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UK Cabinet Re-shuffle February 2023
With a looming set of local elections in May 2023 and a general election in 2024 on the horizon, Rishi Sunak announced a reshuffle of his Cabinet on Tuesday 7th February, and it was more than just the usual shuffling about of ministers. While many have dubbed this a ‘moving of the deck chairs on the Titanic’ there were some substantial restructurings of key Government departments.
The crux of the reshuffle hinges on achieving the right mix between meeting Government aims and managing the regicide-prone factions of the Conservative Party. The Prime Minister has pivoted back towards language geared towards ‘security’, one of the areas that the Party is most comfortable with. The Government sees energy security, national security, and economic security.
Investors and businesses must consider the ever-growing securitisation of the UK investing and political environment. While multiple challenges already exist due to the unique political environment of the UK, investors should expect further developments to emerge throughout this year as geopolitical tensions rise.
A sign of this securitisation is best seen by the moving of the Investment and Security Unit (ISU) from a departmental level to now sit at the heart of Government within the Cabinet Office which has a very security-focused Cabinet Secretary, Simon Case, who has previously worked for the intelligence service GCHQ.
The major departmental development of the day was the breaking up of the Department for Business, Energy and Industrial Strategy (BEIS). The effect on foreign investment is undoubtedly a significant one both in terms of challenges and opportunities.
Energy Security and Net Zero (ESNZ)
The new Department of Energy Security and Net Zero (ESNZ) is headed by the former BEIS Secretary of State Grant Shapps MP and has been tasked with a radical shake-up of the UK’s energy supply. His supporting junior ministers come from different ends of the energy policy spectrum, including Graham Stuart MP who will likely bring his focus on climate change from his previous role and Andrew Bowie MP who hails from Aberdeenshire and is a champion of the UK’s oil and gas industry.
A touch late for businesses looking for low energy prices, but investors in the energy space could find lucrative opportunities here, especially those with ‘clean energy’ solutions and smaller schemes being set up for energy efficiency. It is likely that the Government will speak a lot about nuclear, but whether key developments will occur at speed ahead of the 2024 general election remains to be seen.
Business and Trade (BaT)
Foreign direct investment and exports have been a difficult challenge for the UK Government due to Brexit, the pandemic, and geopolitical tensions. At the helm is a key politician, Kemi Badenoch MP, who commands important factions within the Conservative Party that the Prime Minister does not – important if you are concerned with being unceremoniously dethroned.
This Secretary of State will be an important ally for those seeking to invest in the UK. While deals with the US and India have stalled, she is hoping to breathe life into the trade talks and continue pursuing further deals outside of Europe. However, she has a team that is balanced with geopolitical hawks such as Minister of State, Nusrat Ghani MP, who may cause issues for those outside of the Five Eyes allies.
Science, Innovation and Technology
A Department with the Chancellor Jeremy Hunt’s name all over it. This Department will be the cornerstone of his ambition to turn the UK into a Silicon Valley. Both he and the new Secretary of State are likely to seek financial incentives such as tax cuts, rather than taxpayer investment, to attract both inward and external investment.
Those in innovative fields will be treated as a priority by this Department and the Treasury. Life sciences and technology-centred businesses are the industries most in fashion with current Conservative Party thinking, hoping to reignite the success of the COVID-19 vaccine development and genomics programmes.
Strong financial incentives are likely to come for those considering investing outside of the ‘Golden Triangle’ of Oxford-London-Cambridge with ‘mini-Canary Wharfs’ acting like investment zones. This is a key policy borrowed from the ‘Red Wall’ Conservative MPs called the Northern Research Group as part of the ‘Levelling Up’ strategy.
These new Government departments will turn to what is in store for their new portfolios in the rapidly approaching Spring Budget in March. The Chancellor has so far heavily managed expectations across the Parliamentary Party. Perhaps a sign he may pull a rabbit out the hat. Perhaps not. Investors and ministers alike will have to be more than innovative in their thinking if they are to succeed.
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