As preparations for the government’s International Investment Summit next month gather pace, speculation is growing about the direction of travel and official announcements that will underpin the UK’s industrial strategy and its vision for turning the ambition of economic growth into concrete policy.

According to official notices, the International Investment Summit 2024 – due to take place on 14 October – will bring together around 300 industry leaders in business and investment to introduce the new government to investors globally and demonstrate the government’s new collaborative approach, along with hearing how its mission for economic growth will make the UK a global investment destination. 

While details remain firmly under wraps, the government has already said that the Summit will underscore major investment and policy announcements, including the role of the National Wealth Fund, the Industrial Strategy and the economic growth mission.

Encourage additional investment

ICAEW Head of Corporate Finance David Petrie says he hopes details of government investment priorities will be forthcoming: “We’d like to see announcements about a carefully considered industrial strategy that will encourage additional investment and lead to economic growth. 

“Given that the government has made much of a significant shortfall in public finances, the case for allocation of taxpayers’ money to support British industry – as opposed to much-needed investment in public services – should be clear. It should certainly not flow in the direction of assets and businesses where there is already more than adequate funding available.

“The key considerations here are genuine additionality and the real prospect of bringing in private capital to support infrastructure and other public investment where it is genuinely needed, not simply where the best financial returns are on offer for global investment funds.”

In July, the government launched a £7.3bn National Wealth Fund in a move that it says will attract billions of pounds of private sector investment for big infrastructure projects across the UK. Its aim is to reduce the investment risk for private funding or institutional capital in the kinds of innovative assets that are going to be necessary to achieve net zero and generate international competitive advantage.

Unintended consequences

“It is right that government should focus on supporting those industries and sectors where Britain has world class capabilities,” Petrie says. “However, we must also ensure that the fiscal rules do not disincentivise the wider business community. That will be the key consideration if the government is to deliver on its promises.”

ICAEW’s submission to government, with the actions it believes are necessary to deliver the Labour Party’s commitment to boost economic growth, was published last week ahead of the 30 October Budget. It includes calls to remove barriers to improve the investment landscape and invest more in R&D. ICAEW is also calling on the government to Investigate barriers to infrastructure investment in pension fund risk profiles and to explore ways to build demand for UK listed equities. 

SMEs remain the engine room of the economy, and the government must be mindful of the unintended consequences of providing public support to certain tightly defined industries that could result in negative consequences for those businesses not fortunate enough to be beneficiaries of this sort of support, Petrie warns. 

“Fiscal policy should ensure that SMEs can continue to attract both debt and equity funding – for example, through better availability of R&D tax credits and maintaining incentives for equity investment in early-stage business such as the VCT, SEIS or EIS schemes.”

Strategy must benefit overall economic growth

“We need an industrial strategy that’s not simply focused on picking winners, but that benefits overall economic growth and allows people in this country to run their businesses in the way that they feel is going to continue to make them successful and profitable because that in itself will generate more tax income and provide greater employment,” he adds.

Two months after the new government took office, there is no indication that it intends to unwind the capital markets reforms, including the Mansion House Compact, that were introduced in the latter stages of the last government.

However, measures to encourage pension funds to invest in blue-chip British companies, as opposed to fixed interest financial instruments, are still needed, Petrie says. “We would like to see policy measures that would lead to increased equity investment by UK pension funds and funds generally in UK equities that will create a more dynamic capital market. If institutional demand is not there, then pricing is always going to struggle.”