The political and policy volatility that followed the Brexit vote in June 2016 has inevitably tested the UK’s foreign direct investment (FDI) appeal. The country remains the largest recipient of FDI in Europe, figures from greenfield investment monitor fDi Markets show, but the data also confirms that EU competitors have been closing the gap. Besides, the changes of the past few years have unsettled investors, as also highlighted by the Harrington Review on FDI in the UK published in November. Lord Dominic Johnson, who has served as investment minister since November 2022, discusses with fDi what he is doing to maintain the country’s investment appeal, including the details of an intergovernmental committee on investment that is about to launch.
Q: What is the government doing to shore up foreign investment in the country?
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A: As soon as I arrived, we saw clearly that the big issue for the Office for Investment (OFI) was that we were very good at industrial relationships [relations with manufacturers], but we didn’t have much strength with the big capital pools. They are the big sovereign wealth funds, the Australian supers, the Canadian pension plans, the corporate venture capitals. I drove the department to focus more on those. I want all of them to set up an office in the UK. That is direct cash, which is then easy to funnel by the OFI into big infrastructure projects in things like offshore wind, hydrogen, nuclear power and things like these that demand huge amounts of capital. So far, the commitment we have received from the sovereign wealth funds in the Gulf, Australia and Canada has been huge. At the Global Investment Summit (GIS) in November we announced £30bn in investments, with half of them coming from the Australian supers.
I want all of [the big capital pools] to set up an office in the UK
Q: Most of the ‘investments’ from the GIS you refer to came in the form of memoranda of understanding (MoUs) where the funds committed to considering investment opportunities in the UK. Has there been any concrete follow-up?
A: We have an implementation group, including myself, that meets regularly with the parties that have committed to invest significantly in the UK to make sure they are looked after and to hear how they want to invest. In some deals they may need government support because of the complexity of the arrangements, in others they will just make their own private investment.
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Q: What is the core of your pitch for a post-Brexit UK to investors?
A: Compared with the rest of the European markets, our economy is performing far better. [The UK-based Centre for Economics and Business Research expects the UK to grow faster than all the eurozone major economies in the next 15 years.] We have areas of significant interest, for example, sustainable energy and hydrogen-associated products … but also artificial intelligence, deep tech, life science, advanced manufacturing. And we are a competitive regime when it comes to flexible employment markets and relatively competitive tax regimes. Ultimately, investors like predictable and stable investment environments with predictable rates of return, and established mechanisms for investment. And the UK provides that ahead of our competitors in Europe.
Q: In fairness, the UK has gone through a lot of volatility since the Brexit referendum. How do you address these concerns?
A: This time last year I went to the US and I received a pretty frosty reception. I went back again this January and the response was completely different. That signals that prime minister Rishi Sunak stabilised the government and has projected a very powerful layer of predictability and stability.
Q: And yet the elections, and possibly another change in government and ruling party, are looming.
A: Obviously, I’m a supporter of the Conservatives. If you look at all parties’ intentions, in terms of investment into the UK, I think they’re pretty consistent. So I’m very comfortable when I sell investments in the UK to overseas investors. When they ask me about the elections, I say we have a series of centrist candidates [who aspire to do their best for the UK].
If you look at all parties’ intentions, in terms of investment into the UK, I think they're pretty consistent.
Q: The Harrington Review also suggested elevating the role of investment minister to cabinet minister. Should we expect that to happen?
A: I don’t think it’s necessary. Investment should be at the forefront of the ministers’ minds. It’s really important that ministers understand how investment fits into their policy matrix. What we have done instead is we have set up an intergovernmental committee on investment, with FDI being a core component of it, led by the Chancellor where myself, my secretary of state, Kemi Badenoch and key ministers will meet hopefully relatively regularly. We are having the first meeting soon, where we will look at the pipeline of big deals to make sure they have across-goverment working, and make sure the policy framework and matrix is suitable for investment.
This interview has been edited for clarity and brevity.
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