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UAE FDI to boost the UK economy and help hit climate targets


Mubdala, a UAE fund has proposed to pay £800m into life sciences over the next five years. The overall deal is expected to be worth up to £5bn, additionally, the UK government will invest £200m with the UAE commitment as a joint venture.


The plan includes investing billions towards British health, tech and green technologies as well as infrastructure.


The deal is part of a larger post-Brexit scheme involving the UK creating four regional trade and investment hubs to increase economic growth, the expansion will drop US tariffs on some goods which have been put in place over a related dispute about US subsidies to Boeing.


Secretary of State for International Trade Liz Truss said on Monday that the hubs would be located in Edinburgh, Cardiff, Belfast and Darlington. Unfortunately, this means the hubs will not be located in any areas which have been ravaged by unemployment as a result of the collapse of the steel industry, such as the North East.


Similarly to the Siemens Factory on the Humber-Estuary, the proposal from the UAE will help the UK achieve its climate targets, committing the country to become carbon neutral by 2050.


Additionally, due to it being a foreign nation investing in the UK, this is an example of Foreign Direct Investment. This will yield a gross investment, an investment that replaces or creates additional capital within an economy.


As a result, the productive capacity of the UK economy will increase, leading to long-term economic growth as real GDP increases. Additionally, due to increased output, goods and services will be abundant, leading to a fall in the general price level.


A fall in the inflation rate directly benefits consumers on fixed incomes such as those on job seekers’ allowance or on fixed pensions. This is because these individuals have no way of increasing their current income, meaning that any reduction in the price level will result in them having increased buying power.


This may help to reduce relative poverty in the UK because of the increased purchasing power allowing lower-income earners to have a similar standard of living to their peers.


Also, due to more goods and services being produced within the economy, firms will have to increase their factor inputs, such as labour. Jobs created directly through the scheme are in highly specialized industries such as medicine and tech.


This results in higher-paying jobs which increases the number of people who are working, decreasing unemployment in the regions in which the hubs are deployed. Hence, the decision will raise living standards for these newly employed individuals and will yield increased economic activity.


Furthermore, investment in green technology may help reduce harmful emissions from factories and cars. This will reduce the levels of air pollution emitted leading to an increase in air quality in the UK.


This is significant because every year 36,000 people die from poor air quality in the UK. Hence, an increase in air quality will reduce respiratory-related illness, alleviating the pressure on public health services such as the NHS.


This allows additional scarce medical resources to be used elsewhere in the NHS such as increasing capacity, as according to trading economics, there is 2.54 hospital beds per 1000 people, a decrease from 2.57.

Overall, the increase in the productive capacity will improve the living standards of those on fixed incomes and will generate higher-paying jobs. Additionally, due to an increase in air quality, the UK will be more likely to hit its climate targets, the decision will also lead to an improvement in public health within the UK as individuals will be more likely to receive treatment on time, yielding an increase in productivity as people will take less time off work

 

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