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Charles White Thomson is a senior fellow at the Adam Smith Institute and former investment company CEO
The UK’s 2024 International Investment Summit raised £63 billion of private investment and 38,000 UK jobs ahead of the Budget.
The investments include: wind and solar farms, data centres and carbon capture infrastructure.
The investors are a wide range of multinational companies – Iberdrola, Blackstone and Amazon to name a few. At first glance, this is good news and much needed, especially as our ability to increase our national debt to finance investment is currently constrained.
As with all big financial announcements, the devil is in the detail and there are two sides – the buyer or the multinationals and the seller or the UK.
Finding the sweet spot where both sides of the transaction win is easier said than done, and it is further complicated when long dated contracts, incentives and changes to regulation are included.
The buyers are a list of highly sophisticated companies. They have shareholders or boards who demand value or ‘return on their investment’ and will be supported by some of the finest minds who specialise in competitively positioning for the future.
The UK is also in competition with countries like France, Germany and the Netherlands. This is not a charitable event; the companies want to make money.
They are right to be focused, as even the most sophisticated investors make mistakes. The Abu Dhabi Investment Authority, a sovereign wealth fund, are reported to have recently written down their £263million investment in Thames Water to £1.
This is what is worrying me. The negative narrative that has been peddled around the UK economy, financial mismanagement, the alleged £22 billion black hole, and a painful October budget could prove to be a double-edge sword.
We have told the world, and ourselves, that we are in a difficult position and we need their money to help us grow. The recent consumer confidence survey is telling.
There is a tone of neediness which buyers won’t miss and they will drive a hard bargain because of it.
Sellers who appear needy rarely get the best price. The head of Eli Lilly noted, at the Investment Summit, that the UK has become a ‘relatively small market’ having left the European Union.
Putting aside for current purposes the veracity of the assertions, this is of course a textbook example of muscle flexing, positioning and negotiating technique.
UK consumer confidence fell in September and October ahead of the budget
This Government needs good news after a difficult first 100 days, but there can be no place for short term positive headline chasing.
Or, put another way, we must avoid deals that look good today but are bad in five years, for future governments or consumers to pick up the pieces or bill. This is why the details are so important and in many cases, are lacking or have not been made public.
This is where the electorate must hold the executive or ministers to account. What is the taxpayer being asked to contribute in terms of finance and other government support?
What checks and controls will the taxpayer, via the government, have over the project for any such contribution? And if the project succeeds, how will the taxpayer enjoy its rightful share of that success?
We will also rely on newspapers like the Daily Mail to use their influence and resources to fully scrutinise and subsequently publish their findings.
These investments are building blocks of our future growth. Our Government needs to show great confidence in these negotiations, with the knowledge that we are the sixth largest economy in the world and buyers should pay a fair and good price for a piece of the UK’s future.
I would rather we came away empty-handed than sell out for a handful of headline grabbing deals that turn out to be mispriced millstones.
Charles White Thomson is a senior fellow at the Adam Smith Institute and former investment company CEO
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