Indian investment in Britain surges despite Brexit
By Lord Dolar Popat
For the best part of three years, Britain has become synonymous with one word and one event: Brexit. Following the giant referendum in June 2016 when 52% of British residents took the monumental decision to leave the European Union, our departure has played out like a soap opera that the whole world has watched with increasing despair.
All other economic and political events have been overshadowed by the ongoing negotiations, including some remarkable stories and statistics. One such overlooked story was the recent India Meets Britain Tracker report released by Anuj Chande, Senior Partner at Grant Thornton on the 24th April, detailing the phenomenal successes Indian investors are now achieving in Britain.
The report details how a record 842 Indian companies are now operating in the UK, with combined revenues of £48 billion and employing over one hundred thousand people. Indian investors are increasingly seeing Britain’s business-friendly environment, world-class universities and cultural highlights as the best place to create an overseas base.
This is incredibly encouraging for those of us who have long wanted Britain and India to develop closer economic and political ties. Building better relations with India was David Cameron’s first foreign policy priority when he took over as Prime Minister – perhaps best exemplified by him visiting India three times whilst in office, including his first non-EU visit – and we are now beginning to feel the benefits of Cameron’s foresight.
But it also takes two hands to clap, and Narendra Modi’s Government have been alive to the economic benefits of building relations with Britain, particularly in a post-Brexit environment. Modi took the unusual step for an Indian Prime Minister of attending last year’s Commonwealth Heads of Government Meeting in London, as well as undertaking an official visit in November 2015.
During those visits he was able to negotiate several key policies to assist Indian interests in Britain, including a fast-track system to resolve issues that Indian companies face in the UK and a new UK-India Tech Alliance to develop new technologies. These are in addition to the existing research relationship between both nations and the high priority India-UK Trade Partnership discussions to create an even more positive post-Brexit relationship.
India’s outstanding economic growth in recent years has been in marked contrast to a lot of the world’s economic struggles, particularly in Europe. The headwinds against economic success have been strong: a potential US-China trade war, the financial crisis and the Eurozone debt issues – not to mention Brexit uncertainties – have led to many leading economies slowing and protectionism rearing its ugly head again.
Britain’s economy has also done remarkably well to weather the story. Unemployment – at 3.9% – is down to the lowest level the UK has seen since the 1970s, with a record high of 32.7 million people in employment. The British economy has now grow by over 17% since 2010, outperforming most other advanced economies. And investment in the UK is also booming, with recent OEDC figures revealing that Britain was the most popular country in Europe for Foreign Direct Investment (FDI), almost doubling the amount invested in Germany.
India has played a big part in that success, with Department for International Trade figures showing that 120 new FDI projects in 2017-18 originated in India, creating nearly six thousand new jobs. Leading Indian investors like Tata Steel are now being joined by newer investors like TMF Metal Holdings, Route Mobile and BB Ltd, who in turn are finding unprecedented levels of success. 62 of the Indian companies investing in the UK last year had growth rates of over 10%.
These investors are attracted to Britain because of lower tax thresholds, a business-friendly environment, good access to finance via the City of London and the fall in Sterling following the Brexit result. But in turn, these companies are helping to create jobs, build links between our two great nations, give our workforce more skills and hugely contributing through taxes, with a record £684 million paid in corporation tax by Indian businesses in the UK last year.
Whether it be in pharmaceuticals, IT, engineering and manufacturing or business and financial services, these investments are helping the British economy both to move on from the financial crisis grow and showing the way towards a post-Brexit future. Government borrowing is now down to its lowest level in 17 years, and Britain is moving away from this period of austerity and back into a mindset where it can invest properly for the future. Debt is falling, investment in public services is increasing, unemployment is at a record low and 32 million people have had a tax cut.
As it stands, trade between Britain and India in goods and services is a little over £15 billion. This figure has the potential to increase significantly in years ahead, particularly if Indian investors and high-net worth individuals continue to see Britain – and in particular London – as the best place for a second home.
But there are other issues that will need to be resolved to keep this relationship strong. The Indian Government have long been annoyed at the UK’s Visa system and how they feel it disproportionately hurts Indians wanting to move to the UK, and there is certainly some truth in that (even though India receives more skilled worker visas from the UK than any other country). The need to create an equitable migration system post-Brexit will be a key part of this relationship.
In addition, the Indian Government will have to continue to liberalise its domestic markets and tackle long-standing issues like corruption and infrastructure problems to entice British investors. This is very much the direction of travel that the current Government is pursuing, but we will await India’s election results later this month with interest.
Yet leaving the future relationship aside, it is incredibly encouraging that, as the Grant Thornton report shows, so many Indian firms are finding success in Britain across so many different sectors. Britain very much looks to India as a key member of our Commonwealth family, and in these uncertain economic times it is fantastic that our nations are once again finding success together.