FT SPECIAL REPORT Investing in Britain

Wednesday November 20 2013 www.ft.com/reports | @ftreports

Flurry of Inside » Business boom UK strength is in vehicles, activity puts food innovation and pharma Page 2 UK back on Infrastructure work slows Construction revival is still stuck at first base the map Page 2

Biotech under the microscope Results point to a performance second only to Life sciences get a shot in the arm China, though fears over potential EU exit may from government be tempering enthusiasm, says Brian Groom Inflows: the £1.5bn London Gateway container terminal is just one of the UK’s big internationally financed projects Bloomberg Page 3

ritain, helped by its lan- France’s EDF to build a £16bn nuclear DP World, has just opened in Essex. London and guage, location, a flexible power station at Hinkley Point in Work is also progressing on plans to workforce and its role as a southwest England – the country’s Competition ‘Fight on hands’ to stay ahead of Germany redevelop London’s Battersea Power the world gateway to the European first for a generation – with the Station, bought last year by a Malay- Cheerleaders for Union – has been a leader in involvement of two state-owned Chi- The UK’s quality of life, diversity, per cent) and corporate taxation (up sian consortium for £400m. Binward investment for 30 years. Since nese companies, China General culture and language are the leading from 53 per cent to 61 per cent). Ian Livingston, the former chief the City point to the financial crisis its performance Nuclear Power Group and China aspects of the country that attract The UK maintained its position as executive of BT Group who will take its advantages has faltered, though now there are National Nuclear Corp. investors, says EY, the advisory group. Europe’s number one destination, over as trade minister from Lord signs that things are picking up Other Chinese investments include Those factors were cited by 91 per winning 697 projects in 2012. Green in December, says: “One of the Page 3 smartly again. Industrial and Commercial Bank of cent of 200 investors worldwide in its But Steve Varley, EY’s UK and things I am going to do is talk the UK Inflows of investment to the UK in China putting £650m into a business annual attractiveness survey for 2013. Ireland managing partner, warned that up. If we keep telling people how the first half of this year, at $75bn, district at Manchester airport, prop- Not far behind were technology and the country had “a real fight on its rubbish we are, then others will take Ties that bind were greater than in any country erty group Dalian Wanda investing telecommunications infrastructure, and hands” to stay ahead of Germany. the same view.” except China, according to data from £700m in a luxury hotel development the stability and transparency of its For the first time, Germany overtook The UN said Britain bucked a global A new hope for the Organisation for Economic Co-op- in London and buying yachtmaker political, legal and regulatory the UK for new projects, as opposed to decline in investment last year with a Britain as the eration and Development, a club of Sunseeker for £300m, and Advanced environment. reinvestments. Investors rated Germany 22 per cent rise in inflows: its accumu- mostly developed nations. That is an Business Park planning a £1bn office The biggest increases in relative as the most attractive location over the lated stock of investment was worth former empire improvement on 2011, when it slipped complex in the capital’s former dock- terms were in investors’ assessments next three years. $1.3bn, behind only the US and Hong strikes back to sixth in the world. lands. of the attractiveness of the UK’s labour Kong. EY, the advisory group, said Some big projects have been landed, London Gateway, a £1.5bn container costs (jumping from 48 per cent to 63 Brian Groom Page 4 not least the long-awaited deal for terminal developed by Dubai’s Continued on Page 2 2 ★ FINANCIAL TIMES WEDNESDAY NOVEMBER 20 2013 Investing in Britain Construction revival still stuck at first base Nissan has led renaissance in With the government provider, foreign investors capital – outside your home the business lobby group, Infrastructure busy cost-cutting and the took a substantial invest- country – Britain ticks most have spurred the govern- economy in recession, more ment in 19 of 66 projects of the boxes.” ment to take action. In 2011, car production The money is out projects were axed or scaled that received financing in Nevertheless, the problem the government tried to there, but the back than created. the 21 months since Janu- remains that, despite push things along by identi- The £55bn Building ary 2012. This includes projects such as Hinkley fying 40 “nationally signifi- projects are not, Schools for the Future pro- some of the biggest deals of moving ahead, the spades cant” building projects. It Manufacturing of Japan and Siemens of reports Gill Plimmer gramme was cancelled the year for the UK market are unlikely to hit the also launched a £40bn “UK Germany, failed to achieve almost as soon as the gov- – an offshore wind farm ground for some time yet. Guarantee” aimed at help- their early promise, ernment came to power. near the Lincolnshire coast, Even if the Hinkley deal is ing important but stalled Sunderland was the although the sites have David Cameron donned a Road projects, including the cables for a new offshore approved by the European schemes to raise finance. industry’s saviour, gone on to other employ- hard hat and overalls at proposed upgrading of the wind farm in the Thames Commission next year, con- Critics say even this has ment-related uses. Hinkley Point in Somerset A21 near Tonbridge in Estuary, and new trains on struction will not start until failed to gain traction – it says Chris Tighe But, apart from a setback last month to announce the Kent, were also postponed. the intercity and Thames- 2015. Other projects remain has been used for the Drax in early 2009 when the glo- construction of the first Although the government link railway lines. stuck at first base. Cross- power plant (biomass con- bal recession forced Nissan nuclear power station in revealed a wishlist of more Hitachi, Dong, Vinci, Veo- rail, approved by the last version) and approved, From the moment in 1981 to shed 1,200 jobs, its Sun- Britain for a generation. than 570 projects in the lia, Siemens and Itochu all Labour government is going though not yet closed, for that Nissan announced it derland project has been an “This is a very big day for Autumn Statement of 2010, took a stake in projects, ahead, but HS2 is looking the Northern Line tube was seeking a UK location extraordinary story of sus- our country,” the British it soon emerged that there while the Japanese banks increasingly contentious. extension. But analysts for a European car plant, tained growth, underpinned prime minister said. “The were few concrete means of Done deal: wind farm also provided much of the Richard Abadie, infra- argue that many of the hit the Japanese carmaker’s by a relentless quest to first time we’ve built a