4. 1 MART TO ASSURE YOU THAT THIS MEASURE WILL HOT PREVENT AND IS.
EXPECTED TO DISCOURACE UK COMPANIES FROM UNDERTAKING NEY INVESTMENTS, BUT WILL AFTECT ONLY THE HETHOD 1 HICH THEY FINANCE SUCH RIVESTMENTS. IN PARTICULAR IT WILL ENCOURAGE THEM TO FINANCE
WITH FOREIGN BORROWING. I AM VERY HUCH AWARE OF THE IMPORTANCE OF
UK PRIVATE LIVESTMENT FOR MANY OVERSEAS STERLING AREA COUNTRIES,
HOWEVER EXPERIENCE I OPERATING IDENTICAL RULES OVER A NUMBER OF
YEARS IN COUNTRIES CUTSIDE THE STERLING AREA HAS SHOWN THAT THEY DO NOT PREVENT DIRECT INVESTMENT CONTINUING AT HIGH AND INDEED
INCREASING LEVELS, I SHOULD NOT EXPECT THE LEVEL OF UK INVESTMENT
IN OVERSEAS STERLING AREA COUNTRIES TO SUFFER FROM THE INTRODUCTION
OF THESE NEW RULES.
f
R
5. 1 SHALL BE ANNOUNCING PARALLEL MEASURES AS REGARDS THE
FINANCING OF UK INVESTMENT IN EEC MEMBER STATES, SIMILAR MEASURES
HAVE BEEN IN FORCE FOR SOME YEARS FOR UK INVESTMENT IN OTHER
NON-STERLING AREA COUNTRIES AND THESE REMAIN UNALTERED,
6. SECOND, I SHALL EXTEND TO SECURITIES PAYABLE IN OVERSEAS
STERLING AREA CURRENCIES THE SO-CALLED 256 REQUIREMENT. THIS IS THE RULE UNDER WHICH 25% OF THE PROCEEDS OF SALE OR REDEMTPION OF
FOREIGN CURRENCY SECURITIES WHEN OWNED BY UK RESIDENTS HUST BE
SOLD 14 THE OFFICIAL FOREIGN EXCHANGE MARKET, WITH ONLY THE REMATHING 75% BEINAG AVAILABLE FOR REINVESTMENT OVERSEAS.
8 ~ I WANTED YOU TO BE FULLY AWARE OF THE REASONS FOR THESE CHANGES,
•
CALLAGHAN
NO DISTRIBUTION
HEAD FRD
MR MARSHALL
-2-
COPIES TO
PS/CHANCELLOR OF EXCHEQUER
MR D J MITCHELL, TREASURY
MR T U BURGNER, TREASURY
MR E B BENNETT, BANK OF ENGLAND
+
Page 150Page 151