By Alexander Smith and Elisa Martinuzzi
DAVOS, Switzerland (Reuters) – British industry and energy minister Sarah Jones said that meetings in Davos this week with CEOs considering where to make their next investment had been positive as the government took its growth mantra to the Swiss mountains.
“People are enthusiastic with the message that they’re getting from the government … what people want to see is evidence that we mean it,” Jones told Reuters on the sidelines of the World Economic Forum annual meeting.
Official data has shown Britain’s economy stagnated in the three months to September and the Bank of England has forecast that it flatlined again in the last three months of 2024, adding to pressure on the government, which faced a recent steep rise in borrowing costs as a result of a wider bond market wobble.
“Of course businesses are interested in what’s happening with interest rates, what’s happening with taxation, all of these things,” Jones said, speaking on Thursday. “Regulation … just knowing what the rules of the game are, and understanding who to talk to as well, and how to navigate your way through investing in the UK.”
Although Britain’s high-profile mission to Davos to rally support for its economic plans gave investors and financiers some encouragement, several told Reuters they needed to see the government deliver on growth rather than just talk about it.
Senior bankers and executives, who spoke on condition of anonymity, said there was a worried mood in the business community and one way to make investment in Britain more attractive was by making it more appealing to entrepreneurs.
One Davos attendee told Reuters that a change announced on Thursday to the rules around how wealthy, often foreign residents, pay tax on overseas income was “a small step in the right direction”.
Concerns over Britain’s debt levels have shown up in the bond markets, adding to its borrowing costs at the start of the year before they eased more recently.
Official data this week showed Britain ran a bigger-than-expected budget deficit in December, swelled by debt interest costs and a one-off purchase of military homes.
“In the end, to make debt sustainable you’ve got to grow the economy,” finance minister Rachel Reeves told Reuters on Thursday. “We are taking out those barriers that have stopped businesses investing and growing in Britain,” Reeves said, adding: “I’m confident we can get those growth numbers up.”
The worry for businesses is that Reeves may have little choice but to make more spending cuts to keep her fiscal pledges, piling more pressure on the economy, one executive said.