UK Trade and Investment

Written by Edward Davey MP, Liberal Democrats Shadow Secretary of State for Trade and Industry and published in Parliamentary Monitor on Sat 16th Sep 2006

As trade becomes ever more global, manufacturing moves East and competition intensifies, the challenge to Britain's exporters and the fight for more inward investment gets tougher. The UK's mounting trade deficit suggests we are far from meeting that challenge. So what should Ministers be doing?

The Government's recent revamping of UK Trade & Investment (UKTI) is supposed to be key to this strategy. UKTI is a Government organisation supporting both companies in the UK doing business internationally and overseas enterprises seeking to set up or expand in the UK. Liberal Democrats have serious doubts as to whether such Government initiatives are really that significant.

Take the UKTI's recent 2005/6 report. Full of praise for its own activities, it trumpeting of the "success" of inward investment to the UK should be taken with a considerable pinch of salt. When you look at the figures they show the UK maintained its place as the number one country in Europe for inward investment - which sounds good. But how many new jobs would one expect to have been created in such a record year for inward investors- 50,000? 100,000? More than that? In fact the answer is 10,070. Overall the number of new jobs created by inward investment (including expansion of existing facilities and takeovers etc) was only 34,077.

Whether this represents a record performance or is better than our European counterparts is largely academic when the absolute numbers are so low. Costly Government initiatives are no substitute for a focus on the underlying conditions that attract inward investment and promote exports like improving the skills and productivity of the workforce, cutting the regulatory burden, backing science and technology and reducing complexity in the tax system.

On skills, the Government might claim it has been hyper-active. The Learning and Skills Councils, the Regional Development Agencies, the Sector Skills Councils, the Regional Skills Partnerships, the Sector Skills Development Agency and various other bodies have all been created since 1997. All have produced grand strategies. Yet it's far from clear what impact has been made. Presumably that's why the Treasury has belatedly asked Lord Leitch to review skills policy, again.

The problem with this Government's approach is that it has not bitten the bullet in our schools and colleges. It has not got rid of the divide between academic and vocational education and failed to lead a debate in making skills and vocational qualifications aspirational for all. It has not made the key links needed between things like maths and physics and computer games and automotive engineering. It has not developed work-based learning opportunities for 14 to 19 year olds properly. While it has spent lavishly on new quangos, it has cut back adult education, not tackled Britain's scandalously low school staying-on rate and failed to offer more opportunities for those who missed out on education first time.

It is this type of skills agenda that will boost productivity for exporters and encourage inward investors.

On regulations, the government has initiated a variety of studies and reviews of regulation. These need to be brought to a swift conclusion and immediate actions taken as soon as possible. There needs to be an across-Whitehall commitment to stopping regulations at birth and to reviewing recent regulations, with an independent system of regulatory impact assessment and "sunset" clauses built in to new measures.

Nowhere could this have a bigger impact than in the Treasury. If we could slowdown the juggernaut of annual tax legislation, by restricting the Chancellor to a full Finance Bill once every other year, we would give a fighting chance to the goal of creating simpler, more stable tax laws for business - the fiscal stability firms need to complement Britain's new monetary stability.

Instead of resting on our laurels we need to act now to remain competitive and attractive. This can only be achieved through a wide ranging programme of deregulation and enhancing our education and skills training in areas relevant to doing business in a 21st century economy.