The 2024 UK International Investment Summit has generated £63bn of private investment and 38,000 British jobs ahead of the Budget.
The investments include: wind and solar farms, data centres and carbon capture infrastructure.
The investors include a wide range of multinationals – Iberdrola, Blackstone and Amazon to name a few. On the face of it, this is good news and much needed, especially as our ability to raise our national debt to fund investment is currently limited.
As with all major financial announcements, the devil is in the detail and there are two sides: the buyer or the multinationals and the seller or the UK.
Finding the sweet spot where both sides of the deal win is easier said than done, and becomes even more complicated when long-term contracts, incentives and regulatory changes are factored in.
The buyers are a list of very sophisticated companies. They have shareholders or boards demanding value or ‘return on investment’ and are backed by some of the brightest minds specialising in competitiveness for the future.
Britain is also competing with the likes of France, Germany and the Netherlands. This is not a charity event; the companies want to make money.
They are right to be focused, because even the most experienced investors make mistakes. The Abu Dhabi Investment Authority, a sovereign wealth fund, is said to have recently written down its £263m investment in Thames Water to £1.
This is what worries me. The negative narrative around the British economy, financial mismanagement, the alleged £22bn black hole and a painful October budget could prove to be a double-edged sword.
We have been telling the world and ourselves that we are in a difficult position and that we need their money to help us grow. The recent consumer confidence survey is revealing.
There is a tone of neediness that buyers will not miss and will therefore negotiate hard.
Sellers who appear needy rarely get the best price. The head of Eli Lilly remarked at the Investment Summit that Britain has become a “relatively small market” after leaving the European Union.
Of course, if we leave the veracity of the claims aside for present purposes, this is a textbook example of muscle flexing, positioning and negotiating technique.
UK consumer confidence fell faster than the budget in September and October
This government needs good news after a difficult first 100 days, but there is no room to chase positive headlines in the short term.
Or, put another way, we need to avoid deals that look good today but will be bad in five years, leaving future governments or consumers to foot the bill. That is why the details are so important and in many cases are missing or not made public.
This is where the electorate needs to hold the executive or ministers to account. What are taxpayers being asked to contribute in terms of finance and other government support?
What control does the taxpayer, via the government, have over the project for such a contribution? And if the project is successful, how will taxpayers enjoy their fair share of that success?
We will also rely on newspapers such as the NY Breaking to use their influence and resources to fully investigate and then publish their findings.
These investments are building blocks for our future growth. Our government needs to show great confidence in these negotiations, knowing that we are the sixth largest economy in the world and that buyers should pay a fair and good price for a piece of Britain’s future.
I would rather leave empty-handed than sell a handful of headline-grabbing deals that turn out to be mispriced millstones.
Charles White Thomson is a senior fellow at the Adam Smith Institute and a former CEO of investment firms