Capital investment for new, increased or upgraded production capacity is central to boosting productivity. Nestlé’s experience across the globe confirms that embracing new technology can deliver significant increases in output. Automation of basic tasks and integrating digital communications can combine to liberate and enable operating staff to focus on higher value activities. The UK is a relatively high wage market – so high levels of productivity are essential to maintain competitiveness.
Inward investors are a particularly important source of the UK’s capital investment. They have contributed a cumulative £1 trillion to the UK stock of investment, but the type and quality of that investment is as important as the amount. Particularly effective in boosting productivity is inward investment that builds on the UK’s strengths as a base of production for export.
The businesses with the best insight into those strengths are often the ones that are already here. According to UKTI, 740 of the 1,988 new investments in 2014 were expansions by existing investors. The track record that Nestlé’s British operations have built up over many decades is a crucial part of their case for fresh investment, and the most important factor in deciding where Nestlé locates investment globally. This type of investment is fiercely contested between managers inside multinational firms like Nestlé, who must champion their local operations. So much modern manufacturing depends on reliable delivery, that a clear, stable and compelling track record is often decisive in winning investment.
Understanding the ‘compound investment case’ for existing inward investors can help turn a history of inward investment and strong results into a future of strong productivity performance. Decisions to produce the Butterfinger product for the US market and Nescafé Dolce Gusto in the UK were direct consequences of outperforming other international locations over long periods of time, showing a track record of production and productivity, a strong base of skilled workers and support from local government and the community. In this sense, investment is won many years before it is ultimately made.