Inward investment in UK at record high

Britain attracted a record number of inward investment projects last year although the number of jobs created fell as the surge was fuelled by takeovers rather than new projects.

Figures released today by the Department for Trade and Industry show there were 1,220 foreign investments in the UK over the 12 months to March, bringing employment to every region of the UK.

The number of new jobs dropped 14 per cent to 34,077 but a large increase in the number of jobs safeguarded by an investment pushed the total employment gain to almost 90,000.

Alistair Darling, the Secretary of State for Trade and Industry, said: "These figures are proof that the UK is a great place for business and the best base from which to compete internationally."

There were 508 "green field" investments, virtually unchanged from the total in the previous year and almost identical to 2000-01.

The number of expansions of existing investments rose slightly to 337 but the major growth was in M&A activity, which accounted for 375 or 31 per cent of the total.

Brian Shaw, the head of inward investment at the DTI, said the fall in numbers of new jobs reflected the "nature of the projects we are targeting" that tended to be of high value but low job intensity.

"There was a significant M&A component in last year's performance and often there are no additional jobs," he said. "However, there are many potential benefits in terms of inputs, technology and a more sustainable globally competitive operation."

The UK has been the target of a wave of takeovers of companies including BAA, O2 and Allied Domecq. Unions often claim takeovers lead to job losses.

The DTI highlighted the increasing number of projects going to high value-added sectors. It said RD investments rose 62 per cent to 164. Pharmaceuticals were up 19 per cent to 98 projects.

It also said it was becoming increasing successful in attracting investments from India. The number of projects more than doubled 76. China made 26.

Mr Darling defended the DTI's recent decision to shift resources away from supporting overseas exporters towards attracting new inward investment projects.

He also launched another attack on the growing trend of protectionism in the US and Europe. "I'm worried about the climate of protectionism, not just in the US but right across the world," he said. "There are people in the US and Europe calling for more barriers rather than less.

"I'm extremely concerned now that the World Trade Organisation talks have reached a crucial stage, that there's a big prize if we succeed but the price of failure is very substantial."

Asked about a possible takeover of Centrica by Gazprom, the Russian state-owned entity, Mr Darling said he could not comment as he would be involved if it went ahead. But he said: "We need to confident that people play by the rules and we need to make sure people act correctly."