23 May 2022

If the Government wants companies to choose Britain, we need a culture change

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Business gets a hard rap. As Adrian Wooldridge pointed out last week, business news is too often relegated to the back of the paper ‘along with sport and horoscopes’, in favour of blow-by-blow accounts of the latest miniscule Westminster drama. In policy, business often seems like an afterthought. And as we have seen with the windfall taxes debate, when the business community does get attention from government, it is all too often not entirely welcome.

The private sector is the engine of economic growth, the key to boosting our living standards – not just through our wage packets but also in improving our quality of life. It employs millions of people, contributes to the Government’s coffers, and creates products and offers services that we all use, all of the time. All of the things that, during an economic crisis, we could do with a little more of. So when business speaks, the Government should listen.

And business has spoken. Our think tank, the Centre for Policy Studies, has recently conducted the biggest survey of its kind of CEOs, founders, and senior leaders from some of the biggest companies in the world – the people making the decisions on a daily basis about where to invest their and their shareholders’ capital in order to grow it. We asked them: Why choose Britain? And there’s a lot we can learn from the answers.

The overwhelming sense from the business leaders we spoke to was that the UK is a great place to invest – but there are more than a few things that are slowly starting to chip away at this status, especially when shaping up against our European and global competitors.

First, the good news. There was plenty of praise for the UK’s natural advantages (time zone, language, history of success) and things we take for granted, such as our brilliantly low levels of corruption. There was also praise for many actions that this government has taken, especially the establishment of the Office for Investment.

There was also some valuable criticism when it came to policy and its effect on investors’ decision making, especially with regard to tax and regulation.

On regulation, there was an overall frustration from our interviewees about the Government not moving quickly enough to set a more business-friendly direction post-Brexit. Instead too much has been left in the hands of the regulators themselves, who are generally not viewed as prioritising growth or competitiveness nearly enough.

On tax, our conversations made abundantly clear how important tax regimes are, not just to attracting businesses but also the people that work for and run those businesses. Our current corporate tax regime got a good reception, but the elephant in the room was the tax rises slated for April next year. As the CPS has pointed out previously, these will see us slide from 22nd to 30th in the OECD for corporate tax competitiveness.

This will seriously harm the UK. As investors weigh up the cost/benefit of investing more in the UK, the outcome of the equation begins to look a lot bleaker with these tax rises when compared to our counterparts across the water – and  there’s only so much we can rely on historical advantages to do the heavy lifting for us. Not only does it disincentivise investment in pure mathematical terms, by raising the cost of doing business, but raising corporate tax rates also has a strong signalling effect. A country that is putting up its taxes on business is not often a country that is proud about being open to or pro-business.

In fact, this cultural question was arguably the most important discovery from our research. While the UK still has a good story to tell to attract inward investment, it is not one that anyone is hearing. The creation of the Office for Investment is a good start, but the Government should go further to avoid losing ground on its European competitors.

One name that came up multiple times during our discussions was Emmanuel Macron. As this site’s Editor-in-Chief Robert Colvile pointed out yesterday in his Sunday Times column, it seems almost impossible for a CEO to visit France without ending up at the Elysée with the French president. But people also mention that Boris Johnson, in his role as Mayor of London, was equally good at this kind of thing – ‘probably the best politician in the world’, as one interviewee put it.

So what can we do to turn the ship around?

More invitations for businesses for tea at Downing St and Buckingham Palace is a good place to start. That should be facilitated by an expanded and formalised support structure for the business outreach team in Number 10. There should also be a heightened role for excellent regional champions like Andy Street and Ben Houchen to make the case for the wider UK.

What we really need, however, is an attitude change. If we want to be the best place to invest in, start and grow a business, we need to  celebrate entrepreneurship and wealth creation,. and ensure that is the message that investors are hearing.

Last year Dr Frank Luntz worked with the CPS to investigate British political and social attitudes. We asked people to rank their attitudes to a number of different occupations; entrepreneurs were ranked below almost all others in favourability. If we want to continue attracting the investment that makes us all better off, it’s time for that to change.

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Gerard B Lyons is a Business Researcher at the Centre for Policy Studies.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.