More to inward investment than grant giving
GRANTS are not the key issue in attracting inward investment, argues Colm Reilly, of UK Trade & Investment’s investment services team.
AS the discussion with Simon Goon of the UKTI’s investment services team at the Northern Growth Summit in Leeds last month showed, there are a wide range of interlinked factors that attract inward investment. There are also a number of myths about what drives companies who want to invest in the UK.
One of these myths is the effect of the availability of grants and, in particular, the grants for locating in Scotland compared with the loss of grants for the North of England. It is important to note that the Regional Growth Fund has helped close this particular gap.
However, there is also clear evidence that investments made by companies based mainly on grants, without a broader case for investment, have not been successful in the longer term. In some cases the companies have left after only a few years.
The implication of this for areas such as Yorkshire is the need to develop a specific, tailored and compelling proposition based on the area’s strengths, strategic objectives and ambitions.
This proposition can be strengthened by tax incentives and grants, where they are available, but they are not the deciding factor.
To bring this a step further, this is also illustrated by the fact that the Enterprise Zone incentives alone are not competitive with other similar initiatives in other parts of Europe. But they were not designed to be so.
They were designed to fit into an overall competitive landscape offering skills, capability, world-class research and some financial returns. The proof is that the UK still attracts inward investment and will continue to do so.
The significance of this point should not be underestimated. Every country gets to determine the approach that it believes will work best for inward investment. In some countries funds such as ERDF and EU can be used to address specific economic challenges ranging from peripherality, skills deficits and infrastructure gaps.
In England, the approach has been to bridge the project funding/competitiveness gap in selected locations with RGF for specific capital intensive and strategic sectors that England wishes to attract and grow such as advanced manufacturing, life sciences and energy. Different does not mean bad but simply reflects the ability for this varied landscape to offer different solutions for different client needs.
The reality is that cost reduction is not the key factor for most companies. Evidence (from research carried out by UNCTAD) shows that, for companies currently seeking to invest in the UK, the primary drivers of their decision making are access to markets, clients, resources (including skilled people) and technology. Cost reduction is only ninth on the list and fewer than 17% of companies say it is an issue for them.
So the message to potential investors needs to be that the UK can offer a competitive total cost of operation, along with access to the skills they need.
This means that the UK remains Europe’s leading inward investment destination, and Yorkshire plays an important part in that.
UKTI will be working with all its local partners to help maintain that position by developing a clear case to show potential investors how locating in the UK will give them access to markets, clients, technology, resources and skilled people in a business friendly and financially supportive environment.
In the competitive world of inward investment that kind of sophisticated case is much more likely to be successful than one based only on financial incentives.
– The investment services team is a service provided to UKTI by PA Consulting, British Chamber of Commerce and OCO Consulting.
