Britain falls to second place for investment

BRITAIN will be the world's second favourite country for inward investment over the next five years, having just ceded first place to the Netherlands, the Economist Intelligence Unit (EIU) said today.

Britain's best features were the Government's favourable disposition to private enterprise and foreign investment, its large and developed capital markets and flexible labour markets.

"As in recent years the UK should remain a major destination for foreign direct investment," the EIU said, as it unveiled its rankings for 60 countries for the period between 1999 and 2003.

Britain's least attractive features were the congestion and unreliability of its road and rail infrastructure, as well as high rental costs, particularly in London, the EIU said.

Lower inflation, a less volatile exchange rate and stronger public finances would help to improve Britain's score over the next five years, it added. Britain ranked second among European countries for the same period, after winning the top position between 1994 and 1998.

The EIU said: "Our scores show that we expect the benefits of macroeconomic stabilisation to offset the costs of more regulated labour markets."

New frameworks for fiscal and monetary policy drawn up by the Chancellor, Gordon Brown, should help reduce the economy's propensity for instability. The impact on the labour market of legislation on the minimum wage and the working week would be mitigated, and reforms to trade union law passed in the 1980s should be unaffected by the legislation.

Earlier this month a report by the United Nations Conference on Trade and Development found Britain was the most popular destination for foreign direct investment in the European Union in 1997, and the third-biggest recipient in the world.

The report said that overseas direct investment in Britain rose to pounds 22.2bn, or 34 per cent of the EU's total inflow, while similar investment into France and Germany fell.