As someone who works with local authorities to help entice inward investment and spur economic growth, and, with another hat, advise organisations and funds on how best to package their investment narratives for city mayors and council leaders, I am shocked by the differences in approach on this side of the pond compared to ‘back over there’.
Typically, when the U.S. makes a decision to do something, it tends to ‘Go Big’.
Last year, mired in rampant inflation and a stagnating economy, President Biden unveiled his Inflation Reduction Act (IRA).
This multi-faceted piece of legislation had all kinds of fringe and technical components embedded in it. As with all U.S. legislation hoping to make it through Congress, there are favours and sweeteners, ‘pork barrelling’ for swing states, and schemes and programs tagged on to ease its passage.
But at the heart of the Inflation Reduction Act lies the idea that jobs created in America is a goal worth pursuing.
As part of this initiative, Biden announced $369 Billion over the next ten years to tackle energy security and climate change programs. One of the stand-out elements of this plan is the $7500 rebate every American who purchases an electric vehicle will receive – so long as that vehicle was built in U.S. with largely U.S. components.
The political priority of this generous wheeze was as much to wean US car manufacturers off their reliance on Chinese-made batteries and electronic components and to reward those manufacturers who built their vehicles here in the land of the free, as it was to change the driving habits of car-loving Americans.
In what is a particularly polarized period of American politics, the IRA got support from both sides of the aisle, and after a predictable round of point scoring and name calling, sailed through.
Popular with U.S. politicians, labour unions, consumers and climate change activists – Biden and his advisors patted themselves on the back and got to work putting their rather expensive plan into action, meeting with lobbyists, investor relations teams and FDI professionals.
But economics is a global game, and when one nation wins, invariably another loses.
This, it appears, is the view from Britain.
The idea that car manufacturers who want to sell their vehicles in the world’s most profitable auto-market might now be better off building them there seems to have irked the UK Government.
A rapidly rotating roster of Prime Ministers and cabinet ministers have called ‘foul’.
With inward investment into the UK economy tumbling year-after-year since the 2016 Brexit decision, somewhat ironically, UK ministers are citing the trade rules negotiated between the EU and US amongst others, as evidence of Biden’s unfair policies. They will be worried that foreign manufacturers’ plans to invest in battery technology plants in UK aren’t undermined by America’s siren call of subsidies.
As well as electric vehicles, generous grants are also being given to tech start-ups who are developing wind turbines and solar panels – nearly all of which are currently made in China – so renewable energy options can be brought to scale affordably and with predictable U.S. supply chains.
It is hard for anyone, let alone signatories to global climate accords, to say the U.S. sinking hundreds of billions of dollars into clean energy is anything but a good thing. It is perhaps the single best act which will make a meaningful contribution to cool a planet already recording daily record highs.
But domestic politics matter too.
In a recent meeting between Biden and Macron, the U.S. President responded to the French President’s lobbying on behalf of automakers Peugeot/Citroen and Renault by indicated he would look at ways to ensure what he called ‘allies’ as well as formal trading partners like Mexico and Canada, were not adversely affected by the IRA.
Britain will be hoping it gets folded into that list of Allies.
But America has wider political and economic issues to consider. After decades of ‘off-shoring’ and then periods of ‘on-shoring’ jobs, the latest trend is ‘friendshoring’ whereby jobs and production facilities are placed in nations which hold perhaps ‘broader strategic relationship opportunities’ – think precious metal rich Africa and Latin America, Russian-bordering Eastern Europe, and current China energy suppliers in the Middle East.
And ‘pragmatic politics’ appear to be making a come-back after dalliances with fundamentalism.
While America and her politicians would still resolutely declare themselves ‘free-market capitalists’, they do not see any contradiction in holding that ideology while pumping state money into industries and sectors they see as of national significance.
They argue, convincingly, this is simply good government.
But this raises concerns and challenges for others.
Britain, and her cities, regions and nation states in their individual efforts, are doing a pretty appalling job at attracting inward investment. A recent decision by a major pharmaceutical company to build its new facility in Ireland rather than expand its UK presence, illustrates that peril.
Financiers and deal makers point to skilled-labour shortages, complex trade and regulatory challenges for exporters, and the decision to raise Corporation Tax from 19% to 25% as ‘ill-advised’.
Britain, once the ‘workshop of the world’, doesn’t have a discernible Industrial Strategy and the current PM has expressed his view: He doesn’t think we need one.
The promises of Brexit haven’t, as yet, materialised.
UK ministers may have signed trade deals with a ring of smaller economies, but the ‘economic elephants’ – those who invest hundreds of billions – are not currently favouring England’s green and pleasant lands.
But how can they compete? America has a $2 Trillion dollar Infrastructure Plan to rebuild everything from roads and railways to nationwide 5G fibre and replacing poisonous lead pipes in her historic cities. It has social programs to tackle racial imbalances baked in and the aforementioned $369 Billion for climate change.
If you were looking to invest your Euro’s, Saudi Riyals, or Indian Rupees the opportunities on this side of the pond, boosted by giveaways and favourable terms, look much more attractive.
In the battle to attract global money, fund new schemes, and grow the economy, America is winning. Foreign direct investment in the United States increased $506.1 billion to $4.98 trillion at the end of 2021, up from $4.47 trillion at the end of 2020.
Britain’s is a fraction of that, of course.
And while the City Regions, Metropolitan Boroughs and Inward Investment teams in Cardiff, Edinburgh and Belfast are toiling away, and my clients and others are looking for the right opportunities, without the ‘Big Idea’ and ‘Big Politics Support’ which a national strategy offers, it is difficult to see the gap across the pond closing any time soon.