Appeal to international industry comes as NIESR figures show chancellor could have avoided double dip recession
George Osborne has asked technology businesses to invest in the UK, insisting that the government has “the right vision and the right policies” to help companies succeed.
His appeal came as a thinktank said the government decision to implement austerity as soon as it came to power may have cost the country 16.5% in growth over a decade. Delaying austerity could have avoided the double-dip recession.
Osborne is also under pressure following this week’s official figures showing Britain is enduring the longest double-dip for more than 50 years, sought to woo international business at the latest in a series of business summitsin London to capitalise on the Olympics.
The chancellor cited the filming of a new Tom Cruise blockbuster in a British studio, which will create 500 jobs, and a “triple whammy” of investments by Vodafone, Barclays and gaming network GREE in the capital’s technology hub, Tech City.
The science-fiction thriller All You Need Is Kill, which also stars English actor Emily Blunt, is to be made at Warner Brothers’ £100m studios at Leavesden, near Watford.
The chancellor said the government was “leading the world” in supporting technology companies and claimed ministers were pulling out all the stops to ensure the globe’s top technology investors had everything they needed to succeed as he outlined Britain’s technology credentials and potential for investors.
David Cameron backed his chancellor on Thursday, insisting he was “not going anywhere” after calls for Osborne to be replaced following U-turns after his unpopular budget and questions about the government’s growth strategy.
Osborne highlighted one of the central features of his budget in front of his international audience on Friday, pointing to his decision to cut the top rate of income tax from 50p to 45p. He said the government was making “bold changes” to the tax system.
“We have introduced the most generous early-stage investment tax breaks in any country in the world,” he added.
The event was the latest in a series of 17 summits being staged in London over the next month – tailored to different parts of the world and different industrial sectors – as the government seeks to exploit the presence of scores of heads of government and state for the Olympics to raise at least £1bn of inward investment.
The chancellor announced investment already secured in the technology sector, much of it centred in east London’s Tech City, where Vodafone is committed to opening a new technology lab; Barclays and Central Working are setting up a new club to help 22,000 businesses during the next five years, and to where Tokyo-based mobile social gaming company GREE Inc plans to relocate in September. GREE also aims to open a new game development studio in the UK.
Osborne said: “Coming so quickly after the announcements from Facebook and Amazon, British technology has hit a purple patch.
“You will not find a country anywhere in the world that is more open to technology, more open to investment and more open for business. We’re putting in place the right vision and the right policies to help your company succeed right here in the UK.
“That’s why the world’s leading technology companies are beating a path to our shores. And that’s why we will continue to do everything we can to help technology investors and entrepreneurs invest, innovate and succeed in the UK.”
Osborne gave his address as he was urged to step up investment in projects to boost growth, amid warnings from a leading economic thinktank that Britain’s GDP will shrink by 0.5% in 2012.
The prediction by the National Institute of Economic and Social Research (NIESR) was down sharply from its May forecast for zero growth, issued before the publication of official figures showing the economy contracted by 0.7% in the second quarter of 2012 alone.
NIESR also downgraded its forecast for UK growth in 2013 from 2% to 1.3% and said the “jubilee effect” reduced growth this spring by 0.4%.
The thinktank said Osborne had “scope for a less aggressive path of fiscal tightening” and should consider stepping up investment in big projects to boost growth.
The report also found that the government’s decision to implement austerity immediately after it came to power may have cost the country a total of 16.5% in GDP growth over a decade – the equivalent of £239bn in 2010 prices.
If the chancellor had waited to introduce his deficit reduction package of cuts and tax rises until 2014, by which time the recovery that began in 2010 would have been “well under way”, he could have avoided this year’s double-dip recession, said NIESR’s experts.