[A-List] UK eurozone membership: FDI dwindling

["Michael Keaney" <michael.keaney@xxxxxx>]

Foreign investment in UK drops 77%
£27bn shortfall prompts call for adoption of single currency, writes MURRAY
RITCHIE
The Herald, 29 October 2002

FOREIGN investment in the UK is expected to fall from £35bn last year to
£8bn this year, a drop of 77%.

By comparison Germany, which ditched the mark and embraced the euro, has
seen its foreign investment rise from £20bn to £28bn, according to new
figures compiled in Brussels by the United Nations and shown to The Herald.

The figures brought calls from the pro-euro lobby - including David Martin,
Scotland's most senior Euro-MP and vice president of the European
Parliament - for Tony Blair to speed up UK entry into the single currency.

The grim statistics follow news earlier this year that foreign investment in
Scotland had similarly dried up.

This prompted an alarmed Jack McConnell and Wendy Alexander, the then
industry minister, to announce a "major policy shift" in which government
financial support for foreign investment was switched to indigenous
business.

The latest UN Conference on Trade and Development (Unctad) statistics will
prompt new political tensions over the euro.

Mr Martin, the leading Europhile Labour MEP, argued: "The myths put around
by the Eurosceptics in relation to the single currency have all proved
unfounded.

"The warnings sounded by the pro-Europeans are proving to be correct. The
price of our isolation from Europe will be lost jobs and lost investment."

He added: "Our investment is shrinking while that of our European
competitors is growing. As soon as the five economic tests are met, Britain
must begin preparations to join the successful single currency or risk being
sidelined by investors for years to come."

He said the figures suggested companies were deserting Britain "in droves"
for the eurozone states. "Britain is being snubbed by big business."

Mr Martin said Britain's inward investment had been running at a level which
produced "hundreds of thousands" of jobs which would no longer be the case.

While investment in Germany has risen, in France it has fallen - but is
still worth £29bn, far ahead of Britain.

Masakaka Fujita, who compiled the report for Unctad, said the figures showed
the euro attracted big business.

"It may be that companies are choosing to invest more in continental Europe
in order to be inside the currency bloc in the long run," Mr Fujita
suggested.

Before the euro was introduced Britain had 16% of foreign investment coming
into the EU. That figure now stands at just 5.1% compared with 18% which
goes to Germany and 19% to France.

The statistics are published only days after major car manufacturers warned
the UK was suffering as a result of its isolation from the euro.

Ford, Vauxhall, MG Mitsubishi Europe and Rover all claimed it was costing
them "millions" of pounds.

Philippe Legrain, chief economist of Britain in Europe, the pro-single
currency campaign, said: "Foreign investors have warned again and again that
Britain is a less attractive location if we remain outside the euro. These
warnings have been ignored, and now we are starting to the pay the price.
The longer Britain remains isolated from the euro, the higher that price
will be."

Angus MacFadyen, director of the anti-euro No campaign, urged caution about
taking lessons from the figures.

He said: "One change in this trend is hardly a reason to want to join the
euro just because there is a sudden turn against us.

"The United States has also been badly hit. This shows Britain's economy is
closely aligned to that of the US in terms of trade cycles."