new delivering them. backing. Bank of Tokyo structure partner at PwC, list of 40 priority projects move was seen to have squeeze costs as a way to nuclear power station for a George Osborne, the Mitsubishi lent big tickets says: “The real problem is that have been approved political and manufacturing remain competitive. very long time.” chancellor, had hoped that projects at short notice did on 10 of the 66 projects the dearth of new investa- are too small. This includes significance that potentially The site has become by The £16bn deal between private investors would not help to win investor closed. Sumitomo Mitsui ble projects. There is a lot Mersey Gateway, for exam- threatened the status quo. far the northeast’s biggest EDF Energy, the French stump up 64 per cent of the confidence. Nor did regula- Banking Corp lent on 12 of of money out there, which ple, a new bridge that has So much about UK manu- private sector employer, utility, and two Chinese £310bn cost of the hundreds tory reforms such as the the 66, according to Infra- people are ready to invest, received the goahead. facturing has changed since with 6,100 currently on its companies was hailed as a of new energy, road, rail overhaul of the electricity structure Journal. but there is also real frus- Nevertheless, Mr Murphy the signing of the agree- payroll. It also indirectly victory for the government, and water projects. market. The value of new This shows, says Darryl tration that there are so few remains optimistic that the ment to set up the com- supports around 12,000 sup- which had been wrangling But, although pension orders for infrastructure Murphy, partner in global new projects ready to get market is changing. pany’s plant in Sunderland plier jobs in the Sunderland over the extent of the sub- funds made an initial show dropped by 33 per cent infrastructure at KPMG, off the ground.” “Eighteen months ago, – including its growth to area, out of 26,000 UK sup- sidy for the past two years. of seeming willing – setting between 2009 and 2012. that Britain has “always Mr Murphy agrees. “The you would have been hard become the UK’s biggest car ply chain jobs. Most compo- Although private-sector up the £2bn pension fund But although investment been an attractive market frustration for the Chinese pressed to find institutional producer for the past 14 nents are sourced within investment in infrastruc- infrastructure platform – in infrastructure remained for foreign investors. The has been that, when they investors willing to take years – that awareness of Europe. ture has been a key plank they soon proved averse to low overall, foreign money UK remains, on the face of come to the UK, there construction risk,” he says. the initial misgivings has Growth has exceeded of the coalition’s strategy construction risk, favouring continued to pour into it, very attractive to inter- aren’t projects to invest in “Now they are realising faded. It is easy to forget even the most optimistic for reviving the economy already built projects with water, energy and rail national investors because immediately because many the risk can be managed just how radical this project early expectations, and ever since it came to power guaranteed income streams. projects. According to Infra- of our financial and regula- of the projects are in vary- and they will have to take looked three decades ago. today the site produces one in 2012, making progress The government’s own structure Journal, a data tory frameworks. If you ing states of development.” that risk if they want the Northeast England, Hum- in three cars made in the has proved difficult. willingness to cancel and specialist information want a safe home for your Complaints by the CBI, yields and returns.” berside and Wales – places UK. The complex, which with no history of carmak- has grown into a £3.5bn- ing – had been on Nissan’s plus investment, last year location shortlist, and had made a record 510,572 vehi- competed fiercely to be the cles, and output for 2013 recipients of an investment output looks set to top this. that offered new manufac- Sunderland is one of Nis- turing jobs at a time when san’s most productive UK’s strength traditional UK industry was plants and the UK’s biggest shrinking traumatically. car plant ever by annual But while these areas volume. By the start of were vying to win the 2014, when it begins operat- project, there was national ing both its production controversy over the per- lines around the clock, it is in vehicles, centage of component con- will directly employ 6,500 tent that the plant would people. It has never had a source from Europe. There strike. was also disquiet over Nis- Since 1986, Sunderland san’s refusal to allow multi- has produced more than 7m food innovation union representation, and vehicles, and 80 per cent of its determination to enforce production is exported to 97 a no-strike agreement. markets worldwide. Its cur- There was lengthy debate rent models are the Qashqai over the project’s size; the – which has been one of the and pharma original proposals for a company’s biggest suc- £275m plant to produce 200,000 Datsuns a year were pruned back to a £50m fac- tory employing 470 people The site has to assemble 24,000 Bluebirds become the Foreign investment Future success lies in a year on a single eight- hour shift. northeast’s biggest focusing on proven sectors, not competing The Conservative govern- ment of the early 1980s, led private sector for every opportunity, writes Brian Groom by prime minister Margaret employer by far Thatcher, believed that a UK-based Nissan plant o judge by Britain’s booming the number built in 2009. About 80 per could push back imports. cesses – the Note, the Juke motor industry, you would cent will be exported. Norman Tebbit, when and the LEAF, the first all- think the country’s indus- A big challenge is to rebuild the industry secretary, said: electric car to be mass-pro- trial sector was in rude supplier base. Only about 30 per cent “Surely it is better for the duced in the UK. health. Indeed, advanced of the parts in a typical UK-built car British to buy Japanese Yet not even an inward Tmanufacturing accounted for almost come from UK suppliers, whereas in cars made by British work- investment of this scale can one-third of the 170,000 jobs created or Germany it is twice that. ers than German cars be presumed to be safe from safeguarded by inward investment in Another is to address a scarcity of assembled by Turks?” external economic forces. 