Budget fears are denting the £60 billion boost in UK investment
Rachel Reeves praised £63 billion of investment announced at a global business summit yesterday as she declared Britain was ‘open for business’.
Notable deals included four US companies pouring £6.3 billion into UK data centers – which are crucial to the rollout of artificial intelligence (AI) – and a £1.1 billion expansion of Stansted airport.
But the summit was in danger of being overshadowed by fears of tax hikes in the budget later this month and a further rise in government borrowing costs due to concerns in bond markets.
Investment drive: Chancellor Rachel Reeves (pictured) has announced that Britain is ‘open for business’
However, striking an optimistic tone, the Chancellor said: ‘Following the investment secured at this summit, my optimism for Britain burns brighter than ever. It is a sign of confidence in the British economy.’
Ministers claimed that 38,000 jobs would be created across Britain as a result of the investments, although some initiatives have already been announced.
The Conservative Party said Labor was taking credit for work done during its time in government.
And business leaders expressed concern on October 30 about the prospect of tax increases in the budget.
Reeves gave her clearest signal yet that employer national insurance contributions were likely to rise. Businesses are also very concerned about an increase in capital gains tax (CGT), which could deter investment.
One city manager said they expected CGT to rise from current levels, but the government could likely avoid a “catastrophic” increase.
Meanwhile, outside the splendor of London’s Guildhall – where the summit took place – bond markets remained jittery about the outlook for government debt, amid speculation that Reeves will tweak fiscal rules to allow her to inject billions more in public money into stop investments.
The yield on ten-year government bonds – the return that bond investors expect for the risk of loans to the government – rose above 4.25 percent for the first time since the elections.
Bosses at yesterday’s summit included Goldman Sachs chief David Solomon and Larry Fink, head of the world’s largest
asset manager, Blackrock. Fink gave a very positive assessment of the UK’s prospects, stating that this ‘opened our eyes that this could be the next real destination for capital’.
Chief executives from British-listed BAE Systems, Aviva, Barclays, Severn Trent and British Airways owner International Airlines Group were also among about 300 business leaders the government said were present.
They sat in the Great Hall as Prime Minister Sir Keir Starmer declared: “This is a great moment to support Britain.”
Some may have been less convinced by his claim last week that a workers’ rights package that gives workers rights on day one is “pro-growth.”
And underlining the positivity was the implication that the Budget will include painful measures for some, with the Prime Minister declaring that Britain’s strained public finances needed “tough love and caution” and that the Government needed to act “fast” to restore public services and the get the economy in order.
Barclays CEO CS Venkatakrishnan warned against hitting banks with higher taxes. He told Bloomberg TV: ‘Banks are among the highest taxed entities in Britain, we are an important part of the economy.’
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