The global credit crunch is seeing more tangible effects
every day as the twin evils of inflation and unemployment seek to out-do
eachother in a race towards recession. This month, the UK government announced
the worst unemployment figures for 16 years, with a 15,000 increase in just
three months. This does not yet include the 500 job losses at JCB announced
this week, or the 5,000 job cuts announced by housebuilders Persimmon,
Barratt’s, Bovis and Redrow in recent weeks; nor those at HBOS (650 jobs); or
Somerfield (800); or Wolseley (700)… by the time you read this you’ll have
heard of several more, I’m sure.
I don’t want to be a doom and gloom merchant, but this is
the economic context in which the latest inward investment figures have been
announced. Since UKTI started the ball rolling earlier this month with “record
figures”, each region has followed with similar announcements of more jobs and
projects than last year. This is a familiar ritual which means either that the
inward investment industry is bucking the trend and keeping Britain afloat, or
else maybe the figures need more examination.
There is no doubt that the UK continues to be attractive to
international companies, although much of this activity is a natural by-product
of the ever-more global economy. You don’t have to dig too deep to see that 30
per cent of the UK figures are mergers and acquisitions (which are sometimes
good for the UK, and sometimes not) and 28 per cent are expansions of existing
investments (which is always a good thing). That leaves 653 new inward
investments last year, up 9 per cent on the year before. This is still an excellent performance and
credit should go to all involved at every level in national, regional and local
inward investment teams.
For the annual inward investment figures to have any
meaningful story though, there should be reforms to the way that the numbers
are crunched. Firstly, the M&A deals should be stripped out of the totals –
how can the takeover of a UK company by a foreign entity be viewed in the same
total as a new facility that creates real jobs. The ultimate ownership of a
company is, more often than not, an irrelevance; our focus should be on
projects that create new jobs.
Secondly, and this one will require some extra work, we
should publish the NET figures for new jobs and projects in the UK. Yes, it’s
great that we attracted 653 new projects, but how many do we lose year on year?
How many corporates relocated their headquarters from London to lower tax
locations like Geneva, Dublin, Dubai or Bermuda? How many foreign companies
shifted production or call centre seats to Asia? I realise that this might
knock the shine off the annual record-breakers ceremony, but at least it would
paint a more accurate picture of how we are doing.
The credit crunch and rising unemployment places even more
importance on the role of inward investment. We do ourselves no favours by
pretending that everything is always rosy. Attracting new projects is getting
much tougher as the competition gets smarter and the world gets smaller. Inward
investment took a hit after the dot.com crash and in the wake of 9/11 – all the
signs are that we are about to take another hit after five great years. An
honest assessment of the figures will help explain and soften the seemingly inevitable
blow next year.