2012-13, according to official data. trained engineers, which creates prob- But after long negotia- Carlos Ghosn, Nissan’s But the overall picture is more com- lems across manufacturing. Appren- tions, on-site work began in chief executive, warned plicated. While manufacturing finally ticeships are increasing, but the speed 1984. The export in 1991 of recently that the company seems to be recovering from a tough of the automotive sector’s expansion the first Sunderland-made would be forced to recon- recession, output remains more than 8 means JLR and other carmakers have Nissan cars to Japan was a sider its strategy and future per cent below the economy’s 2008 had to raid their own suppliers to moment of particular pride. investments should the UK peak, and even further below the peak make up the shortfall. “There is a Japanese carmakers leave the EU. of manufacturing output in 2000. massive skills gap. From apprentices Honda and Toyota followed However, Garel Rhys, pro- Manufacturing accounts for about a to technician level, to graduate level, Nissan’s lead, and set up fessor at the Centre for fifth of the UK’s accumulated stock of to engineers...there are shortages UK plants at Swindon and Automotive Industry foreign direct investment, but Britain across all areas,” said Vince Cable, Creator: Range now in the forefront of developing locate projects here. In the past year in Derbyshire. Research at Cardiff Univer- is facing stiff competition from Rus- business secretary, in June. Rover Evoque SUV “functional food” – products that it had secured only 12 per cent of all Today, a blend of foreign sity, says the Sunderland sia, Germany, Serbia and Poland to JLR, bought by Tata Motors from moves along the provide health benefits. manufacturing investments in Europe investment and new ways site is by far Nissan’s domi- win new projects. Ford in 2008 for $2.3bn, accounts for line at Tata’s Kellogg’s and PepsiCo of the US and and just 7 per cent of new projects. of working have trans- nant European production The motor industry’s revival is about three-quarters of the £10bn Halewood plant Switzerland’s Nestlé are among those More positively, it had attracted 23 formed UK car manufactur- base, and hugely important remarkable for a sector that had seen automotive investment set in train Bloomberg that have R&D operations in the UK. per cent of Europe’s R&D projects. ing. In the past two years, to the company. a big slide over the previous decade. since 2010. Its production and work- China’s Bright Food last year spent Russia led the way in securing new more than £6bn of inward “They can’t do without it Investment by the global carmakers force have grown by more than half $1.7bn buying a 60 per cent stake in manufacturing in 2012, while Ger- investment has gone into unless they decide Europe that dominate the industry has topped over the past two years, driven by the cereal maker Weetabix. many – despite being a higher-cost UK car plants, powering an isn’t for them. That would £6bn in the past two years. exports to emerging markets. Research and development across economy – won the joint-second high- automotive manufacturing cut them off from one-third The sector has transformed itself But Tata Steel’s UK business, which industry is a British strength: projects est number, level with Serbia. Poland renaissance. of the world car market,” from low-skilled volume production to the Indian company bought for $12bn were up 84 per cent to a record 298 came fourth. Ten years ago, the UK Across all UK industry, he says. high-end niche manufacturing. A flex- from Corus in 2007, reflects the mixed last year, creating almost 10,000 new dominated alongside Russia. Japanese manufacturing’s The site has, Mr Rhys ible labour market and a competitive fortunes of manufacturing investors. high-value jobs, according to UK EY said that despite the creation of emphasis on “just in time” adds, notched up “one suc- corporation tax environment, coupled It is cutting 500 jobs in northeast Trade and Investment, the trade pro- 1,500 jobs by JLR last year, the UK sourcing, on kaizen – con- cess after another” and is with research and development tax England due to sluggish European motion body. ranked only seventh among recipients tinuous improvement – on now twice the size of any credits, have played a part. demand. This follows a $1.6bn write- Other large sectors include chemi- for manufacturing jobs across Europe flexible working and quality other individual Japanese Jaguar Land Rover, owned by down by Tata Steel against the per- cals, pharmaceuticals and aerospace. over the past 10 years. has been extremely influen- motor industry investment India’s Tata, Volkswagen-owned Bent- formance of its lossmaking European Investors in the latter sector include Mark Gregory, EY’s chief econo- tial. These concepts have in Europe. ley and BMW-owned Rolls-Royce, division announced in May. It expects Airbus, the European aircraft maker, mist, says: “The UK must now iden- raised awareness of the “You can’t simply shut have flourished under their foreign European steel demand this year to be Italy’s Finmeccanica, France’s Thales, tify the sectors in which it can need consistently to achieve overnight a plant which is owners, while Nissan, Toyota, Honda only two-thirds of pre-crisis levels the US’s Boeing and Canada’s Bom- develop a meaningful competitive world league standards, to making 500,000-plus cars, and BMW have continued to pour after falls in the past two years. bardier. The UK has a particular repu- advantage rather than compete for compete globally. and is pencilled in to do money into their UK plants. Britain’s largest sector for inward tation for the design and production every opportunity. This strategy can In Nissan’s early years in 650,000,” he says. “They Production rose 8 per cent last year, manufacturing investment is not cars of wings and aerostructures, aero then form the basis for a campaign to Sunderland it was one of have had the biggest pro- against an 8 per cent decline in Ger- but food and drink, a high-technology engines and aircraft systems. reposition the UK with investors. four high-profile northeast ductivity in Europe in many and a 12 per cent fall in France. industry with a strong record of inno- But EY, the advisory group, warned Even with the UK still riding high, England inward investment terms of output per man for At this level of growth, the UK will vation. The UK pioneered frozen food, that the UK continues to struggle to the real competitive battle may be projects. The others, by the last 15 years. They are produce 2m cars a year by 2017, twice ready meals and instant coffee, and is attract foreign manufacturers to just beginning.” Samsung of Korea, Fujitsu number one.” Flurry of inward investment puts UK back on the map

