US business is continuing to lose confidence in the UK as a place to invest as a result of Brexit, rising corporate taxes and a year of intense political turmoil in Westminster, new research has found.
A survey of 56 US companies operating in the UK for BritishAmerican Business, the transatlantic trade association, showed confidence in the UK falling for the third year in a row despite Rishi Sunak’s steadying hand in Downing Street after the turbulence of the Boris Johnson and Liz Truss administrations.
On a scale of 1 to 10, the average confidence rating among the US companies fell to 6.5 down from 7.3 in 2022. The decline of nearly a full point marked an acceleration in negative US sentiment towards the UK after a half-point drop between 2021-2022.
By contrast, UK business confidence in the US remained high, with 23 British companies surveyed giving an average confidence rating of 8.4 out of 10.
The US remains the UK’s most important trading partner, with a trade relationship worth £279 billion a year, according to the Department for Business and Trade.
However, Duncan Edwards, the chief executive of BritishAmerican Business, said that while US-UK trade still remained strong and sentiment was positive overall, there was a clear negative direction of travel in US business views of the UK.
“There is a clear trend over the last three years that stated confidence from US investors into the UK has declined, and last year the decline was greater than the previous two years, which is a source of concern,” he said.
Jonathan Frick, partner at Bain & Company, the consultancy that conducted the survey, said the study represented a “call to action” to both the US and UK governments as well as business to strengthen transatlantic ties.
The findings were based on a survey of 56 US companies covering a range of sectors, including financial services, technology, healthcare, media, telecommunications and manufacturing.
US business sentiment towards the UK deteriorated even though the survey was conducted after Sunak had entered Downing Street and concluded the Windsor framework agreement on post-Brexit trading relations with Northern Ireland that has improved UK relations with Brussels.
Despite this, the report found that US companies remained “consistently concerned” about the repercussions of Brexit, with improving EU-UK ties the number-one priority that US companies 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 are concerned about friction that didn’t exist 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 rip EU-era law from the UK statute book by the end of 2023, to which it responded by removing the end-of-year deadline, to the relief of industry.
However the research found that “despite Sunak’s efforts to rebuild confidence” US companies gave the UK a confidence rating of only 5.8 out of 10 when asked specifically about the UK government’s ability to bolster economic growth and productivity.
“In 2022 . . . views on UK political stability were evenly split between positive and negative. In the new edition these views skewed more than two-to-one to negative, emphasising the salience of political risk as a significant concern for US investors in the UK,” the report said.
The government’s decision to raise the corporate tax rate from 19 to 25 per cent 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 findings emerged after Rishi Sunak’s visit to Washington DC last week at which he agreed an “Atlantic Declaration” to boost economic ties with President Joe Biden. Edwards said while the declaration was full of laudable intent, it lacked much in the way of concrete agreements.
The Department for Business and Trade said the BAB survey was “not supported by the facts”, noting that the US had been the UK’s largest single investor for the last two decades, with £14 billion of new US investment into the UK being announced during Sunak’s trip to Washington last week.
“A PwC survey from last year ranked the UK as the most important market for US business leaders — overtaking China, and a recent EY report ranked the UK as the top investment destination for financial services in Europe,” a spokesperson added.
