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Charles White Thomson is a senior fellow at the Adam Smith Institute and a former chief executive of an investment firm.
The 2024 UK International Investment Summit raised £63 billion of private investment and 38,000 UK jobs ahead of the budget.
Investments include: wind and solar farms, data centers and carbon capture infrastructure.
The investors are a wide range of multinational companies: Iberdrola, Blackstone and Amazon, to name a few. On the face of it, this is good news and much needed, especially as our ability to raise our national debt to finance investment is currently limited.
As with all big financial announcements, the devil is in the details and there are two parties: 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’s even more complicated when long-term contracts, incentives, and regulatory changes are involved.
The buyers are a very sophisticated list of companies. They have shareholders or boards of directors who demand value or “return on their investment” and will be supported by some of the brightest minds specializing in competitive positioning for the future.
The UK also competes with countries such as France, Germany and the Netherlands. This is not a charity event; companies want to make money.
They are right to focus, as even the most sophisticated investors make mistakes. The Abu Dhabi Investment Authority, a sovereign wealth fund, is reported to have recently written down its £263 million investment in Thames Water to £1.
This is what worries me. The negative narrative that has been spread around the UK economy, financial mismanagement, the alleged £22 billion black hole and a painful October budget could prove to be a double-edged sword.
We have told the world, and ourselves, that we are in a difficult position and that we need your money to help us grow. The recent consumer confidence survey is revealing.
There is a tone of need that buyers will not ignore and will negotiate hard 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” after leaving the European Union.
Leaving aside for current purposes the veracity of the claims, this is, of course, a textbook example of muscle flexing, positioning and negotiating technique.
British 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 room for chasing positive headlines in the short term.
Or, put another way, we should avoid deals that seem good today but will be bad five years from now, so that future governments or consumers will pick up the pieces or pay. That is why the details are so important and in many cases they are missing 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 funding and other government assistance?
What verifications and controls will the taxpayer, through the government, have on the project for such a contribution? And if the project is successful, how will the taxpayer enjoy their fair share of that success?
We will also rely on newspapers such as the Daily Mail to use their influence and resources to thoroughly examine and subsequently publish their findings.
These investments are the pillars of our future growth. Our Government needs to show great confidence in these negotiations, knowing that we are the sixth largest economy in the world and that buyers should pay a good and fair price for a part of the UK’s future.
I’d rather we come up empty-handed than sell out on 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 a former chief executive of an investment firm.
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