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#TradeTuesday: Britain’s economic future - and credibility as trading partner - will be up for debate at Davos

17 January 2023

By George Esmond & Hugh Matthews

To go or not to go to Davos? That has been the fundamental question for senior British politicians and policymakers deciding whether there is still any value in mixing with the rich and famous to help better Britain on the international stage.

Labour leader Sir Keir Starmer will be in attendance, meanwhile, Prime Minister Rishi Sunak has decided to stay at home and seem more in sync with the general public by focusing in the “people’s priorities”.

However, the political chaos of 2022 means this year’s event could be a pivotal one for Britain. The backlash of Kwasi Kwarteng’s mini budget which caused investors to sell the pound and create chaos in the bond markets, followed by Jeremy Hunt’s spending cuts and painful tax rises to shore up the UK’s finances in the short-term, means investors are now wondering what Britain will do next.

A country such as Britain, with low savings rates and continuous stagnant productivity growth, requires a healthy flow of foreign capital from strong global trade arrangements to provide investment opportunities.

Institutional investors who haven’t bought UK stocks for a while will be arriving in Geneva to work out whether the UK can finally agree on a period of economic consistency to drive foreign direct investment and provide clarity for its trading partners.

It is clear the demand is there.  PwC’s annual poll of more than 4,000 chief executives revealed this week that the UK climbed one place this year to become the third most important country globally for growth, alongside Germany.

The poll of corporate leaders showed the UK had become increasingly important to global CEOs looking to grow their revenue, doubling from nine per cent of executives prioritising the UK to 18 who selected in 2023.

The growing investment sentiment was down to the country’s focus on investment in skills and technological development across key areas for the future, such as green technology and the pharmaceuticals and financial services sector. Last month’s extensive reforms to financial regulation dupped the Edinburgh reforms – coupled with the financial partnership agreed with Singapore in November - were seen as timely and necessary to attract international investment and allow the UK to remain internationally competitive. Meanwhile, according to PWC, the UK's Life Science’s global export levels could rise from four to nine per cent if the government’s Life Science Vision plan is implemented.

With the biggest debates in Davos revolving around these emerging geo-economic risks - from trade restrictions and barriers, to the spread of technology, reduced capital flows, and a sharp decline in international cooperation - assessing and identifying access to stable markets with growing sectors will be a key priority for investors.

It seems the future of Britain’s investment potential will be up for debate for those at Davos.