The prime minister of the UK is fighting for his political life. Denials, exaggerations, distractions and distortions are all being employed by Boris Johnson and his supporters to save his stumbling leadership, not to mention the outright lies he is alleged to have told Parliament and the public about parties hosted at 10 Downing Street during Covid lockdowns.
It is easy for UK citizens to be preoccupied by thoughts for what this ongoing scandal means for accountability and the rule of law in their country, but we should also consider what it is doing to the UK’s international reputation.
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Hype men for Johnson may argue that it is the media’s fixation with the scandal, if anything, that has damaged the UK’s reputation – but that is to claim that government ministers telling untruths without any consequences is some small matter. It is not. Representative democracy doesn’t work without the government being held responsible for its actions.
The UK has long been a highly attractive investment destination for international companies. A prosperous, open and inclusive nation strictly governed by the rule of law and offering an attractive business environment.
This reputation is threatened both by the partygate scandal and the policies of the Johnson government.
Many of the political aspirations of his administration are underpinned by an expectation of increasing foreign direct investment (FDI) into the UK, yet the actions and behaviour of those leading the government are often counterproductive to that aim.
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By GlobalDataClowning around the world
In December 2021, the UK signed a free trade agreement with Australia that has the potential to be a boon for investment, with relaxations of visa restrictions for those with professional qualifications and greater access to government-procured contracts for inward investors.
Yet, just a month later, former Australian Prime Minister Paul Keating accused Foreign Secretary Liz Truss of making “demented” comments in relation to China and advised her to go “back to her collapsing, disreputable government”.
For an administration that so often likes to roll out the buzz phrase “global Britain”, it seems surprisingly adept at alienating those who should be its closest allies.
In December 2021, French President Emmanuel Macron was reported to have called Johnson a “clown” and “knucklehead”, while US President Joe Biden is understood to remember well the controversial comments Johnson made about former President Barack Obama’s Kenyan heritage.
The relationship with the US looks set to deteriorate further, with no resolution in sight for the Northern Ireland protocol and Biden (a man proud of his Irish heritage) having taken the EU’s side on how the issue has been handled.
Johnson owns Brexit, for better or for worse
Brexit may go down in history as Johnson’s most significant legacy. He led the Leave campaign and won an election based on a belligerent approach to negotiations with the EU.
Brexit is also set to be the biggest headwind for the UK economy for years to come. Alongside the impasse over the Northern Ireland protocol, which threatens the integrity of the UK, videos of lorry drivers stuck in customs at Dover for up to 24 hours highlight the bodge job this government is doing.
As Brexit’s transitional measures ended at the start of January 2022, UK companies exporting to the EU faced onerous new rules of origin on goods with many citing compliance challenges.
It will be many years until the full effects of Brexit on inward investment can be properly ascertained. Yet it is common sense that if you wish to export across the EU there are now better places to base your company than in the UK.
You also can’t overlook that western European companies still have more subsidiaries in the UK than investors from any other region. If the UK makes it more difficult for those companies to operate in the country, that spells bad news economically.
FDI flows have fallen almost everywhere in the world over the past two years thanks to the Covid-19 pandemic, yet the 57% decline in inflows to the UK in 2020 was worse than was seen in France, Germany and the US. According to data from the UN Conference on Trade and Development, FDI inflows to the UK have fallen every year since the EU referendum of 2016.
Are Johnson’s hopes pinned on FDI attraction?
Some may view the introduction of the National Security and Investment Act as necessary to protect the UK against foreign control of sensitive sectors and technologies, yet as lawyers have explained it will undoubtedly increase the length of time and costs of getting UK FDI deals done.
Among the government’s big ideas to encourage foreign investment is the creation of ten free ports around the UK. The intention is to tempt businesses to the UK by offering business-friendly regulatory exemption if they site themselves at one of these locations, and to localise supply chains by allowing different industries to cluster together.
Yet free ports remain controversial and a risk for UK plc. Any potential benefits look over-exaggerated, while they may encourage a competitive race to the bottom for deregulation around the country and become havens for criminality.
Then there is the government’s big ‘levelling up’ agenda, which so far has amounted to little more than bluster and hot air. Of course, in principle the idea of spreading prosperity more evenly across the country is easy to support, but it appears to be a task beyond this administration.
This latest scandal has even unearthed accusations that MPs would have funding withdrawn from their constituencies if they didn’t support Johnson. If such corruption is the norm for this government, how on earth can they be trusted to create a fairer economy?
Much has been made of planned gigafactories that the government is supporting but real fears persist that the UK automotive sector is in terminal decline. Data from the Society of Motor Manufacturers and Traders shows car production in the UK in 2021 fell to the lowest level since 1956.
I am not naïve enough to suggest any company would reverse an investment decision many years in the planning due to Johnson’s rule-breaking, but these scandals are a stain on the country, and the policies Johnson is responsible for are having long-lasting negative ramifications for UK plc.
Trade agreements with Oman, the UAE and Australia demonstrate the capability of this administration to act in a way that will attract foreign investors. Yet will these individual deals outweigh the reputational damage caused by Johnson and the economic damage caused by Brexit?
Johnson’s leadership is making the UK a joke internationally, which only exacerbates the very real economic challenges the country faces.
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