There is one statistic that should worry Reeves and Starmer the most

Independent

5 hours ago

If there is one statistic that should ring alarm bells in government it is this: that the number of foreign direct investment (FDI) projects in the UK has fallen to the lowest level since records began 18 years ago.
It isn't the Tories or a Tory-backed think tank saying this but the government's own people, the Department for Business and Trade. There were 1,375 FDI projects secured by the UK to the end of March, down 12 per cent from the previous year and the lowest since the data began to be compiled in 2007-08.
Why does this matter? Because investment from overseas brings with it jobs and prosperity. It's a declaration of faith that Britain is a good place in which to do business and by choosing to come here, foreign businesses are preferring this country over others.
Britain needs that international money, it cannot rely on homegrown capital to drive wealth. But increasingly, it's not coming. Investors, it seems, do not like what they see and would rather go elsewhere.
The phenomenon is not new – the peak, of 2,265 ventures, was in 2016-17 – but it gives the lie to Sir Keir Starmer 's much vaunted growth agenda. We're told that the prime minister and his chancellor, Rachel Reeves, are going further and faster to kickstart the economy. A year into their rule, a period that more or less coincides with the official DBT update on FDI, foreigners are telling us something very different.
There is of course, more than one way to skin a cat, and a DBT spokesperson duly insists: 'This government knows the power of inward investment and is laser-focused on targeting the highest-impact job-creating wins across the UK, which is why the value of our FDI projects has gone up over the past year as we seek quality over volume.'
Note the 'laser-focused', which sounds impressive but is meaningless. It's insulting and, by the way, wouldn't previous administrations also declare they were similarly 'laser-focused'? Then again, it's a bit like 'further and faster', a description to be repeated ad nauseam but which does not amount to anything.
Note, too, the shift from quantity to quality. These were figures devoted to quantity, as they have been for almost two decades. But now, they are rendered redundant. Would they have said the same if the total had risen? What do you think?
The point about concentrating on the size of a deal rather than its existence is that value is hard to quantify. It depends on how companies formulate their accounts, exchange rate movements and other factors. Crucially as well, that size tally can be skewed by just one deal, one mega-merger between multinationals that may even result in substantial UK job losses.
Another, accompanying, piece of data is that the government estimates that jobs created via FDI were down 3 per cent in the year to end of March 2025. It was said to be an estimate but the number was precise, at 69,355, which is the lowest since 2020-21, when Britain, and the world, was in the grip of Covid-19.
It is true that Britain is not alone. Other large nations, especially those in Europe and including the US, suffered falls in their inward investment. The recent EY attractiveness survey put the blame on 'weak economic growth, geopolitical turbulence and ongoing high energy prices'.
That may be so, but how to explain then the fact that FDI in the UAE increased by 49 per cent last year? This was in the World Investment Report from the United Nations Conference on Trade and Development. Being the UN, however, the popularity of the rich UAE was a cause for regret. 'Too many economies are being left behind… because the system still sends capital where it's easiest, not where it's needed,' said UNCTAD's secretary-general.
Yes, capitalism is unfair. Unlike many nations, though, Britain is in a position to make life easier for investors. What is the government doing? Only increasing employers' national insurance contributions and adding to the regulatory burden, and therefore the cost, with its new workers' charter. Not much sign of 'further and faster' there.
Comparing the UK's performance with others and saying they were down as well, is rather like those organisations that when they suffer a disaster fall back on the reality that most of the time everything operates fine. No, it's this calamity that counts and its consequences, that is all that people are concerned with. It's a convenient get-out tactic that encourages acceptance and complacency rather than action. But they are laser-focused so that's alright then.
What is concerning is where those falls in FDI projects occurred, in IT and financial services, in life sciences, biotech and pharmaceuticals, just the sectors the government is keen to promote as epitomising Britain's modern economy.
There is a trend underway that, if reports are to be believed, has seen Reeves react. This is outflow of individuals' wealth from Britain. Some non-doms, the wealthy foreigners able to take advantage of lower tax rules, have chosen to depart. Meanwhile, others are not coming. Why? Because in her Budget, the chancellor said she was planning to make them subject to UK inheritance tax on their worldwide assets, including those held in trusts – a proposal she is now said to be reconsidering. Whether it's enough remains to be seen. Hers is a regime that has targeted the wealthy in other areas. That she decided to strike at the non-doms may be seen as indicative of a wider policy.
Reeves made her move at exactly the same moment as other nations were doing their level best to woo the fleet-of-foot global rich, offering an array of inducements and benefits. They were doing so because while these folks pay lower taxes they contribute to the public purse through other means, by spending and investing – like FDI in other words.
Perish the thought the two are related, that foreigners per se no longer wish to invest in Britain. That laser focus, it seems, has yet to reach them.