A committee of MPs has voiced “alarm” at the government’s failure to develop a policy on post-Brexit international investment agreements, with the UK fewer than 100 days away from a possible no-deal departure from the European Union.
A critical report condemned the Department for International Trade’s “inability to set out even basic lines of policy” on the agreements, which will be vital to the UK economy after EU withdrawal.
And the cross-party House of Commons International Trade Committee questioned government claims that foreign direct investment (FDI) in the UK had remained strong following the 2016 referendum vote to leave the EU, warning there was a danger that ministers were painting an excessively positive picture by “cherry-picking” figures.
Their 70-page report cited experts who said the Department for International Trade relied on “very suspect” private sector estimates of jobs created by FDI.
And even the former investment minister Edward Garnier told the committee he initially thought it was “mad” to follow an international norm which measures FDI in terms of the number of projects attracting investment, regardless of their value.
Appearing before the committee in March, the then international trade secretary, Liam Fox, replaced by Liz Truss in Boris Johnson’s reshuffle last week, said the UK’s FDI performance had been “very strong because we have strong economic fundamentals”.
But the report pointed to figures from the Office for National Statistics suggesting that the number of jobs created and safeguarded by FDI has fallen in each year since 2015-16.
And the report quoted FDI experts who said there had been a “sudden and very notable decline” in foreign investment in new “greenfield” projects in the UK following the Brexit vote, with one putting the fall in the number of such projects at 25 per cent between 2015 and 2018, with a 50 per cent decline in associated manufacturing jobs. Meanwhile, greenfield investment in the Netherlands, France, Germany, Switzerland and Ireland had “boomed” as companies moved operations due to Brexit.
Much of the FDI activity which contributed to the UK’s apparently strong performance involved mergers and acquisitions of existing companies by foreign buyers – such as the Kraft takeover of Cadbury – found the report.
“The government regularly cites statistics on FDI from various sources,” said the committee. “In doing so, it needs to be careful not to risk giving the impression of cherry-picking figures so as to convey the most favourable impression possible.”
The cross-party committee said it was “disappointed” by the information provided to its inquiry on international investment agreements, with neither ministers nor officials “able to set out even basic lines of policy”.
Ministers’ claims that the UK is barred from developing a policy until after Brexit did not appear to have “any credible legal basis”, the committee found.
The report warned: “The government needs to have a policy in place for the eventuality of a Brexit scenario in which there is no transition period, which could occur on 31 October.
“We are alarmed that no such policy seems yet to have been formulated.”
Committee chair Angus MacNeil said: “Despite describing the value of investment to the UK as ‘phenomenal’, the minister for investment could tell us surprisingly little about the government’s approach to international investment agreements after Brexit.
“This is urgent, given that we could leave the EU without a deal in a matter of months, and if that happens the UK will take back responsibility for negotiating such agreements.”
A Department for International Trade spokesperson said: “The UK is an incredibly attractive destination for foreign direct investment, as shown by a range of analysis by independent experts.
“As the prime minister has said, we are ready for no deal. We are building on the 90 bilateral investment agreements we have already secured with countries across the world.”
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