Continued from Page 1 conference in May: “This is Nissan, the Japanese worried about the post- and that measures such as concern is whether inward the UK’s inward investment for the west, and countries group that is pumping crisis dip in inward invest- restricting student visas are investment is adequately stock, according to OECD the UK had kept its position like Britain, a sink-or-swim £250m into expanding ment “because I wanted to sending a negative signal. spread around the country. data, followed by manufac- as Europe’s number one moment and I am deter- Britain’s biggest car factory know whether it was cycli- There are also concerns London attracted 45 per turing with 20 per cent. destination by number of mined that Britain is going in northeast England, cal or structural. I think the about skills. A study by the cent of projects in 2012, said Transport, property, mining projects, despite a challenge to be one of the success sto- warned recently that an signs that I picked up most OECD found that while EY, and Scotland, Wales and utilities were also high from Germany. ries of this century.” exit could create obstacles recently are that it was pre- older workers’ skills in Eng- and Northern Ireland also up the list. Factors that have helped Overall, business invest- to foreign investment in dominantly cyclical.” land compared well with saw strong increases. But Mr Cridland says: “I’m turn things around include ment within the UK has carmaking (see above). The country’s tax compet- those in other countries, the total number of projects reasonably optimistic that cuts in corporation tax, due been slower to pick up than Hitachi, the Japanese itiveness had significantly the literacy and numeracy in English regions outside the UK for all the positive to fall to 20 per cent by 2015 investment from abroad, technology group, also improved, Mr Cridland of young people entering the capital dropped to 24 reasons remains a great compared with 28 per cent though there are hopes it warned the UK against says, though on the debit the labour market were in per cent below the level in place to invest: political in 2010, and measures such will now start to recover. leaving, saying the future of side was the “endless navel the bottom three out of 24 2010. The biggest number of stability, language, time- as the “patent box”, offer- For inward investors, Mr its large-scale investments gazing” about whether to nations. projects last year came zone, legal codes, universi- ing a lower rate of tax on Cameron’s proposal to hold in the country’s nuclear build extra airport capacity Mr Cameron said the UK Employers say they from the US, followed by ties, science, capability of some intellectual property. an in-out referendum on and rail sectors would be in southeast England and would maintain its position Japan, France and Italy, the workforce, the best of Competition for invest- Britain’s EU membership thrown into doubt. the government’s immigra- as a prime destination face bureaucratic according to UK Trade and the education system – ment, however, has never by 2017 is creating uncer- John Cridland, director- tion policies. Employers for investment by keeping obstacles to hiring Investment, the trade pro- although that’s a mixed been more intense. David tainty and there are fears general of the CBI, the UK’s complain that they face taxes low, reforming motion body. picture. Cameron, prime minister, that the country could slide largest business lobby bureaucratic obstacles to welfare and investing in overseas workers Financial services “But I think there are no told a global investment towards leaving the EU. group, says he had been hiring overseas workers education. But another account for 24 per cent of grounds for complacency.” FINANCIAL TIMES WEDNESDAY NOVEMBER 20 2013 ★ 3 Investing in Britain Overseas funding goes further Drive to promote financial services

gapore are both gaining ground on Start-ups The digital sector leads the way in attracting foreign capital, writes Jonathan Moules The UK and the City the established leaders. For Chris Cummings, the chief executive of Despite turbulence and TheCityUK, a financial services indus- f you want to understand the where they can get the best deals,” he challenges from Asia, the try body, this is “absolutely a con- international nature of the UK’s says. “Many of those putting money cern”. digital sector, and why so many of into American VC funds do not even UK remains a strong centre, Martin Gilbert, the chief executive these start-ups have investments realise their money is going overseas, reports Daniel Ben-Ami of Aberdeen Asset Management, is in from overseas, there are few bet- but that is where the institutions see pole position to witness some of these Iter examples than TransferWise. the greatest opportunities.” trends first hand. His company is This innovative online foreign The UK government is alert to this, Whatever challenges Britain faces as based in Aberdeen and has an exten- exchange service was, from day one, a and last year appointed Chris Wade, an international financial centre, it is sive operation in Asia, including a global business, using the worldwide an experienced founder himself, to hard to accuse the government of regional headquarters in Singapore. reach of the internet to match buyers lead a venture capital unit with UK being bashful about promoting it. Mr Gilbert has also joined the govern- and sellers of currencies at rates far Trade & Investment, the inward The initiatives have come from the ment’s Financial Services, Trade and better than can be obtained at a high investment agency. top down. George Osborne, the chan- Investment Board, tasked with pro- street bureau de change or by calling “I regard what I am doing as a bit of cellor, recently announced plans for moting UK financial services. a broker. a start-up in UKTI,” Mr Wade says. Britain to become the first non- He specifically defines himself as Its founders Taavet Hinrikus and The UK is attractive to people in Muslim country to issue an Islamic bringing a “Scottish view” to the chal- Kristo Käärmann are also typical of Silicon Valley not just because they bond, or sukuk. He said his goal was lenges facing UK financial services. London’s cosmopolitan tech entrepre- can get access to good start-up pros- for the City of London “to be the unri- “There are vast numbers of people in neur community. Both were born in pects more easily, but also because valled centre for Islamic finance”. financial services employed outside Estonia but relocated to London to get the money they invest tends to go Meanwhile, Britain is easing regula- the M25 [London orbital motorway]”, involved in the UK capital’s fast-grow- further, Mr Wade notes. tory requirements to allow Chinese he says. “Especially in places like ing start-up community. “Most of these companies require institutions to set up wholesale bank- Glasgow and Edinburgh.” Mr Hinrikus was the first employee software engineers to grow, and the ing branches rather than having to Mark Gregory, chief economist for at Skype, Europe’s most successful bald facts are that we have them at a establish separate subsidiaries. In a the UK and Ireland at EY, accepts tech start-up to date, and claims that much lower cost than in Silicon parallel move, the government is that inward investment is flowing TransferWise is doing for foreign Valley,” he says. promoting London as an overseas cen- into existing locations but says it is exchange what his previous company “If you put money into a UK com- tre for trading in renminbi. not going to new ones. “Where there did to cut the cost of long-distance pany you can buy a lot more program- Nor is the drive to promote Britain phone calls. ming talent over a longer period than as a financial centre confined to the Earlier this year, TransferWise on the west coast of the US.” government. In a recent speech, the added to its international credentials The cosmopolitan character of UK- governor of the Bank of England, London is being promoted