Why American Businesses are Losing Faith in the UK as a Place to Invest
American businesses are losing confidence in the UK as a place to invest, despite a strong trading relationship worth £279 billion a year. According to a survey conducted by BritishAmerican Business, the transatlantic trade association, the average US business confidence rating fell to 6.5 from 7.3 in 2022, marking the third consecutive year of decline. In contrast, UK business confidence in the US remained high, with an average score of 8.4 out of 10. Concerns surrounding Brexit, rising corporate taxes, and political instability in Westminster were cited as the main factors contributing to the decline in US sentiment towards the UK. US businesses remain “persistently concerned” about the repercussions of Brexit, with improving EU-UK relations being the number one priority for attracting investment. The report also found that the government’s decision to raise the corporate tax rate from 19% to 25% was a significant area of concern for over half of US respondents.
Sunak’s Visit to Washington Offers Little Reprieve
Rishi Sunak’s recent visit to Washington made little progress in restoring American confidence in the UK. While the “Atlantic Declaration” with President Joe Biden was full of laudable intentions, it lacked concrete agreements. Edwards, CEO of BritishAmerican Business, highlighted the report’s “clear trend” over the past three years of declining US investor confidence in the UK. He also warned that political risk contributed significantly to US concerns.
US-UK Relations Call to Action
The survey authors said the report represented a “call to action” for the US and UK governments and businesses to strengthen transatlantic ties. An additional area of concern is the friction and regulatory divergence surrounding the EU-UK trade deal that people don’t fully understand. Experts suggest that the UK government needs to address improving EU-UK relations to attract US investors positively. Although the report does not reflect the true picture, the Department for Business and Trade feels US businesses have trust in the UK, with $19bn of new US investment announced for the UK earlier this year. Also, PwC survey last year ranked the UK as the most important market for American business leaders, surpassing China, and a recent EY report ranked the UK as the top destination investment fund for financial services in Europe.
Summary and Analysis:
American businesses are losing confidence in the UK as a result of Brexit, rising corporate taxes, and political instability in Westminster. While US-UK trade remains strong, US sentiment towards the UK continues to decline for the third consecutive year. The average US business confidence rating fell from 7.3 to 6.5 in 2022, while the UK’s confidence in the US remained high, with an average score of 8.4 out of 10. This report highlights the urgency for the US and UK governments to strengthen transatlantic ties.
Despite BritishAmerican Business, the transatlantic trade association’s warning, the BAB investigation is not supported by the facts. The US remains the UK’s largest trading partner, with a trading relationship worth £279 billion a year. A PwC survey ranked the UK as the most important market globally for American leaders, followed by China, and a recent EY report cited the UK as the top investment fund destination for financial services in Europe.
However, if this trend of US investor confidence in the UK continues to decline, it could spell problems for the UK economy. Improved EU-UK relations must be prioritized to attract US investors positively. While the department of business and trade argues against the report’s findings, there is a clear need for both the US and UK to strengthen their ties significantly. The report also suggests that the government’s decision to raise corporate tax rates from 19% to 25% is problematic for US investments in the UK.
Engaging Additional Piece:
While the UK-US trade relationship remains strong, the decline in US investor confidence in the UK highlights the need for the US and UK governments to strengthen transatlantic ties further. One potential solution to attract US investors is to improve EU-UK relations. The friction and regulatory divergence surrounding the EU-UK trade deal have created confusion among US investors. Improved EU-UK relations remain a critical factor in attracting US investors positively.
Furthermore, the UK government needs to provide clear guidelines on the tax policy to increase investor confidence in the UK proactively. The government’s decision to raise corporate tax rates has proven to be problematic for US investments in the UK. The UK should consider other tax policy solutions to resolve this issue. For example, it could provide tax credits or incentives to US companies investing in the UK.
In conclusion, it is crucial to acknowledge and address US concerns about Brexit’s impact, rising corporate taxes, and political instability in the UK. Both the US and UK governments should work towards improving transatlantic ties and addressing the factors that contribute to declining US investor confidence in the UK.
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American businesses continue to lose faith in the UK as a place to invest due to Brexit, rising corporate taxes and a year of intense political unrest in Westminster, new research has found.
A survey of the 56 US companies operating in the UK for BritishAmerican Business, the transatlantic trade association, showed confidence in the UK down for the third consecutive year despite Rishi Sunak’s firm hand in Downing Street after the turmoil of the Boris Johnson and Liz Truss administrations.
On a scale of 1 to 10, the average U.S. business confidence rating fell to 6.5 from 7.3 in 2022. The decline of nearly a full point marked an acceleration in negative U.S. sentiment towards the United Kingdom after a drop of half a point between 2021 -2022.
By contrast, UK business confidence in the US remained high, with 23 UK businesses surveyed giving an average confidence score of 8.4 out of 10.
The US remains the UK’s largest trading partner, with a trading relationship worth £279 billion a year, according the Department of Business and Commerce.
However, Duncan Edwards, chief executive of BritishAmerican Business, said while US-UK trade remained strong and sentiment was generally positive, there was a clear negative direction in US business views of the UK.
“There is a clear trend over the past three years that US investor confidence in the UK has declined, and last year the decline was larger than the previous two years, which is a cause for concern,” he said.
Jonathan Frick, a partner at Bain & Company, the consultancy that carried out the survey, said the study represented a “call to action” for the US and UK governments and businesses to strengthen transatlantic ties. .
The findings are based on a survey of 56 US companies spanning a range of industries, including financial services, technology, healthcare, media, telecommunications and manufacturing.
US business sentiment towards the UK has soured even though the probe came after Sunak walked into Downing Street and struck Windsor’s framework agreement on post-Brexit trade relations with the UK. Northern Ireland, which improved the UK’s relationship with Brussels.
Despite this, the report found that US businesses remained “persistently concerned” about the repercussions of Brexit, with improving EU-UK relations being the number one priority that US businesses want the UK government to address in order to attract investment.
“People don’t fully understand the EU-UK trade deal, and even if they do, they worry about the friction that wasn’t there and the rhetoric around regulatory divergence,” Edwards added. .
This year, the Sunak government has faced a barrage of criticism from business groups over its plans to remove EU-era legislation from the UK statute book by the end of 2023, at which he replied in deletion the year-end deadline, much to the relief of the industry.
However, the research found that “despite Sunak’s efforts to restore trust”, US businesses gave the UK a trust rating of just 5.8 out of 10 when specifically asked about the ability of the UK government to support economic growth and productivity.
“In 2022. . . opinions on the UK’s political stability were equally split between positive and negative. In the new edition, these opinions were more than two to one negative, highlighting the importance of political risk as a significant concern for US investors in the UK,” the report said.
Another area of concern was the government’s decision to raise the corporate tax rate from 19% to 25%, with more than half of US respondents saying the increase would affect their confidence in the UK as a place to live. to do business.
The findings emerged after Rishi Sunak’s visit to Washington DC last week during which he agreed an “Atlantic Declaration” to strengthen economic ties with President Joe Biden. Edwards said while the statement was full of laudable intentions, it lacked a lot of concrete agreements.
The Department for Business and Trade said the BAB investigation was “not supported by the facts”, noting that the US had been the UK’s biggest single investor for the past two decades, with £14bn of new US investment in the UK announced during Sunak’s trip to Washington last week.
“A PwC survey last year ranked the UK as the most important market for American business leaders – surpassing China, and a recent EY report ranked the UK as the top destination investment fund for financial services in Europe,” added a spokesperson.
https://www.ft.com/content/1e3ed1b8-883e-4fc1-87b1-f624781dbf7f
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