The City of London Corporation has called for the UK government to develop a financial and professional services strategy to unlock up to £7.7bn (€9.2bn) in additional capital from foreign sovereign investors by 2030 in order to help drive UK economic growth.
The corporation has conducted research into the sovereign wealth fund market ahead of the government’s International Investment Summit 2024 and found that over the past decade, sovereign wealth and public pension funds that have opened a UK office have more than doubled their UK investments compared to the five years preceding their presence in the country.
This, according to the corporation, has led to an additional £13.4bn investment across the UK in key growth areas such as infrastructure, innovative tech sectors and renewable energy with 92 investments by these firms spread across 36 different cities and towns outside London.
Critical
The corporation therefore said that foreign direct investment (FDI) is “critical” to the government’s objectives to drive economic growth, provide high-skilled jobs nationwide and increase funding for public services.
However, it pointed out that although the financial and professional services sector generates “significant” FDI for the UK, traditional estimates understate the economic contribution of these investment flows. It noted that over the past decade, £119.5bn was collectively invested by all sovereign investors with UK presence.
With the Labour Party conference beginning this week, the City of London Corporation has urged the new government to establish a long-term financial and professional services (FPS) strategy overseen by a public-private sector FPS council chaired by the chancellor to target these investors.
It said that building on the Harrington Review of FDI, the strategy will convene the best of government and industry to forge a path that places financial and professional services “at the heart of the UK’s inward investment, streamlining our approach and setting the foundations for a cross-sector National Investment agency”.
Case study
The Corporation’s report showcased several case studies of foreign investors that have gone on to increase their investment after opening a UK office.
Canadian-based British Columbia Investment Management Corporation, for example, increased its UK investment by £4.7bn after opening an office in 2016, including funding to key UK infrastructure such as the National Grid.
Meanwhile, Singapore-headquartered Temasek increased its UK investment by £2.2bn after opening its UK office in 2014. This included UK tech companies such as AI drug discovery BenevolentAI, wealth management firm FNZ, and fintech company Thought Machine.
Lastly, Aware Super, one of Australia’s largest superannuation funds which opened a UK office in 2023, has committed £8bn to invest in the UK by 2030, focusing on energy transition and digital infrastructure.
Chris Hayward, policy chair of the City of London Corporation, said the UK’s financial and professional services are the “engine in the country’s economy” and therefore it is “essential” that the UK positions itself as the “premier destination” for overseas investors.
He noted that the £7.7bn of additional capital from foreign sovereign investors setting up offices in the UK will serve alongside the government’s National Wealth Fund as a “crucial vehicle to drive growth not only in London but in every corner of the UK”.
He said: “The UK needs a long-term financial and professional services strategy overseen by a financial and professional services council. This will provide a streamlined and organised system that supports foreign investors seeking to invest capital in the UK.
“The road to economic growth passes through the City, therefore there must be a plan to both prioritise and capitalise on the contribution of financial services to foreign investment,” he said.
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