by securing an investment from Peter based companies is also a draw to Mark Carney, evoked an image of the Thiel, co-founder of PayPal and a key overseas investors, Mr Wade says. UK at the centre of a renewed globali- as an overseas centre player in Silicon Valley’s tech start-up Although, like other western sation. His emphasis was on the Bank for trading in renminbi community. nations, the UK has tightened its facilitating this role by ensuring that This was the first London-based immigration controls, Mr Wade notes financial institutions remain resilient. investment made by Mr Thiel through that special programmes have been Despite such pronouncements, the is a historic relationship – Yorkshire, his Valar Ventures fund. However, he created to help entrepreneurs get the UK faces several challenges if it wants Scotland are probably good examples was following a trend among US- talent they need. to remain a leading centre for global – there is some definite spillover based investors of putting money into “If you want to hire the best finance. On a macroeconomic level there,” he says. UK-based technology companies. product marketing guys from Silicon there is concern that it is perpetuat- Sue Langley, the chief executive of “Not a month goes by without a Valley or a chief scientist from India, ing a lopsided economy that is too the Financial Services Investment company around here raising money the visa system will allow it here,” he heavily dependent on finance. Organisation, is pursuing four priori- from overseas,” Mr Hinrikus says says. A related worry is that the benefici- ties for investment in financial serv- from his headquarters in Shoreditch, It is not just the Silicon Valley VC aries of investment in financial serv- ices: asset management, insurance, the epicentre of London’s tech community that is investing in the ices could be too concentrated in Lon- financial technology and mid- and start-up community. UK’s digital industries. don and the investment banking sec- back-office functions. “Capital is becoming much more Race to the top: London’s tech sector attracts international investment Bloomberg The fastest-growing investor group tor. The City, if defined most broadly As for international competition, international,” he adds. “Twenty is the large foreign companies, accord- as the whole financial services sector, the most formidable threat is seen as years ago, a venture capital firm ing to DFJ’s data. Mr Wade’s team is employs about 1m people, of whom coming from Asia. would not invest in a business more that are securing this funding. In chief executive, who describes the also aware of this and has been target- about two-thirds work outside Lon- “Places like Singapore and Dubai than two or three hours away from its October, Edinburgh-based flight com- movement as “venture tourism”. ing companies in Japan, Singapore don. Throw in professional services – are really very keen to woo people to office. Now, that money will travel parison service Skyscanner became In many ways the US is the reverse and South Korea to this end. such as accounting practices, law have their financial centres there as halfway around the world.” only the second British technology of the UK, according to Mr Cook. Over Taking investment from abroad is firms and property professionals – and well,” says Mr Gilbert. Of the £375m invested in UK digital company to secure an investment there, there is too much money for about enabling UK-based companies almost another 1m could be added. EY’s Mr Gregory adds that while businesses in the first half of this from Sequoia Capital, the Californian the number of deals available; in the to grow internationally, like the Cam- Finally, there is increasing competi- Asian centres have the potential to year, 15 per cent came from outside VC firm famous for providing Apple UK the number of technology start- bridge-based chip designer Arm tion from other financial centres, grow stronger, the recent turbulence the EU, and most of this was from the with its first funding back in 1978. ups has grown exponentially in recent Holdings, the UK’s largest technology especially those in Asia. in emerging economies has, at least in US, according to figures compiled for This reflects a significant increase years while the amount of private business, Mr Wade adds. “We want to While London is generally maintain- the short term, worked to London’s the UK government by the private in interest in UK-based digital compa- equity available has remained small. build more $20bn companies [like ing a slight lead over New York, advantage. “Asia probably is the new equity firm DFJ Esprit. nies from across the Atlantic in recent “The best venture funds are now Arm] and we don’t do that by having according to a recent report by City threat, but London seems to have It is not just London-based start-ups years, according to Simon Cook, DFJ’s coming to the UK because that is a market that is just in the UK.” think-tank Z/Yen, Hong Kong and Sin- advantages that are holding up.” Life sciences get shot in the arm as they work around problems

Biotech Initiatives to boost pharma are helping, but caution remains, says Andrew Jack

In an empty field on the southern outskirts of Cambridge, Pascal Soriot is overseeing investment in an ambitious new complex to reap the benefits of what he hopes is a vibrant future for the evolving British life sciences sector. Earlier this year, the new chief executive of Astra- Centre: the Francis Crick Institute for biomedical research in London, due to open in 2015 Zeneca dealt a blow to the UK’s pharmaceutical indus- try when he announced the notably in medical devices. ilies. He cites a report he can gather better informa- closure of the Anglo-Swed- While Mr Treherne commissioned from EY, the tion. Others are more cau- ish group’s historic attempts to present a gov- consultancy firm, arguing tious. Funding remains research centre in Alderley ernment policy of “UK that the UK has the strong- tight, from government Park near Manchester, as first” without any local est bioscience cluster in financing of promising ear- well as its London head- bias, many recent investors Europe, ranking below New ly-stage academic projects quarters, with the loss of have focused on the “golden England, San Francisco and to the modest appetite of hundreds of jobs. triangle” that takes in Cam- San Diego in the US. the equity markets for ini- Yet in its place, he has bridge, Oxford and London. He cites initiatives includ- tial public offerings from put his faith in a newer In central London, for ing the Biomedical Catalyst the more-established bio- approach to drug develop- instance, that includes and the Technology Strat- tech businesses. ment in a different location, Johnson & Johnson, which egy Board to help support Larger drug companies where he wants company has opened an innovation fledgling drug developers, express greater frustrations scientists to work more centre, one of a handful and the “patent box”, which at the UK’s approach to the closely with university and around the world. There are provides tax credits