Government departments charged with attracting inward investment to the UK and promoting British exports are facing significant job cuts as part of the forthcoming spending review, Whitehall insiders have warned.
The proposed headcount reductions come despite repeated pledges by the chancellor and prime minister to attract more investors to the UK and boost economic growth.
One person with knowledge of the discussions said staff in the Department for Business and Trade had been warned of headcount cuts of “30 to 40 per cent”, under proposals to merge two units involved in promoting the UK as an investment destination.
A second person said there were plans for a “brutal haircut” to export promotion teams in the “zero-based” spending review, where departments must start with a blank sheet and justify their staffing levels.
The Department for Business and Trade said that it “did not recognise” the speculation of 30 to 40 per cent cuts, adding that no final decisions have been made on headcounts.
However, officials accepted that the review, which concludes in spring, was imposing tough decisions on all Whitehall departments.
A third person familiar with the process said that trade unions had raised concerns about the restructuring. The Public and Commercial Services union, which represents more than 190,000 civil servants, declined to comment.
Officials said the cuts to inward investment staffing were happening in tandem with a merger between the 25-person Office for Investment — a joint Treasury, Number 10 and business department body set up in 2020 — and the much larger inward investment promotion directorate in DBT.
Sir Keir Starmer promised last October to “bolster” and “revamp” the OFI alongside the appointment of Baroness Poppy Gustafsson, co-founder and chief executive of cyber security company Darktrace, as the minister for investment.
One person familiar with the restructuring said that ministers planned to turn the OFI, which had previously operated like a small team of cross-departmental “fixers”, into the main agency for promoting investment.
The proposals follow recommendations by Lord Richard Harrington in his 2023 review of the UK investment landscape, in which he said the OFI needed “to be given stronger backing from central government” as part of a new business investment strategy.
Its beefed-up role will also include strengthening links with regional mayors, using combined authorities to help draw up locally based investment propositions to attract investors.
Tom Pope, deputy chief economist at the Institute for Government think-tank, said there was a strong economic logic behind greater use of mayoral combined authorities to attract FDI.
But, he added, there was currently a “capacity gap” in staff and expertise at MCAs to deliver the ambition.
However, two insiders said that despite its bolstered role, merging OFI with the business department’s investment directorate would still lead to a net reduction in headcount.
“We’ve been told it will mean reduced capacity overall, and no expansion of headcount or services,” said the director of one UK regional trade promotion body.
The changes to the investment directorate were announced to staff at an “all hands” call earlier this month, with a request for “up to 40 per cent haircut” in overall staffing numbers, according to one account of internal discussions.
Jordan Cummins, the head of the CBI’s UK competitiveness department, said that the challenge was to both bolster the OFI while also making headcount reductions within the department, which were expected as part of the spending review.
“Deckchair shuffling as part of the spending review is only step one. Step two is making this new body more responsive to investors, helpful to mayors and transparent for businesses. That starts with the investment minister setting out a vision for what she wants to achieve,” they added.
UK trade performance has been weak since Brexit compared with other G7 countries, with UK trade as a share of GDP now 3.5 per cent below pre-pandemic levels, with goods exports down by 20 per cent over the same period, according to the Office for National Statistics.
The British Chambers of Commerce said that it was looking to deepen partnership with the business department in order to improve export and trade promotions, citing studies showing the government support for trade led to companies being more likely to export and survive recessions.
William Bain, head of trade policy at the BCC, said the group would be worried by cuts to export promotion activities. “This is the moment, if you want to increase growth and look at reversing recent trade losses, to be making a targeted investment in export promotion,” he added.
The business department said that boosting trade and investment had a vital role to play in delivering the government’s economic growth mission and the department would continue to support British business to export and attract investment.
“We’re creating a new investment promotion agency, that will be more streamlined and well skilled, to provide a better service to our key investors and secure the investment our economy needs to drive jobs and growth,” it added.
