British share of new investment in EU `declining'

Business leaders' fears that the tide of anti-European feeling in the Conservative Party will harm inward investment prospects are backed by a report published today which shows that the British share of new overseas investment in the EU is in decline.

The figures from the UN's Conference on Trade and Development (Unctad) add weight to fears that Adair Turner, director-general of the CBI, will express in a St David's Day speech in Cardiff today.

Mr Turner will say that even if the UK does not join the single currency, it is essential for the sake of business for the Government to strike a positive tone.

He will also criticise the Government's "triumphalism" about the difficulties some continental economies are currently facing. "Before we fall for the myth of Europe's economic disaster, we should remember that its income per head has grown faster than that of the US in the past five, 10 and 20 years, and that continental Europe's export performance remains strong. The European economy is not a disaster."

He adds: "Our national interest lies in full and constructive membership of the European Union, arguing from within for the changes needed to make it more successful. We cannot afford to let Euro-phobia rule."

The fear that British isolation from Europe could be damaging investment flows was backed by economists yesterday. Nigel Pain, an expert on the subject at the National Institute of Economic and Social Research, said: "The primary factor in inward investment has always been to locate in the EU. To the extent that there is any uncertainty about Britain's commitment, that will discourage potential investors."

Ruth Lea, head of policy at the traditionally Euro-sceptic Institute of Directors agreed. "Our membership of the EU is valuable on balance, and one reason is inward investment. There is no doubt that free access to the single market is a major factor," she said.

Mr Pain added that concerns about Britain staying outside the single currency, and having a volatile exchange rate against the euro, could potentially offset any advantages investors saw in the low level of costs in the UK.

The Unctad figures show that the UK share of new investment by Japanese companies has fallen from 44 per cent in the late 1980s to 39 per cent in the first half of the 1990s, although Britain still has by far the highest amount of existing Japanese investment.

While the UK holds the lead for investment from Hong Kong and Taiwan, Malaysian investment is concentrated in France, and China's in France and Germany. The smaller Asian economies invest far more in Japan and the US, but are increasing their investment in the EU rapidly.

The Government has argued deregulation and low taxation are among the key factors attracting inward investment to Britain. But the UN report, commissioned by the Thai government, shows the British share of total investment from overseas has shrunk from nearly $22bn (pounds 13.5bn) out of a $60bn total in the late 1980s to $17bn out of an $82bn cake in the early 1990s. That is, it has shrunk from more than one-third to just under one- fifth.

However, Ms Lea argued that it was no surprise to see countries such as France catching up in terms of attracting inward investment after a poor record in the early 1980s. Asian businesses would anyway want to invest in a range of countries. "They don't want to put all their eggs in one basket," she said.

The UK still has the highest level of existing, as opposed to new, Asian investment in the EU - about 40 per cent by value as opposed to 30 per cent for Germany.

The report says that a clear trend towards further liberalisation by the dynamic industrialising economies in Asia means their overseas investment will continue to grow. For EU countries, continuing to attract this new flow will be crucial. But it predicts that Eastern Europe will emerge as a significant competitor to the EU.

Comment, page 21

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
tv
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
art
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine