business leaders last October, which found that between 8% and 12% of companies have not yet decided where their primary location will be in five years time. CBI director-general John Cridland is worried at the numbers of business leaders telling his organisation that the UK no longer holds the same attraction it once did and, even worse, questioning whether they need to be here at all.

“The Budget and Plan for Growth were a good start, but the government now has to completely transform the investment landscape," says Mr Cridland. "With competition for international capital so fierce, the government must play up our strengths and remove the stumbling blocks to investment. Time isn’t on our side and we have less than five years to turn things around.” Business leaders highlighted a range of issues in the report, including the tax regime, regulation, planning and infrastructure.

Siemens UK chief executive Andreas Goss says the continuing government target of working towards a low-carbon economy makes the UK attractive to business, but he's worried about the lack of engineering and science skills, which are vital if we are to innovate and remain competitive in the global market. This is despite the overall impression of business leaders that the UK has a firm science base, particularly in research and development, and innovation, and that four of the world’s top ten universities happen to be located in the UK.

Nonetheless, when asked about the obstacles to investing, among the factors cited by business leaders were the UK's well-publicised skills shortages, particularly in science, technology and maths, which affect a wide range of sectors from manufacturing and engineering to the creative industries.

Following an analysis of this survey, the CBI has a shopping list for the UK government:

- Stimulate new market activity. For example, by opening up public services to private provision; accelerating the transition to a low-carbon economy; making the UK a prime site for clinical trials by speeding up the regulatory process, and improving high-speed broadband availability.
- Use public procurement intelligently by streamlining the bid process, and making it open to innovation and wider economic value.
- Use business taxes to encourage investment. The Government’s recent announcement of a phased reduction to a 23% main corporation tax rate is welcome, but it should set a longer-term objective of reaching 18%. Other business taxes need to be competitive. These include employment taxes, fuel duty, complex low carbon taxes and business rates.
- Support measures to provide small and medium-sized firms with the capital they need to grow through a range of tax changes and more effective use of public procurement.
- Remove the 50p tax rate as soon as the public finances allow and within the lifetime of this Parliament to attract and retain the best mobile talent.
- Develop the UK’s skills base by supporting further business-led academies and extending apprenticeships.
- Build greater resilience into the UK’s infrastructure across transport, energy, waste, water and digital.
- Create a planning and regulatory system for investment and growth, including developing fast-track processes for planning and a presumption in favour of sustainable development and regulations that are proportionate to risk.

In 20 years time, Mr Cridland wants the UK to have the most competitive tax regime in the OECD, be a world leader in low-carbon technologies, boast a strong education and skills base, a fit-for-purpose infrastructure and the fastest broadband in Europe. No pressure then!

“This is within our grasp,” he insists. “But we need to act quickly to prevent this opportunity slipping through our fingers.”

Les Hunt

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