for approval and uptake of charity researchers, hospi- also the headquarters of companies registering their innovative medicines. tal doctors and independent grant-giving organisations intellectual property in the That includes the role of biotech companies. led by the Wellcome Trust country. “The Spanish are the National Institute for He is not alone in aggres- and Cancer Research. trying to emulate it and the Health and Care Excellence sively pruning his organisa- The Francis Crick Insti- Germans are complaining, (Nice), which advises the tion. In 2011, Pfizer shut its tute for biomedical research NHS on which new medi- sprawling but isolated post- is also set to open in 2015. cines are safe and cost-effec- war research centre at Mr Treherne says his tive. They also point to poor Sandwich in Kent. Glaxo- “competition” in attracting ‘People like to talk uptake in the NHS of even SmithKline has cut back inward life science invest- about the negatives those medicines that are some of its operations north ment is often other EU recommended by Nice. of London. And, in recent countries. “Most people but there are The latest drug pricing weeks, Shire has unveiled looking at the European agreement with industry plans to scale back research market consider the UK as more success caps growth in the medi- at its former Basingstoke a gateway.” He cites advan- stories, too’ cines bill to the NHS, but offices in Hampshire, while tages including flexible allows companies to set Novartis is shutting its Hor- labour laws, an extensive their prices freely and cre- sham unit in West Sussex. ecosystem of suppliers, tax so it must be attractive,” ates scope for the health “The whole pharma land- benefits, and the European Mr Bates says. service to pay for costlier scape around the world is Medicines Agency HQ. Chris Brinsmead, a life new medicines if the manu- going through tough times Mr Treherne points to a science business adviser to facturers provide discounts and we are not immune,” life science sector that still the government, points to on older products. says Mark Treherne, chief includes 4,500 companies efforts to ease red tape “There is a danger of executive of the govern- employing 165,000 staff, around clinical trials. “A lot disconnect between all the ment’s Life Science Invest- spends nearly £5bn on of people like to talk about positive messages coming ment Organisation. “There research and development, the negatives, but there are out in support of life sci- are fewer net jobs in big and has an annual turnover now more anecdotal success ences, and what’s really pharma, but you have to of more than £50bn. stories too,” he says. happening on the ground,” look at the whole food Steve Bates, head of the Prime minister David warns Chris Stirling, UK chain.” BioIndustry Association, a Cameron, has unveiled and global head of KPMG’s He points to a compensa- trade body, shares his opti- efforts to scale up genetic life sciences practice. tory growth in smaller bio- mism. He points to the UK’s testing in the NHS and inte- “The NHS is under signif- tech companies, clinical traditional strength in sci- grate the health service’s icant funding pressures. My research organisations and entific research, its lan- patient data more effec- worry is there is a danger of other niches in life sciences, guage and facilities for fam- tively so that researchers pushing too hard,” he says. 4 ★ FINANCIAL TIMES WEDNESDAY NOVEMBER 20 2013 Investing in Britain EU referendum plan unsettles Britain’s friends

for the principle – but it has no say at all in setting its rules: it just has to implement directives,” he said. “The Swiss have to negotiate access to the single market sector by sector, accepting rules over Column which they have no say – GEORGE PARKER or else not getting full access to the single Nick Clegg, Britain’s market, including in key deputy prime minister, said sectors such as financial this month that the UK services.” would be committing That point is especially “economic suicide” if it left relevant for the the European Union, international banks in the scaring away inward City of London, which investment and cutting it enjoy the full benefits of off from the world’s the EU single market and biggest trading bloc. can turn to Mr Osborne to Yet if David Cameron’s defend their interests in Conservatives win the 2015 the councils of Brussels. general election, the Britain’s decision to stay country will be offered an outside the eurozone has in-out referendum in 2017 led to fears that the City on EU membership – and will be punished by other recent opinion polls EU members in the single suggest the country is currency, as they move evenly split. towards a banking union Mr Cameron’s promised and closer co-ordination in referendum thus creates a the wake of the financial cloud of uncertainty over crash. Britain’s attractiveness as But Mr Osborne has a venue for inward succeeded to some extent investment, but so far in ensuring the City’s there is little evidence to voice is heard in Brussels, suggest potential investors either through negotiations are putting their plans on – other EU finance hold. Inward foreign direct ministers say they investment was £63bn in understand London’s the year to June 2013, up importance as a European from £42bn in the year to financial centre – or by June 2012. resorting to the courts. Meanwhile, UK Trade If Britain voted to leave and Investment reported in the EU, there would be July that the UK saw 1,559 commercial uncertainty to projects secured – 11 per say the least. cent more than the And Mr Cameron has previous year – creating been warned by people in 170,000 jobs, some 51 per Washington that the US cent higher than in 2012. wants the UK to stay a full Although the figures member, acting as a reflect a number of factors, including a faltering return of business confidence, The referendum The former empire strikes back anecdotal evidence suggests that, so far, the casts uncertainty UK’s uncertain European future is not causing over Britain’s extensive economic damage. attractiveness for FDI From Weetabix to Blackburn Rovers, overseas investors are piling in to UK brands, says Brian Groom For example, the vast inward investment investment by India’s Tata Motors in Jaguar Land s it a great opportunity for mutual Group and China National Nuclear Work in progress: framework and political stability. It 2006, the Corus steel business in 2007 Rover, the upmarket car champion of liberal, free- benefit or a case of the empire Corp, are taking a 30-35 per cent stake Battersea Power wants to create multinational compa- and Jaguar Land Rover in 2008. brand, with the creation of market values in Europe. striking back? While Indians are in French utility EDF’s project to Station in London nies as it shifts from basic manufac- Those purchases have proved a more than 9,000 jobs at its Philip Gordon, a senior investing in British steel, cars, tea build a £16bn nuclear power station at is set to be reborn turing to higher-margin sectors. Some mixed bag for Tata. JLR has boomed, three plants assumes easy US state