Theresa May is set to back a new system to vet foreign investment in Britain, as she wants the government to be able to intervene in an “orderly and structured” way regarding sensitive foreign investment. However, chancellor Philip Hammond has warned that Britain cannot afford to adopt “French-style” protectionism. He led a chorus of warnings at a ministerial meeting last month that Mrs May’s plans must not undermine Britain’s position as Europe’s top destination for direct foreign investment.
Mrs May has instructed the business secretary to consider alternatives to the original proposals, which appeared to impose the idea of a wide-ranging public interest test for foreign investment; such proposals were not welcomed positively by ministers. The prime minister believes that Britain should have a more transparent regime covering specified foreign investment, essentially enabling ministers to intervene. This represents the conflicted principles that Mrs May is dealing with in her early days as prime minister, including the rejection of globalisation (encapsulated by the Brexit vote) versus the notion that Britain must be an open and free-trading nation after it leaves the EU.
It appears that the caution voiced by Mr Hammond has been heeded by the prime minister, who is now focusing on improving the existing foreign investment framework as opposed to significantly extending the scope of state intervention. A consultation is expected next year. A spokeswoman for Mrs May told the Financial Times, “At the moment our regime is sometimes unclear, leaving investors without certainty and the government with few options to scrutinise in order to get the best deal for the UK. Improving the regime would be good for business as well as being good governance.”