Brexit makes us a whole new investment prospect for foreigners

EDITOR'S BLOG: The FDI figures look good for now but the future is highly unclear despite the pound's slide

by Matthew Gwyther
Last Updated: 31 Aug 2016

Liam Fox had some heartening news yesterday. Fresh from spending the summer fighting with Boris Johnson and David Davies about who gets the best weekends at their shared grace and favour country residence in Chevening, from his new position as International Trade Secretary he was able to tell us that the last set of Foreign Direct Investment figures for the UK looked pretty good. Total projects funded by FDI rose 11 per cent to 2,213 and created or protected 116,000 jobs. Investors came from 79 countries with the USA with 570 projects leading the way followed by China and India. Fox called the figures ‘a continued vote of confidence’ in the UK. And this they are.

The important rider to this is that these figures apply for the tax year to end April 2016. What has happened after the Brexit vote is not yet known. Whether we will continue to be Europe’s most popular destination for FDI and so attractive now hangs in the balance. We are now a different investment prospect entirely - we’ve gone from a reasonable bet to a far trickier punt because the future is so uncertain.

In the immediate period since 23rd June the steep fall in the value of sterling means out assets look cheap. You can pick up freehold commercial property for 15% less than three months ago if you have dollars or Euros to spend. Tourists are flocking over.

However, the key question is how much our membership of the single european market, especially in the manufacturing sector but also in services, determines whether investors will still find us worth considering. Buying an office block in London is one thing, a whole new, riskier commercial venture where the rules of trade and movement of people are very unclear is another.

The mood when it comes to Brexit continues to be rancorous. Remainers are bewildered, angry and apprehensive. Leavers are still supposedly pleased and liberated but irritable by what they see as anti-democratic backsliding. They want to get on with in. What many of them hope - and this may well be the eventual consequence - is that the entire EU edifice falls apart and we can scavenge among the flotsam and jetsam. They want us to be the scrappy, opportunistic Francis Drake-like pirates darting here and there grabbing what we can and making off.

But when arch-Brexiteers like Jacob Rees-Mogg say ‘Calls to remain in the single market are code for rejecting the referendum result. It is a trap’ they are not telling the truth. That was not what we voted on and there were plenty of anti-EU folk who wished the whole kit and caboodle had stayed as a mere free trade area and customs union without all the bendy-banana-ban bollocks.

June was a binary question but it has many conceivable consequences. The path on which we are set has never been traveled before by anyone and it has many possible destinations. So we would do well to investigate the possibilities extremely carefully indeed before doing anything precipitate. It could be that the best minds of our civil service plus our negotiators and politicians, despite giving it their very best shot in good faith, cannot find a solution that they can recommend to the British people as not very seriously deleterious to all our prospects.

There was some more Brexiteer cheerleading yesterday with the debacle over the EU, Ireland, Apple and its taxes. Or lack of them. The line being peddled here is that as US/European relations sour - and the White House made its displeasure about the Brussels ruling very clear - there will be opportunity in driving a wedge between the two. London can welcome Apple and all other American multi-nationals with open arms offering the kind of sweetheart deals forbidden to Dublin. Good luck there, Liam - that’s going to make us even more popular with Washington and Mrs Merkel as we cause further havoc during already strained negotiations.

Brexiteers may be wildly confident about our future going it alone. They promised us, the electorate, a simple negative - a rejection - based on angry, populist backlash without saying what the alternative was in plain, simple terms. This is because they really don’t know where we are headed or where we can head. So they will have to forgive the many of us who remain anxious non-believers.


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