department and oil refining, the Chinese are Hinkley Point in Somerset, southwest as a residential of the deals give it access to valuable driven by sales in emerging markets, UK access to European official, made the Ipiling into sensitive areas from tele- England. and commercial technology. but Tata Steel has been hit by weak markets for years to come. Washington view plain in coms to nuclear power, seen by some China Investment Corp, a sovereign complex While some people worry that European demand. It recently George Osborne, Britain’s January when he said: “We as turning the tables on a foreign wealth fund, owns 9 per cent of Bloomberg Britain will be constrained from announced 500 job cuts in northeast chancellor, has been in want to see a strong power blamed for stirring the 19th- Thames Water and has discussed speaking out on human rights issues, England. China recently discussing British voice in the EU: century Opium Wars. investing in the Thames super-sewer, there is less official concern about the Britain is the favourite destination with its financiers that is in America’s The UK’s top sources of inward a giant £4bn project under London. security implications of Chinese for Indian companies with about London’s position as a interests.” investment projects in 2012-13 were CIC, which has more than $400bn of investment than in the US. The UK $30bn invested, or about a quarter of global hub for renminbi International investors the US followed by Japan, France and assets, also owns about a third of government is relying on regulators India’s outbound FDI stock. trading: the UK’s financial appear to be watching how Italy, according to official data. But Canary Wharf, the Docklands estate. to handle any security, safety and Essar, an Indian conglomerate, services sector is fully the debate evolves and the India was the fifth largest source of Last November it took a 10 per cent financial stability issues that arise. bought the Stanlow oil refinery in integrated into the outlook is still unclear. If projects and the third most important stake in Heathrow airport for £450m. But US bankers attacked a new Cheshire this year. Meanwhile, Black- European system. Mr Cameron does not win for creating new jobs. Other potential areas for Chinese light-touch regulatory regime pro- burn Rovers football club is owned by Conservative MPs and the 2015 election, a While the number of individual involvement include wind farms and posed for Chinese banks in the City of VH Group, an Indian poultry those from the anti- referendum may not projects from China – which was sev- the High Speed 2 rail project. The London, under which they would be company. Brussels UK Independence happen: the Labour enth – declined, the level of associated whole of MG Rover, Manganese able to operate via branches rather From the Gulf, Dubai’s DP World party argue that such fears opposition is not new and safeguarded jobs increased, Bronze, which makes London’s black than as full-blown subsidiaries. has just opened London Gateway, an are unfounded and that if committed to a plebiscite. indicating that Chinese companies are cabs, and 60 per cent of Weetabix cere- Perhaps the most contentious ambitious £1.5bn container terminal Britain pulled out of the But most politicians placing larger projects in the UK. als are also in Chinese hands. Chinese investment in Britain is by in Essex. EU, it could and would across all parties agree Britain is also continuing to attract Meanwhile, Chinese investors are Huawei as part of a big BT upgrade of A Malaysian consortium last year negotiate trade deals with that it is more a question steadily increasing numbers of also backing a £650m business district its telecoms infrastructure. The regu- bought London’s Battersea Power the rest of Europe. of when – not if – Britain projects from emerging high-growth at Manchester airport. Advanced latory system put in place to oversee Station for £400m and plans to The model sometimes finally holds a referendum economies such as Turkey, South Business Park, a Chinese property Huawei’s operations has been criti- develop it with the help of architects cited is that of Norway or to settle its vexed Africa, Malaysia, Mexico, Brazil, the developer, plans to turn London’s cised by a parliamentary committee, Frank Gehry and Lord Foster. The Switzerland, both of which relationship with the rest Gulf and Russia. Royal Albert Docks into a £1bn but the Chinese company’s equipment developers believe the residential and have trade deals with the of Europe. But it is communist China that is “Asian business port”, an office com- is now integral to Britain’s digital net- retail project will be worth £8bn by EU, although they do not After all, the last creating the most excitement and, plex, while Dalian Wanda is to build a works. the time it is completed. belong to the 28-member referendum was held in some believe, carries the greatest dan- five-star hotel in a £700m development ‘We thought The biggest Indian investor is the Malaysia spent £1.4bn, almost all of club. But Mr Cameron, in 1975 and Margaret gers. David Cameron, the prime min- by the Thames. Tata group, whose 50,000-strong UK it in London, last year – more than his landmark speech on Thatcher – heroine of ister, is expected to visit Beijing Wanda has also bought Dorset it would be a workforce means it is vying with any other Asian state – snapping up Europe in January, today’s generation of shortly, following recent trips by yachtmaker Sunseeker for £300m. “We British Aerospace to be the country’s City offices as well as the Battersea specifically rejected that eurosceptics – was a George Osborne, chancellor of the wanted to buy 30 Sunseeker yachts better deal if largest manufacturer. It first opened site. Now its government pension model, arguing that the supporter of the successful exchequer and London mayor Boris because we are planning to build we just an outpost in London in 1907 to buy fund plans to buy even more UK prop- Norwegians and Swiss paid campaign to stay in. Much Johnson. Relations have thawed since three marinas here in China,” said supplies for its Indian operations, and erty assets. a heavy price in terms of has changed since then, Mr Cameron angered Beijing by meet- Wang Jianlin, chairman. “So then we bought the Tata Consultancy Services, which “We like London; we know it well access fees to the single but many business and ing the Dalai Lama, Tibet’s spiritual thought it would be a better deal if we company’ pioneered the outsourcing of comput- and understand it and you can get a market and a loss of financial leaders believe – leader, early last year. just bought the company.” ing to India, opened in 1975. very good yield on London offices,” influence. or hope – the country will Two state-owned Chinese compa- To Beijing, the UK is attractive as Wang Jianlin Tata bought Tetley tea in 2000, said Najib Razak, Malaysia’s prime “Norway is part of the make the same choice next nies, China General Nuclear Power an open economy with a strong legal Brunner Mond chemical company in minister. single market – and pays time round.

