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HomeUncategorizedUS investors find UK less attractive after Brexit

US investors find UK less attractive after Brexit

For the third year in a row, US investors think they are less confident in pouring money into British operations, according to a new poll. Business leaders identify the country’s increasingly strict immigration system, political instability and regulatory uncertainty as their top causes of concern.

The infamous ‘special relationship’ between the United States and Great Britain was first coined by Winston Churchill during the Second World War, to describe the close alliance and cooperation between the two countries. Yet while many residents of the British Isles hold unshakable faith in the strength of that relationship, a new study suggests that feeling doesn’t necessarily go both ways – at least. as far as business is concerned.

Bain & Company polled 79 companies – 56 in the US and 23 in the UK – employing a total of 320,000 people. The transatlantic survey shows that British businesses’ confidence in the US is stable at a high level. When asked how they rate their confidence in the US as a place to do business on a 10-point scale, British respondents reported an average confidence level of 8.4.

Driven by the size of the US market – still the world’s largest economy – as well as the access to capital and skill base of the US workforce, UK investors find The US is a more attractive innovation hub than the UK. As a result, around three-quarters of UK respondents said they believe they will increase their investment in the US within the next two to three years.

In stark contrast, however, respondents across the pond see the UK as a very different prospect. The Bain survey shows that for the third year in a row, US investors are less confident in the UK market than the previous year. In 2021, the average answer was a confidence rating of 7.8 – but that has now dropped to 6.5 by 2023.

As a result, the UK economy is unlikely to see a significant increase in investment from the US in the coming years – at least if the 56 companies polled is anything to go by. . When asked how they see their investment changing over the next two to three years, more than half said they would increase spending – but the majority said it would be a moderate increase. Meanwhile, about 1 in 10 said they would modestly reduce their investment.

When trying to explain why this is so, it is difficult to escape the shadow of Brexit. While British politicians and businesses like to see the country’s departure from the European Union as a matter of years after years of heated negotiations, US investors clearly do not see it as such. So.

Three years after the UK finalized its divorce from the remaining 27-nation EU bloc, US companies have always been concerned about the consequences of leaving. According to the results of Bain’s research, the political and commercial relationship between the UK and the EU is indeed the top priority that US companies want the UK government to address in order to attract investment. Nearly 40% of U.S. respondents said this was a top priority, while a total of 75% of U.S. respondents ranked it as their top three priorities. The responses also made it clear that failure to address the issue would make the UK a less attractive environment to invest assets in.

When asked if the UK’s visa and immigration system – which continues to become more hostile to migration after Brexit – was seen as beneficial or harmful, just 5% of US businesses said the system appeals to them, compared with 23% who said they found it. as unattractive. Meanwhile, similar gaps have been found regarding political stability – the UK has had three Prime Ministers in the last year, the latter two with no electoral mandate – and certainty about regulations. Against the backdrop of Liz Truss’ 49 days at 10 Downing Street, it’s hard for investors to believe that something issued by one administration might not be rescinded by another the next.

Jonathan Frick, partner at Bain & Company in London, comments: “While it is encouraging to see the continued vitality of the UK-US relationship, our findings also highlight important challenges. , on both sides of the Atlantic, but especially for the United States. investor confidence in the UK. This is a call to action for both governments and businesses in our two countries to work together proactively to further strengthen our transatlantic relationship.”

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