UK minister backs Chinese investment only ‘to our advantage’

UK inward investment updates

Lord Gerry Grimstone, Britain’s investment minister, insisted the UK is not becoming more protectionist, arguing that Chinese investment was welcome provided it is “to our advantage” and defending the private equity industry targeting British companies.

Britain will in January introduce sweeping new national security laws covering foreign takeovers, while ministers are looking to reduce the role of Chinese companies in the UK’s telecoms and nuclear energy sector.

But Grimstone told the FT that foreign investment drove productivity and created well paid jobs; new rules for screening foreign bids for domestic companies would set clear and “efficient” ground rules.

Grimstone is preparing for a post-Brexit, green-themed “global investment summit” in October, which would see “the biggest collection of investable money we’ve ever had under one roof in the UK at any one time”.

The minister boasts that Britain is the most attractive location in the world for inward investment, but said that a new National Security and Investment Act would ensure it was always in the national interest.

Grimstone, former chair of Barclays bank, said the new law would bring clarity to the ground rules for buying UK companies and was similar to the screening carried out in the US, France, Germany and Australia.

Chinese telecoms company Huawei has been banned from Britain’s 5G mobile phone networks and ministers are exploring ways to remove China’s state owned nuclear energy company from involvement in future UK projects.

But Grimstone said Britain still wanted investment from China. “Yes, it’s absolutely welcome if it’s investment to our advantage,” he said. “We’re not so foolish to want investment which is not to our advantage.”

Concerns that the UK has had too much of an open-door policy in terms of foreign acquisitions lay behind the National Security and Investment Act, which comes into force in January next year. 

The new act will cover 17 business sectors and will probe any investments of more than 25 per cent in a UK company that cause concern. Crucially, it could be used retrospectively to fine companies.

“If we want to get massive new investments into [the] UK it’s incumbent on us to make sure we have the systems to make sure the investment we are getting in is to our advantage,” Grimstone said. “It’s more efficient, not interventionist.”

He also gave a full-throated defence of foreign investment, saying that UK companies with overseas investors were “more productive, create more jobs and better paid jobs” than their purely domestic counterparts.

Asked about a so-called “fire sale” of undervalued British companies — some of them targeted by foreign private equity buyers — Grimstone conceded that Brexit uncertainty had helped to depress share prices.

But he said Britain’s break from the EU on January 1 — with a new trade deal — ended uncertainty and made people look at the UK afresh. “It gave people a hard set of circumstances against which to judge investments,” he said.

He also defended foreign private equity investors, who have targeted companies including the supermarket chain Wm Morrison. “The days have gone when private equity was all about asset stripping,” he said. “The best private equity firms look to build, not knock down.”

Grimstone said the London investment summit in October would be a chance to “roll out the green carpet” and showcase Britain’s appeal as a destination for investment in the green economy.

He said that around 200 of the biggest investors in the world would attend the event, which will take place before the UK hosts the UN COP26 climate change summit in Glasgow in November.

Foreign investment was also vital in boosting growth in regions such as the Midlands and the north; where opportunities in areas like electric vehicles and renewable energy were multiplying.

He said it was “the best time to invest” in Britain, partly because government policy was simultaneously focused on decarbonising the economy and trying to “level up” the economy.

“It’s this coincidence between where the investment opportunities are in the new economy and where the country’s priorities are for this investment,” he said.

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