UK pledges regulatory overhaul to try to win over investors
2024.10.14 13:50
By Alistair Smout
LONDON (Reuters) -British Prime Minister Keir Starmer promised on Monday to scrap regulation that holds back economic growth as he secured commitments for more than 60 billion pounds ($78 billion) of investment from some of the world’s biggest businesses.
Starmer’s Labour Party came to power in July, pledging to recover the faith of private investors to reinvigorate the UK’s run-down infrastructure and public services.
But many investors – who have long complained that it takes too long to build the kind of infrastructure needed to bolster growth – remain unclear about key tax questions ahead of the government’s first budget.
The new government, which has had a rocky start, told investors at a gathering in London of its plans to streamline planning to accelerate building, overhaul regulation to promote innovation and deliver cheap, clean energy.
The Treasury said 63 billion pounds of investments had been made at the event, creating 38,000 jobs in areas such as infrastructure and technology.
In an attempt to outshine rival governments, the day was due to be capped off with an evening event at St Paul’s Cathedral with King Charles and a performance by singer Elton John.
“We are determined to lead the way on growth,” Starmer told the summit at London’s Guildhall. “Determined to get Britain building.”
Britain was among the top destinations for international investment until the 2016 vote to leave the European Union, which triggered uncertainty over future trading rules and years of political instability.
According to Reuters calculations, the value of foreign direct investment inflows as a percentage of Britain’s economy hit a nine-year low of 2.7% in the second quarter of 2024.
The government, bound by fiscal rules that limit its capacity to borrow, needs to attract tens of billions of pounds of investment.
At Monday’s event, it defended early moves to improve workers’ rights and laid out its plans for an industrial strategy that would encompass skills, R&D, energy supply, planning and funding.
Many companies had previously criticised Britain’s lack of an overarching approach.
Britain also announced plans to ease bank ring-fencing rules, remove redundant reporting requirements for firms and detailed a new National Wealth Fund.
REGULATORY REVIEW
Regulators, including the Competition and Markets Authority (CMA), would be reviewed, it said.
“We will make sure that every regulator in this country -especially our economic and competition regulators – takes growth as seriously as this room does,” Starmer said.
Reeves, speaking in the context of the near collapse of Thames Water, said regulators needed to be more aware of the importance of investment.
Business minister Jonathan Reynolds said there would be no “bonfire” of regulations but Britain’s problems in attracting the capital and building infrastructure had to be addressed.
But regulation is not investors’ only worry.
Markets are retreating from bullish bets on Britain as concerns grow about possible tax hikes and extra borrowing in an Oct. 30 budget to fill what the government says is a 22 billion-pound black hole in the public finances.
Reeves did not rule out an increase in social security contributions for employers.
Starmer said the budget would have the “tough love of prudence” but later called reports that capital gains tax rates might rise to 39% “wide of the mark”.
“There’s been a lot of doom and gloom,” Michael Mainelli Lord Mayor of the City of London, Britain’s finance hub, told Reuters. Now, the government had “the potential to really get shoulders to the wheel and do things,” he said.
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