Lost confidence: US companies lose faith in the UK as a place to invest
According to new research by BritishAmerican Business (BAB), US businesses are losing confidence in the UK as a place to invest. The research showed that, on average, U.S. business confidence rating fell to 6.5 from 7.3 in 2022.
Brexit, rising corporate taxes, and political instability in Westminster were identified as the primary reasons for the declining US sentiment towards the United Kingdom, however, UK business confidence in the US remained high.
Despite this, the US remains the UK’s largest trading partner with a trading relationship worth £279 billion a year according to The Department of Business and Commerce. The extent of concern is such that the report found US businesses remained “persistently concerned” about the repercussions of Brexit with improving EU-UK relations the number one priority that US businesses want the UK government to address in order to attract future investment.
The BAB survey heard the opinions of 56 US companies operating in the UK, including financial services, technology, healthcare, media, and manufacturing companies.
What’s causing the drop?
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.
It is likely UK business confidence in the US is strong because, in terms of stability, we appear a lot less turbulent than the UK. The political environment in the US currently appears far calmer than that of the UK. However, the US is the UK’s biggest trading partner, and given the economic shockwaves enforced by COVID-19, international trade will be critical for kicking starting the UK economy again.
UK Business Confident in the U.S.
Interestingly, the BAB survey found that 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 global economy has been hit hard by the pandemic, but US companies seem to be outperforming their counterparts. According to the Babson Survey Research Group, 79% of US brick-and-mortar service businesses have pivoted to offer online services or products, enabling them to continue to trade and survive through the pandemic.
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. This is perhaps a reflection of recent actions by the UK government such as Raising the corporate tax rate from 19% to 25% has left US businesses concerned about the increase and its affects.
What is being done?
Rishi Sunak’s visit to Washington last week resulted in an “Atlantic Declaration” to strengthen economic ties with President Joe Biden but this was dismissed by the CEO of BAB as not going far enough as there was not enough 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.
Summary:
US businesses are losing confidence in the UK as a place to invest due to Brexit, rising corporate taxes, and political instability in Westminster. This is the third consecutive year that confidence in the UK has declined. The BAB survey found that on average, U.S. business confidence rating fell to 6.5 from 7.3 in 2022. However, UK business confidence in the US remained high with 23 UK businesses surveyed giving an average confidence score of 8.4 out of 10. Despite Rishi 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.
Opinions on the UK’s political stability were more than two to one negative. The government’s decision to raise the corporate tax rate from 19% to 25% was another area of concern with more than half of US respondents saying the increase would affect their confidence in the UK as a place to do business. The US remains the UK’s largest trading partner, and BAB warned that improving EU-UK relations should be the number one priority to attract investment in the future. Rishi Sunak and President Joe Biden signed an “Atlantic Declaration” to strengthen economic ties, however, the CEO of BAB dismissed it for not providing concrete agreements.
Engaging additional piece
Brexit has caused huge uncertainty in trade negotiations between Britain and the EU. This, coupled with the COVID-19 pandemic, is likely to have played a significant role in declining US confidence in the UK. This has been a perennial problem for the UK economy as it forges a post-Brexit landscape. UK businesses will need to work hard to rebuild trust with US investors, and part of this could come from factors like tax incentives, removal of regulatory barriers, and increased trade negotiations with the US.
In conclusion, the UK government has a lot of work to do to rebuild trust with US businesses that wish to invest in the UK. It is important to note that, although the investment situation looks gloomy currently, this is not the first time the UK economy has been down. With more emphasis on negotiated trade deals, avoiding both tariff and non-tariff barriers, the UK economy could exhibit significant growth within the next few years.
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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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