Foreign cash creates record jobs

Could staying out of the euro harm investment?

Foreign firms have invested a record amount of money in the UK and created a record number of new jobs during the past year, according to government figures.

Top investors (share of projects)

USA - 48%

Japan - 7.7%

Germany - 7%

Canada - 6%

France - 6%

source: IBB

The Invest in Britain Bureau (IBB) says that companies from 30 countries put up the money for 757 investment projects, which brought 52,783 new jobs to the country, and safeguarded another 81,366 posts.

In the year to 31 March 2000, investment totalled £252.4bn, an increase of 23% on the year before.

Job creators

USA - 67,991

France - 14,639

Japan - 11,401

Canada - 10,390

Germany - 8,982

South Africa - 3,265

Netherlands - 1,875

Sweden - 1,873

Ireland - 1,445

Australia - 1,280

Other EU countries - 4,000

Others - 7,053

(jobs created and safeguarded)
source: IBB

Investment in manufacturing industries accounted for more than half of all reported projects, with the "knowledge sector" - computer software, internet and telecoms - another driving force of inward investment.

US companies were the top investors, followed by firms from Japan, Germany, Canada and France.

The data will further fuel the ongoing debate as to whether UK business is better off in or out of the single currency, the euro.

Repeated warnings from exporters and inward investors show there could be trouble in the pipeline

Britain in Europe

A recent report by accountants Ernst & Young showed the UK share of inward investment in the European Union dropping by four percentage points to 24%, while all the big eurozone economies recorded an increase.

Investment in the eurozone as a whole was up 11%, while European countries outside suffered an 18% drop.

Manufacturing meltdown?

The pro-euro camp argues that the UK cannot sustain the current high level of investment unless the country joins the single currency.

Simon Buckby of the pro-euro campaign group Britain in Europe said repeated warnings from exporters and foreign investors showed "there could be trouble in the pipeline".

These figures give the lie to the euro lobby's scare stories, which have focussed on some high profile companies with particular problems

Business for Sterling

European Central Bank president Wim Duisenberg added to the debate, warning that the high level of sterling was "damaging to the UK economy" and adding he hoped Britain would join it. Following his remarks the pound fell against the euro.

Anti-euro campaigners see the figures as further evidence that the UK can thrive outside the eurozone.

Nick Herbert of the lobby group Business for Sterling said: "These figures give the lie to the euro lobby's scare stories, which have focussed on some high profile companies with particular problems - mainly in the car industry."

"Now we know that these cases were unrepresentative."

A government memo leaked at the weekend warned of the "foolishness" of staying outside of the euro.

Andrew Fraser, head of the IBB, had warned the government of a "manufacturing meltdown".

And on Tuesday the UK's ambassador to Japan was reported to have warned that Japanese companies would stay not invest in Britain unless the government clarified its attitude towards the single currency.

The row has become increasingly political, with many commentators assuming that the leaks were planned by pro-euro advocates in central government.

US attitudes

It coincides with a conference of UK and US business people, which Chancellor Gordon Brown is expected to attend.

Some say that this conference highlights the fact that for US companies, it makes no difference whether the UK is part of the euro or not.

This is because while sterling has risen against the euro, it has been stable against the dollar.

Many major foreign investors in Britain have urged the government to make a clear commitment to the euro.

Top executives from Mitsubishi, NEC, Nestle, and Linde Hydraulics have warned that the high pound is making UK exports uncompetitive.