Growth, growth, growth: How will Labour build a dynamic economy for the future?
It’s been a whirlwind three weeks for Keir Starmer since becoming Prime Minister. Here, Irwin Mitchell’s International Trade Consultant, Richard Baigent, runs through some of Labour’s recent announcements and explains why exporting more, attracting Foreign Direct Investment (FDI), and a focus on the devolved combined authorities is such an important part of the mix for economic growth.
Sir Keir Starmer’s tenure as Prime Minister has been marked by significant milestones already, from his inaugural Prime Minister’s Questions to his first official visits across the United Kingdom. One key area of focus for his government is economic growth, and it certainly looks like the devolved combined authorities are going to play a pivotal role in achieving this goal.
The Importance of Devolution
Perhaps one of the most significant and revealing events that Keir Starmer has been involved with since coming to power was when he hosted all of England’s Metro Mayors in Downing Street. To do this in his first week of power was clearly a strong signal of intent.
The government’s growth agenda certainly places devolution at its core, and his belief that “those with skin in the game… make much better decisions than people sitting in Westminster” is backed up by his promise to meet with them regularly.
The English Devolution Bill announced at the King’s Speech aims to decentralise decision-making further, recognising that a dynamic economy thrives when local communities have a say. When passed, this legislation will grant new powers to metro mayors and combined authorities, enabling them to implement growth plans tailored to their regions.
Irwin Mitchell’s recent FDI report reveals the most attractive locations for overseas investment and points to some possible trends in relation to devolution.
Although London came top, followed by Brighton in the south-east, it was interesting to see Manchester and Birmingham in the top 10. Leeds, along with other West Yorkshire locations, where their Metro Mayor, Tracy Brabin, who to be fair is relatively new, didn’t perform as strongly. Having seen her personally when engaging in business events, I’d be encouraged that West Yorkshire’s economy will also be positively impacted going forward.
It might be too simplistic to suggest that having a long-established metro mayor directly impacts FDI, but our report certainly points to a correlation. It’s certainly fair to say that having a high-profile figure head, such as Andy Burnham, provides not only greater focus on issues such as skills and infrastructure, but it also offers differentiation for Greater Manchester in a crowded field.
As these Combined Local Authorities locations look forward to new local powers, it will be interesting to see how the new government interacts with the metro mayors and what the impact on future investment will be.
Investment Zones
The eight CAs in the UK have established an Investment Zone initiative which seeks to attract both domestic and overseas investment by leveraging sector-specific strengths.
Greater Manchester Combined Authority, for example, focuses on sustainable advanced materials within the advanced manufacturing sector. Liverpool prioritises life sciences, whilst the East Midlands Combined County Authority leads on green industries.
All eight Investment Zones in England are expected to commence operation in financial year 2024-25. The previous government agreed final plans for six investment zones, and it will be interesting to see how the new Labour government takes this important initiative forward.
In my opinion, they do go hand in hand with devolution and I wouldn’t be surprised to see continued support not just to investment zones, but Freeports too, which are already a year or so ahead in their journey.
Freeports, or Green Freeports in Scotland, are special areas created by the government to boost investment into areas that have historically missed out previously, known as “levelling up” areas. Benefitting from a generous package of incentives and excellent port infrastructure, these zones focus on the proud industrial heritages of their regions, creating an attractive business environment which will be compelling to businesses globally.
Freeports intend to rebalance local economies and aim to help create new clusters in sectors of the future, spearheading the journey to Net Zero and generating long-term, high-quality jobs. Inside Freeports, favourable customs rules apply, allowing businesses to operate within a country’s land border while benefiting from lower taxes, tariffs, VAT, or duties.
My colleague Bryan Bletso, Head of International at Irwin Mitchell, recently wrote about why freeports are important for attracting investment. Read his views here.
Industrial strategy
The recent King’s Speech also clearly articulated the government’s agenda, stating that “Securing economic growth will be a fundamental mission,” adding that “Ministers will establish an Industrial Strategy Council with the objective to see rising living standards in all nations and regions in the United Kingdom.”
In addition to a drive to increase local power and attract more domestic and international investment, the new government says it is also prioritising green energy through its industrial strategy. Another one of my colleagues at Irwin Mitchell, Pete Maguire, has written about this in more detail here.
Labour says this initiative to deliver clean power by 2030 will not only save UK households billions of pounds over the next decade, but it will also position the UK as a net exporter of clean energy worldwide – and important ambition not only in terms of Net-Zero, but also the importance of future energy security.
The announcement by Chancellor Rachel Reeves about the £7.3 billion National Wealth Fund could also help. This initiative aims to support investment in in clean energy industries, enhance energy independence, and support economic growth across the UK. The British Business Bank and the UK Infrastructure Bank will combine to run the fund, which it’s hoped will attract £billions in private sector investment.
Again, if we look at the impact on FDI attractiveness, the UK has a fantastic opportunity to not only attract investment in clean energy, but to be a world leader in exporting related supply chain products.
PM Keir Starmer and the new Labour Government certainly seem to be talking a good game when it comes to growth. Simply put, the UK needs to attract more investment both from within the UK and from overseas, as simply to borrow more isn’t sustainable. The question is – will it work? We’ll only really know if the strategy is delivering when we look at quarterly GDP numbers and other indicators, such as FDI statistics in a year’s time.
Having said that, we can’t rely on the government to do all of the heavy lifting. Businesses need to take responsibility – after all, we all have an interest in making this work.
Personally, I’m optimistic about the potential of the UK economy and I look forward to playing my part in supporting and advising UK businesses to explore their options for growth and engaging foreign businesses looking to the UK as an investment destination.
How we can help
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Sir Keir Starmer has promised to hold regular meetings with England's mayors saying he believes that "those with skin in the game... make much better decisions than people sitting in Westminster".
The prime minister and his deputy, Angela Rayner, used their fifth day in government to meet the 12 regional mayors to discuss "a major programme of devolution".
Ms Rayner, who is also communities secretary, said "for too long" Westminster had "tightly gripped control" and "held back opportunities for towns, cities and villages across the UK".”
