Looming tax rises threatens UK's £30bn investment summit

UK Prime Minister Keir Starmer with Chancellor Rachel Reeves. Dinner at St Paul's Cathedral is on the menu at the investment summit. PA/AP

Get ready for the sort of celebration that Britain does well. There will be a drinks reception at Lancaster House, near Buckingham Palace, followed by a session at the Guildhall in the City, then dinner inside St Paul’s Cathedral.

Those at least are the outline plans, which are subject to change, for next week’s event, billed as the Investment Summit 2024, designed to “showcase the best of Britain”.

Among those lining up to be impressed are David Solomon, chief executive of Goldman Sachs, Eric Schmidt, former chief executive of Google, Larry Fink from BlackRock and, in a sign of the times, Helge Lund, chairman of Wegovy creator Novo Nordisk, as well as other multinational chief executives and leaders from the UK’s leading companies.

It is being organised by Varun Chandra, the Prime Minister’s special adviser on business and investment, and former managing partner of corporate intelligence firm Hakluyt.

Varun Chandra, the Prime Minister’s special adviser on business and investment, has arranged the summit. Zuma

For Keir Starmer, the international gathering is a cornerstone occasion for his “government of change”. It was always Mr Starmer’s intention that within 100 days of taking office he and his colleagues would present a different, go-ahead, inclusive Britain, one that was open for business and ideas and, of course, hard cash.

Doubtless, the event will be so heavily orchestrated and spun as to be heralded a success. Companies that were unveiling projects in the UK anyway have been encouraged to store them up and announce them over the two days, giving the jamboree a positive glow.

Britain will be viewed in isolation, so comparisons with other countries that might also be benefiting from overseas direct investment, possibly in larger amounts, will be discouraged. This will be about Britain alone, and how brilliant it is.

Keir Starmer speaks to workers in Chester. The Investment Summit is designed to 'showcase the best of Britain'. Bloomberg

According to Labour, the event will demonstrate that “Britain is back as a stable place to do business”. No matter that there was an almost identical get-together, held by the Conservative regime last November at Hampton Court. Then, as with this one, there was much flag-waving and jingoism, accompanied by promises of business support.

To put it in context, the outcome would be peculiar indeed if an economy the size of Britain’s did not attract substantial foreign investment. It is also relatively lightly-regulated, with a legal system that works, world-class universities and a common language that is universally used and understood.

It has also had successive governments that are desperate to reinvigorate areas of the nation, that would like nothing more than to reintroduce manufacturing in some form, and with it the creation of mass numbers of jobs, in regions that have suffered neglect and post-industrial decline. There are major subsidies on offer – more so, now the UK has left the EU, to the right takers.

In that sense, what is there not to like? The showcase should generate the feel-good mood that Mr Starmer seeks.

Wary business leaders

Former chief executive of Google Eric Schmidt is scheduled to attend the London summit. Getty Images

Whether it is genuinely an unalloyed triumph remains to be seen. For a start, this “mini-Davos”, as it has also been called, has been arranged in a hurry. When Rishi Sunak called the general election he sprang a surprise. The result was soon followed by the summer holidays, then the party conference season. Meanwhile, the clock was ticking on those first 100 days.

It might have made more sense to delay, to plan it better, but that was not an option. It would have been more sensible for another reason. No sooner did Mr Starmer take office than, together with Rachel Reeves, the Chancellor, he claimed to have found a "£22 billion hole” in the nation’s purse.

The Tories dispute this heavily. Nevertheless, a date has been set for Ms Reeves’ first budget, on 30 October, in which she will aim to plug the gap, probably by implementing tax increases on the wealthy and on business.

So, far from being commerce’s pal, just two weeks after the delegates have packed their bags and headed for their private jets, Labour will be clobbering companies with higher taxes. That is not a good look, and one Starmer and co may struggle to bat away.

The summit also lands soon after a party conference at which Labour did not distinguish itself with how it treated the attending captains of industry. There were complaints galore about its “Business Day”, alleging it was overpriced and ill-conceived. Business leaders are still grumbling about that, when they are supposed to put on their finest and hotfoot it to Lancaster House and the rest to receive another dose of charm from Mr Starmer and his ministers.

£29.5bn is the minimum

Last year's event at Hampton Court secured £29.5 billion of investment promises. WPA

Labour may say it prioritises investment, but it does not have an investment minister. That was supposed to be earmarked for Benjamin Wegg-Prosser, a senior party stalwart and longtime Peter Mandelson ally, but he is said to have withdrawn from the running because of the impact on his business interests.

Repeated attacks on Britain’s ability to develop tech innovation from Elon Musk have not helped either. Nor is the draining in business confidence against a backdrop of likely increased UK taxation and continuing Middle East conflagration.

Both the CBI and Institute of Directors last week issued downbeat UK growth forecasts. These came on top of a report from the task force led by Sir Nigel Wilson, ex-boss of Legal & General, predicting the UK requires £1 trillion in new investment over the next decade if economic targets are to be met.

An impression of a Bank of England at odds with itself, led by a governor, Andrew Bailey, who last week forecast “aggressive” rate reductions but a chief economist, Huw Pill, who only a day later downplayed the cutting, did not instil optimism.

What those attendees would like to hear is news of closer ties with the EU, more free trade deals, increased movement of skilled labour from abroad, investment in developing skills, cheaper and more secure wholesale energy, and a massive injection of public capital into a creaking infrastructure. It is possible that Mr Starmer may yet spring a surprise. Certainly, he will be determined to ensure that the investment tally from last year’s Hampton Court assembly is exceeded. Then, Mr Sunak hailed a figure of £29.5 billion.

The target on Monday will be that figure plus. Anything less will be disastrous. But with greater foresight it might have been higher still.