Doubts on UK Industrial Strategy Cloud Investment Push at Summit

When UK Prime Minister Keir Starmer welcomes business leaders to a major investment summit in London on Monday, his message to executives from the likes of BlackRock, Vodafone and GSK will be simple: plow your cash into Britain. 

But undermining his sales pitch is the ongoing uncertainty over his new administration’s industrial strategy. Would-be investors are keen to know what kind of incentives will be on offer to make it worth their while pouring money into factories, infrastructure and job creation in the UK. While the government plans to spell out its favored sectors at Monday’s gathering, it won’t unveil the full plan until the spring.

“We see lots of companies waiting to invest once they know what that long term is,” said Stephen Phipson, chief executive officer of MakeUK, which represents British manufacturers. “You need a long-term view of where we want the country to be and how government resources are going to be convened.”

Starmer has said that encouraging inward investment is one of his chief aims, as he seeks to generate the economic growth needed to fund his government’s priorities and earn reelection in five years. He and Chancellor of the Exchequer Rachel Reeves see the investment summit as a key staging post, with the government expected to announce billions of pounds of commitments from business.

On Sunday, the Department for Business and Trade named Microsoft UK CEO Clare Barclay to chair its new Industrial Strategy Advisory Council, tasked with helping the government develop its business plans. That came after Starmer on Thursday cleared up some uncertainty by finally naming former Darktrace Chief Executive Officer Poppy Gustafsson as investment minister, ending a three-month search that had seen its first-choice candidate, Benjamin Wegg-Prosser, pull out.

Gustafsson’s challenge will be to show Britain is attracting new spending: in a pre-summit blow, Dubai-based logistics giant DP World put on hold a major investment at its London port, which was due to be announced at the summit, after the British government criticized employment practices at one of its subsidiaries.

Moreover, several recent investment announcements have been restatements of previous plans, including a £10 billion plan by Blackstone to establish a huge artificial intelligence data center in Blyth, northeast England, and £8 billion from Amazon Web Services. 

Part of Labour’s pitch to CEOs has been that it is devising a national industrial strategy — an approach largely eschewed by the Conservatives during their 14 years in power. While former Tory Business Secretary Greg Clark did devise one during Theresa May’s premiership, it was sidelined under her successor Boris Johnson. 

“We need to send a message to the world about the investment opportunities that exist here and create a new ‘Brand Britain 2.0’ that builds on the past, but looks to the future,” said British Chambers of Commerce Director General Shevaun Haviland. “This means putting green and digital innovation at the heart of what we do, investing in infrastructure and skills, removing the barriers to investment and putting more energy and resource into exporting.”

And while Clark expressed an aversion to picking winners, the BCC’s Haviland said the new plan “must be all about leveraging the country’s competitive advantage. It should identify the sectors and places where we are world leaders and set out how we build on these for growth.”

Labour argues that an industrial strategy is needed to keep pace with the US, European Union and China.

“We have got to compete,” Business Secretary Jonathan Reynolds said on a panel at Labour’s annual party conference last month, when asked about the industrial strategy. “I’m sick, to be honest, of people telling me how good the French offer is.”

Labour is crafting its industrial strategy against the backdrop of a UK economy where almost all of its growth over the last five years has been powered by two superstar sectors: technology and science-based industries. Areas such as hospitality and manufacturing have struggled to expand, and a third of sectors accounting for almost 20% of gross value added are still below their 2019 levels of output almost five years after Covid struck.

The business department said Sunday it will prioritize eight sectors in its industrial strategy: financial services, defense, life sciences, technology, clean energy, creative industries, advanced manufacturing and professional and business services. The government said it will publish a so-called green paper on the industrial strategy on Monday, kicking off a consultation that businesses are invited to contribute to.

“Our modern industrial strategy will hardwire stability for investors and give them the confidence to plan not just for the next year, but for the next 10 years and beyond,” Reynolds said in the statement. “This is the next step in our pro-worker, pro-business plan.”

However Labour has yet to reassure business that its plans for the economy are the right ones. Executives were left disappointed by the business day at the party’s annual conference last month, where there was limited access to ministers. Meanwhile Starmer and Reeves have faced criticism for an excessively gloomy outlook on the UK’s economic position that has coincided with a decline in consumer confidence. 

“Global investors need to find trust in the long-term economic vision of the UK to commit more capital,” said Kamal Bhatia, CEO of Principal Asset Management, which has about $650 billion of assets under management globally and is “underweight” in UK holdings.

The investment summit has taken on an added importance because of the country’s tricky fiscal position ahead of a make-or-break budget on Oct. 30. Reeves is under pressure to plug a £22 billion shortfall she says she inherited from the previous government, without curbing growth. She has said crowding in private investment is key to the successful delivery of Labour’s election promises.

But the make-up of that budget is another uncertainty factor hanging over the meeting, with Reeves expected to announce tax hikes in areas such as capital gains, pensions and property. She’s also committed to reforming the non-dom tax regime and closing the so-called carried interest loophole, decisions that have sparked warnings of capital flight by Britain’s ultra-wealthy.

Ministers intend to use the summit to re-inject positivity into the government’s messaging. The agenda includes keynote addresses by Starmer and Reeves, with the premier also due to hold a “fireside chat” with former Google CEO Eric Schmidt. 

Other sessions include: 

With assistance from Ellen Milligan and Alex Wickham.

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