A tale of two parts: London and the rest of the country Contributors »

As with so many economic ular regions fell back, ment agencies, state-run and Hull put in separate are losing out to Germany.” their potential and pursu- Daniel Ben-Ami Regions issues in the UK, inward with projects in London entities with annual budg- bids to host the Green Michael Boyd, managing ing specific companies in Freelance journalist and writer investment has become a slipping by 4 per cent, ets of hundreds of millions Investment Bank, a govern- director of investment at sectors such as automotive Andrew Bounds England needs to tale of two regions: London though to a still healthy of pounds that were in ment institution, they lost UK Trade & Investment, and renewable energy that Northern correspondent and improve its and the rest of the country. 311, and those in southeast charge of inward invest- to Edinburgh. But when admits the regions need the UK wishes to develop. enterprise editor The capital sucked up half England slumping by more ment. Scotland, London, they collaborated on a bid more help but denies there Politicians have also Brian Groom performance to keep of inward investment than a third to 55. Wales and Northern Ireland to host the start of the 2014 is a London bias. He points backed individual projects. UK business and employment UK on top, reports projects in 2012 and contin- Scotland, Wales and the were allowed to keep theirs, Tour de France, they won. out that projects in the cap- George Osborne, the chan- editor ues to increase its share. north of England had rises including offices around the “It is a real wake-up ital tend to be smaller and cellor, lobbied the Chinese Jonathan Moules Andrew Bounds There is also a two-speed of 49 per cent, 244 per cent world. call because, unless the create fewer jobs. heavily to invest in Airport Enterprise correspondent economy outside London: and 71 per cent respec- The local enterprise part- English regions have a “Leps took time to get up City, an £800m office park George Parker as many English regions tively. Scotland recorded 76 nerships (Leps) that more credible approach to and running,” he says, but being built near Manchester Political editor see their foreign investment projects, its highest total replaced them have tiny international investment, they are receiving more airport. He is also backing Gill Plimmer decline, Wales, Scotland for 16 years. Wales recorded budgets and, while business the UK as a whole will lose money from government the £10bn Liverpool and Reporter and Northern Ireland are 31 projects, its highest led, cover smaller areas its top spot for inward and UKTI is working more Wirral Waters development Andrew Jack capturing more. number for five years, and such as a single city and its investment in Europe,” closely with them. It is schemes on the Mersey, Pharmaceuticals EY, the professional serv- Northern Ireland recorded hinterland. “You have to Mr Buckley points out. “We more than doubling the though no major Chinese correspondent ices firm, compiles an 29 projects, its highest for market a region and sell the number of staff that co- investor has yet come for- annual assessment of 14 years. The English story. Scotland is not just ordinate with them to 21. ward. Hugo Greenhalgh, Liz attractiveness. Its report on regions as a whole outside talking about Edinburgh “We recognise that we are Sir Howard Bernstein, Bolshaw, David Scholefield, 2012 found that, discounting London secured their small- but different places for dif- Unless the English working in partnership chief executive of Manches- Richard Gibson, Kate Bevan follow-on projects by com- est total of new investment ferent needs,” Mr Buckley with Leps,” he says. “It is ter City council, says the Editors panies already in the UK, projects on record, only 122. says. regions have a their responsibility to get lack of funding meant cities the regions have seen year- David Buckley, senior Yorkshire won only 21 their offer up to date.” had to compete on their Andy Mears Picture editor on-year falls since 2010. partner at EY in Leeds, projects in 2012, with a pop- more credible However, UKTI cannot merits. “We can demon- Steven Bird Designer Despite a 2.6 per cent says there is a simple expla- ulation and economy of approach, the UK hit its national targets with- strate that the fundamen- total rise in 2012, the nation. In 2010, the incom- similar size to Scotland, out the regions performing tals are here and investing To advertise, please contact: number of investment ing coalition government which took home 76. will lose its top spot better. It is helping them to in Manchester is a good [email protected] projects in 2011’s most pop- scrapped regional develop- When Leeds, Sheffield create online showcases of proposition,” he says. +44 (0)207 873 4597