Policy paper

Terms of reference for the review into the government’s approach to attracting foreign direct investment

Published 30 March 2023

This was published under the 2022 to 2024 Sunak Conservative government

Background

• The government is committed to ensuring it is the most attractive destination in Europe for internationally mobile investment.
• To do this, it is essential the government ensures the UK’s wider investment offer continues to be competitive across a range of areas, including on skills and labour, infrastructure and tax, among other things, and it is taking forward action across a number of these areas to ensure the UK remains at the forefront globally.
• Over and above this, the government’s investment offer is also an increasingly important tool to persuade internationally mobile investors to choose the UK, including investment promotion, advice and incentives.
• The Office for Investment (OFI) was established in November 2020 to support the landing of high value investment opportunities which align with key government priorities. Since its inception, the OFI has helped secure over £11.75 billion of inward investment into the UK, complementing the investment promotion work of the Department for Business and Trade (DBT).
• In the face of increasing overseas competition for internationally mobile investment, it is right for the government to ensure its investment promotion operation is properly equipped to maximise its ability to fight for and win the transformational investments needed to drive the CX’s ambition for the UK to become the world’s next Silicon Valley.
• This review will look at how the government, through the OFI, DBT and its other investment promotion levers, can best take advantage of the UK’s strengths in the face of increasing levels of government subsidy from overseas, learn from our competitors and position the UK as the leading place for inward investment in the world.

Scope

• The review will consider the following, focussing primarily, though not exclusively, on the key growth sectors identified by the Chancellor of the Exchequer (Green Industries, Advanced Manufacturing, Life Sciences, Digital Technology and Creative Industries):
  • The investment promotion tools and processes the UK’s international competitors use to attract investment, and how this compares to the UK approach
  • The mandate for DBT (including the OFI), as the UK’s investment promotion organisation, building on the success of the OFI, and any structural reforms required to increase investor awareness of services and maximise impact in attracting major investments
  • The funding landscape in relation to the role of grant incentives, how these are deployed and structured– including whether the OFI should have a greater role in this – and how these can be used most effectively to win globally mobile investment projects, while maximising value for money
  • The interactions of local support with national government levers
  • The government’s approach to setting and driving investment priorities
• Territorial extent: UK-wide
• The following areas will be explicitly out of scope of the review. However, relevant feedback gathered during the review on these areas will be logged and passed to lead departments to consider and respond to as part of their wider policymaking process:
  • Wider business environment policies, including tax, regulation, infrastructure, and skills
  • DBT’s existing investment service transformation programme

Governance and resourcing

• The review will be co-sponsored by the Chancellor of the Exchequer and the Secretary of State for Business and Trade.
• Lord Harrington of Watford will chair the review and will report into the Chancellor and SoS DBT.
• The Exchequer Secretary to the Treasury and the Minister for Investment will also receive regular reports on the review’s progress.
• The Chair will be supported by a Review Secretariat, made up of officials from the Treasury, OFI and DBT.
• A steering group of senior officials from relevant departments, including Treasury, DBT and No10, will oversee progress of the review.

Timing

• The review will commence in April 2023 and produce a report with findings and recommendations by September 2023.