The Department for International Trade (DIT) has made progress in presenting a coherent UK offer to investors, but needs better coordination across central government, devolved nations and other local bodies, according to a new National Audit Office (NAO) report.
DIT has strengthened how it works with other government departments, including establishing the Office for Investment (OFI)2 as a one-stop-shop for the highest value investors. It has also successfully changed its approach to focus on attracting inward investment that will have the highest economic impact.
The UK operates in a challenging global investment environment. Factors affecting investment flowing into the UK include company mergers, acquisitions or consolidations, competition from other investment promotion agencies, restructuring following EU exit and the impact of the COVID-19 pandemic. The total number of FDI3 projects DIT has supported fell by 37% since 2016-17, and by 19% since 2019-20 to 1,174 projects in 2021-22. However, since 2019-20, the forecast economic benefits of projects rose by 128% to £7 billion.
The proportion of FDI projects that DIT supported in the UK outside London and the South East increased from 46% in 2019-20 to 57% in 2021-22. However, there is variation across the UK. In 2021-22 DIT estimated that the FDI projects it supported led to 3.1 new jobs per 1,000 people aged 16 to 65 in the North East, compared with 0.5 jobs in the South West.
DIT takes steps to understand its impact, including through a regular investor survey. In 2021-22, DIT was involved in 74% of all new UK FDI projects but it is not possible to say how many of these investments would have been made without DIT’s support given long lead times and the impact of wider economic factors. In 2020-21, 89% of investors DIT surveyed reported satisfaction with the information and advice it provided. In 2021-22, 74% said they ‘definitely or probably’ would have invested in the UK without DIT’s support.
DIT is implementing a transformation programme aiming to remove duplication, reduce staff time on lower value investments and improve use of digital tools. The NAO says success will rely on DIT managing delivery risks and building skills, to achieve the forecast additional benefits of £135 million over the next five years.
The NAO recommends working with BEIS, the Department for Levelling Up, Housing & Communities, local authorities in England, devolved administrations, and other bodies to build deeper knowledge of the relative strengths in different industry sectors of UK nations and regions to help it identify the most suitable UK projects for overseas investors.
DIT’s processes for reducing the risk of government involvement with controversial companies are not joined up. The NAO recommends DIT mitigates these risks by developing stronger processes that are proportionate, integrated and used consistently across DIT and OFI.
Regarding evaluation, the NAO recommends that DIT should assess how actual economic benefits from inward investment projects, such as the number of jobs created, compare with its forecast at the outset. This would help DIT improve its future forecasting and understand its impact on economic growth.
“Increasing inward investment is critical for UK productivity, which in turn supports economic growth and the amount of money available for public services.
Success in attracting greater investment in part relies on knowing UK strengths compared with its competitors. Better understanding across the UK’s nations and regions can help present a coherent offer to prospective investors, and improving coordination across Whitehall could reap rewards.Gareth Davies, the head of the NAO
Doing more of what works – and stopping what doesn’t – is critical for success, so evaluating economic predictions against outcomes can help DIT refine its approach.”
Read the full report
Notes for editors
- Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
- The Office for Investment, established in 2020, reports jointly to DIT and to the Prime Minister’s Office
- FDI is defined as an investment reflecting a lasting interest from a foreign investor or enterprise in a UK enterprise where the overseas investor owns 10% or more of the enterprise and aims to have an ‘effective voice’ in its management. DIT defines investments with a lasting interest as those where business activities supported by the investment are expected to last for at least three years. DIT also supports capital investments where an overseas investor invests funds into a company, enterprise, or project for the purposes of furthering commercial objectives and expanding growth.