Lord Dominic Johnson, who was in Toronto Friday, says Brexit makes it easier for country to “differentiate ourselves from the rest of the EU.”
By Josh Rubin Business Reporter
When your country’s left one of the world’s largest trading blocs, and has gone through three prime ministers in a few months, convincing investors it’s a good, stable place to put their money probably isn’t the easiest task.
But U.K. Investment Minister Lord Dominic Johnson, who was in Toronto last Friday to meet with institutional investors including pension funds, said he’s been getting a better reception than you’d think.
Brexit, argues Johnson, made it easier to convince investors of the U.K.’s business climate, even though they’re putting their money into a country of 67 million people rather than a trading block with a population of roughly half a billion.
“It actually makes my job easier. Because what I’m able to do is differentiate ourselves from the rest of the EU,” said Johnson, pointing to lower corporate tax rates and less red tape than in the European Union, which the U.K. formally left in 2020, after the “leave” side narrowly won a referendum in 2016.
Still, said Andreas Schotter, an associate professor of international business at Western University, it’s a harder to make the case now for U.K. investment than it was pre-Brexit.
“If you’re going to invest just in the U.K., sure. But a lot of the companies and institutional investors putting money into the U.K. before Brexit were doing it because of the access to the broader EU market,” said Schotter.
The U.K., said Schotter, is trying to sign as many trade agreements as it can, and with good reason.
“They’re desperate. There are some real structural problems with the U.K. economy now,” Schotter said.
Johnson pointed to a series of trade agreements the U.K. has been busy joining, including — somewhat counterintuitively — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The U.K. signed an agreement to join the CPTPP, which includes Pacific Rim countries including Japan, Malaysia and Vietnam, as well as other countries around the Pacific Ocean, like Australia and Canada.
“We’re free-traders in the U.K. Make no mistake about it, Brexit was not an anti-free-trade move. We’ve gone from being in a single market to being in a multilateral series of relationships, which we think is much better for our trade prospects,” said Johnson.
Johnson, however, admitted that last year’s political instability — when Boris Johnson (no relation) resigned as prime minister, then was followed by the 50-day reign of Liz Truss, then by current PM Rishi Sunak — wasn’t exactly confidence-inspiring for some investors. “The PM Rishi Sunak and the Chancellor Jeremy Hunt have done a fantastic, very important job of ensuring that investors can look at the U.K. again as one of the most predictable, and stable, long-term investment opportunities there are,” said Johnson. “Some of my job is to reassure people … that is the case.”
The U.K. is also working on a trade agreement with Canada, something the two sides are eager to get done, but not rushing into, said the U.K.’s consul general in Toronto, Fouzia Younis.
“It needs to be the right agreement for both countries, and I think that’s what we’re focusing on. Rather than speeding it up, let’s make sure that it’s the right outcome not just for both governments, but for businesses as well,” said Younis, adding that negotiators finished off their sixth round of Canada-U.K. talks two weeks ago, and will shortly be starting their seventh.
Trade between the two countries in 2022 amounted to more than $42 billion, with $18.4 billion in goods and services heading to the U.K. from Canada, and $24.2 billion heading to Canada from the U.K.
A spokesperson for Mary Ng, Canada’s minister for international trade, noted that Canada had already signed a “trade continuity agreement” in early 2021, and was looking forward to a deeper partnership.
“Canada was one of the first countries to sign a trade agreement with the U.K. when they left the EU, and the first to support their accession to the CPTPP, because we know the value of this relationship,” said spokesperson Shanti Cosentino. “We are more than halfway through our trade negotiations and are working together to create good jobs, support small businesses, and drive inclusive opportunities on both sides of the Atlantic.”
Josh Rubin is a Toronto-based business reporter. Follow him on Twitter: @starbeer.