Supporting overseas investment by British companies can bring vast benefits to the UK

Supporting overseas investment by British companies can bring vast benefits to the UK

For centuries the UK has looked outwards to increase our prosperity and build alliances across the globe.

We were among the first nations to recognise and promote the benefits of free trade, and that tradition has remained the cornerstone of British economic and foreign policy.

So it’s ironic that for the past 40 years Britain has remained a champion of free trade while lacking the freedom to truly practice what we preach. All that is about to change.

Leaving the EU will put us back in charge of our own trade policy. It’s an unprecedented economic opportunity: even the European Commission predicts 90% of global growth over the next 20 years will be outside the EU, and Britain will now have the flexibility to increase our trade with the rest of the world.

To fully realise this potential we must be ready to embrace all the opportunities of global economic growth. That will require a genuinely comprehensive trade policy. And yet in the debates about the best way to achieve this, I’m often struck by how many people reduce international trade to merely a transactional activity.

This interpretation sees the world economy like a high street market: we pitch our stall, sell our goods and go shopping, before packing up and going home again.

Of course that is partially correct and, as an international economic department, increasing exports of British goods and services is a top priority. But I’m determined that will not be at the expense of encouraging flows of investment that help the British economy.

Latest statistics show we have record inward investment with more foreign direct investment projects than ever before. With over 2,200 projects recorded, the post-referendum figures show an increase of two percent on the previous year. The data also shows that over 75,000 new jobs were created, and almost 33,000 safeguarded, that’s over 2,000 jobs per week across the country.

While benefits of foreign direct investment into the UK are broadly appreciated, there is sometimes a degree of scepticism about the advantages of UK companies investing abroad. Outward direct investment is often seen as a fig leaf for outsourcing jobs and cutting costs at the expense of domestic investment and jobs for British workers.

However, this view ignores the vast benefits that outward investment can bring to Britain. It’s also an unnecessarily modest assessment of our economic strengths. When it comes to outward investment Britain punches above its weight in the world. We are the fifth largest economy but third in the global league table of outward investors behind the US and Germany.

We are world beaters, and yet this is a vital area of trade policy that has been neglected by successive governments. That’s why I have tasked the Department for International Trade, both in the UK and across our foreign posts, to renew our focus on supporting the outward investments of British companies.

There are six key reasons for doing this.

First – it’s good for the UK’s bank balance. To rebalance the UK’s Current Account position we must support both inward and outward investment – they are indispensable partners. In 2015 UK companies’ net earnings from their investments abroad were just under £57 billion. These profits can then be repatriated to the UK, benefiting shareholders and leading to higher tax revenue.

Second – investing abroad makes British companies better. Not only does it help turn them into global brands, there’s clear evidence that UK companies that invest overseas become more competitive and productive. They pick up new technologies and local business know-how which is then transferred back to Britain.

Third – outward investment helps British businesses grow and expand into new markets. Increased investment goes hand-in-hand with increased trade. It’s why companies with investments and operations in more than one country account for 80% of all world trade. British firms who take ownership of foreign assets can also integrate the UK supply chain into large international projects, creating more export opportunities.

Fourth – the transfer of UK capabilities and expertise, particularly in the service sector, can help us mature market sectors in partner countries faster, giving greater economic force to both.

Fifth – it enhances the reputation of British businesses. Companies that establish a good reputation in one country can experience a ripple effect of new opportunities in other foreign markets.

Finally – showcasing the high standards of UK companies abroad boosts our national reputation and the prospects of increasing international trade. It provides employment for the local population, which strengthens bilateral ties, and gives a taste of the benefits of doing business with Britain.

As we look to build new economic relationships across the globe, it really is a case of try before you buy into a free trade deal with the UK. British companies operating abroad are not just making the most of current commercial opportunities; they’ll also be in the right place at the right time when markets liberalise.

There is a compelling case for supporting overseas investment by British firms, and as an international economic department we will introduce additional measures to complement the support we already provide.

This week we are launching a new insurance policy that will help UK companies invest abroad with confidence. I’ve been in South Africa where we will be doubling the amount of UK export finance we offer to UK firms who want to do business there.

In the longer term we will develop new ways to help British companies that invest and operate overseas. Our strategy will be comprehensive, but there will be no blank cheques, nor will we support all types of outward investment. That includes investments that reduce the presence of a company in the UK.

Our aim is to build a truly global Britain at the heart of international trade. A country that is confident in its abilities and sufficiently nimble to deal with the challenges of a changing world. Helping more British companies make good investments abroad will be central to that task.