The Conservative peer Lord Harrington has authored a report exploring the conflicted feelings that foreign investors hold towards the British government’s foreign direct investment (FDI) strategy. 

Despite recent headwinds, the Harrington report highlights that the UK’s foundations as an investment destination are solid. However, investors perceive the country’s investment promotion set-up, led by the Office for Investment (OFI) and the Department for Business and Trade, as neither charming nor efficient.  

Lord Harrington and his team surveyed more than 200 companies, financial institutions and sovereign wealth funds to closely examine their experiences of dealing with FDI in the UK — “why they invested here if they did, and why not if they didn’t”. 

The Harrington report finds that “their experience pointed to a picture of investment not being a priority across the UK government, especially when compared with its peers.”

Lord Harrington’s analysis is comprehensive and his recommendations are eloquent. But it is unique in the flair he adds when referring to the investors he interviewed — both directly and indirectly. It is this added colour that, ultimately, gives an immediate feeling of the catch-up effort that lies ahead of the UK. 

Several references to the ‘red carpet’ treatment given to foreign investors by France and French president Emmanuel Macron feature among the most insightful and entertaining pieces of evidence it provides. 

“A number of senior business representatives who spoke to the review reported that their CEOs and presidents were used to receiving texts directly from president Macron, being invited to the Palace of Versailles and having ‘the red carpet rolled out’,” reads the review.

“An international conglomerate with a net worth of over $300bn operating in over 150 countries said relationships were ‘critical’ to how they do business, and ‘it starts with the prime minister and extends to only two or three senior ministers or officials’.” 

Across the Channel it is a different story. 

“One major investor described their frustration at having to ‘troop from department to department’ to meet different secretaries of state covering different areas of responsibility related to their investment, many of whom will have changed office before an agreement was secured,” the review reads. “It added up to a sense of investment and investors not being prioritised at the highest levels of government.” 

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Throughout the report, Lord Harrington cites Ireland and its Industrial Development Agency (IDA) — which has pioneered investment promotion since its launch in 1949 — as another reference for international best practices. 

“Earlier this year, a major global investor, developer and asset manager completed the purchase of a large site in Ireland,” reads the review. “The investor shared with the review that IDA Ireland played a pivotal role in the deal, offering a range of support to bring the ambitious investment plans to fruition (tax reliefs, brokerage with tenants/partners, planning support).”

Once again, it is day and night compared to the treatment offered by the OFI, the FDI unit set up in 2020 by then prime minister Boris Johnson to attract and negotiate strategic FDI deals.  

“Although businesses who had first-hand experience with the OFI were complimentary, it was largely acknowledged that, considering its function as the UK government’s premier investment unit, the OFI ‘lacked teeth’ by comparison, and its concierge service could not always provide a substantive offering compared to international competitors.” 

The weak and volatile set-up of the UK’s FDI governance is not just inefficient per se, but has a material impact on the country’s capacity to grab investment at a time when major economies the world over are doubling down efforts to win FDI in strategic industries and beyond. 

“Government was perceived as disorganised by business, allowing opportunities to slip away, apparently due to a lack of clarity over who owned a policy area or who had the power to take a decision on a given issue,” the report reads, substantiating the idea that the weak FDI governance is at the heart of the country's FDI problem. 

Lord Harrington lists a wide set of recommendations for the UK government, if it is to catch up with international best practices in investment promotion. This includes the establishment of a cabinet-level investment minister and upgrading the OFI to become a functioning ‘single window’ that can promote and land foreign investment deals coherently as part of a broader growth and investment strategy. 

Chancellor of the Exchequer, Jeremy Hunt, announced in the Autumn Statement on November 22 that “we’ll put in place a concierge service for large international investors, modelled on the best such services offered by our competitors, and will increase funding for the Office for Investment to deliver it”. 

Perhaps one day, a dinner at Buckingham Palace may also feature in the OFI’s investment promotion menu. It might not change the substance of the menu, but it would add a nice touch.