On Monday 14th October, the UK government will host a high-profile International Investment Summit, gathering up to 300 industry leaders, in a bid to “catalyse investment in the UK”. As Labour seeks to revitalise Britain’s economic landscape, this summit is positioned as a pivotal moment for attracting private money and driving long-term growth. But the question remains: will it deliver?
Dr Bruce Morley, an expert in macroeconomics and finance at the University of Bath explains the potential implications for the UK economy:
"The Investment Summit is likely focused on how to boost long-term investment in the UK economy, which is essential for raising productivity and driving sustainable per capita economic growth. However, the true impact of such initiatives won’t be clear until the UK completes a typical business cycle, which spans around six years.
In the short term, we might see efforts to stimulate aggregate demand through fiscal or monetary expansion. This could become clearer following the upcoming budget, possibly involving increased government borrowing. Business confidence in September was lower than anticipated, suggesting the economy may face some short-term challenges.
To truly enhance UK productivity, we need significant investment in emerging technologies, like robotics, where the UK currently lags behind its key competitors. But investment requires funding, either from domestic savings or foreign capital inflows—this summit’s primary focus seems to be the latter.
However, research consistently shows a strong correlation between domestic investment and savings. The UK has struggled with low levels of both for the past 30 years, ranking among the lowest in the OECD. What’s really needed are policies that encourage greater domestic savings and investment, particularly through reforms to the corporate tax system—a focus that appears to be lacking at the summit."
Professor Mike Lewis, from the University of Bath’s School of Management, specialises in operations and supply chains, major projects and the route to achieving Net Zero. Professor Lewis provides his analysis on these issues:
"The UK government's plans around accounting rule changes and investment summits presents a welcome and seemingly rational view of accounting for growth but some critical analysis is also needed:
- Clarity needed on the associated policy goals: The balance between the governments missions - pursuing industrial strategy, addressing regional inequality, decarbonization, etc. – is really key but there will be conflict between these priorities.
- Unclear Impact on Growth: The potential long-term growth effects of these strategies, especially given historical infrastructure projects, requires scepticism. While new projects may be critical and promise growth, past experience – and indeed this week’s UK infrastructure commission report – show how hard it is to deliver – even with reorganisation of the central oversight function (IPA becomes National Infrastructure and Service Transformation Authority, etc.)
- Over-reliance on Borrowing: While the reclassification of capital spending as long-term assets may create options to increase investment capacity, and still keep within (self-imposed) rules - there are risks with high borrowing, particularly in a volatile interest-rate environment.
- Foreign Investment Dependency: The assumption that private/overseas investment will fill funding gaps is plausible but there is uncertainty in attracting sustained foreign interest, especially in competitive investment markets. The potential risk of over-relying on external funding sources is under-addressed."
Experts from the University of Bath are available for comment to provide insight into the potential outcomes of the summit, the challenges of securing sustained investment, and the broader economic implications for the UK’s future. To arrange interviews please contact the University of Bath Press Office at press@bath.ac.uk.
To greater understand these issues, and designed for senior policymakers and decision-makers from government and the third sector, the IPR Policy Fellowship Programme offers the opportunity to explore policy questions or challenges through a bespoke programme of tailored meetings with leading academics based at the University of Bath. Find out more here.
All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.
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