Vote of confidence in US-UK economic ties amid anxieties over future policy stability - report

British and American businesses have given a new vote of confidence in the strength of transatlantic ties on trade, business and economic relationships despite an uncertain political context in both the UK and US.

The fourth annual Transatlantic Confidence Index from BritishAmerican Business and Bain & Company shows US companies’ confidence in the UK as a place to do business has stabilised in 2024, after two back-to-back years of sharp drops in sentiment, driven by political and economic turbulence in Britain, with multiple changes of Prime Minister, previous bouts of market turmoil, and the ongoing impact of the UK’s departure from the EU.

With UK companies’ confidence in the US business environment also little changed at high levels, combined British and American business sentiment on the transatlantic economic corridor remains firmly positive, BAB and Bain report.

The headline BAB-Bain Transatlantic Confidence Index for 2024 shows a score of 7.1 out of 10, up from 7.0 last year – boosted by the score for US investors’ confidence in the UK ticking up to 6.6, from 6.5 in 2023.

The index for UK businesses’ confidence in the US was unchanged at 8.4 out of 10.

In a further signal of the continued, underlying strength of both markets and of the US-UK economic relationship, BAB and Bain note that investors from both sides of the Atlantic report stable or increasing confidence, and plan to maintain or increase investment levels in both countries.

The findings suggest a current calming of conditions after a series of major disruptions for both US and UK business in recent years – including the Covid-19 pandemic, resurgent inflation and higher costs of doing business in both nations – as well as pointing to cautious optimism over AI and its potential boost to productivity.

However, in a cautionary note amid heightened nervousness ahead of November’s US presidential election, the BAB-Bain report highlights a strong focus by companies on both sides of the Atlantic on the need for stable policies – as well as stronger economic collaboration between the two countries.

Survey respondents in the UK rated the importance of UK/US policy stability, regardless of the outcome of elections, at 8.0 (on a 1 to 10 scale) while US respondents scored this at 7.4.  

Anxieties over policy stability also emerged from the survey’s examination of the two countries’ strengths and weaknesses: respondents raised concerns over political stability and regulatory certainty in the US, and over political stability, as well as talent mobility, in the UK.

Tax competitiveness also emerged from the survey as a high-priority concern for both British and American businesses.

The UK tax environment emerged as a top three priority for more than 70 per cent of US companies surveyed, up from 60 per cent in 2023 – standing out as the only notable adverse shift in sentiment on the UK among US investors in the wake of recent increases in corporate tax and concern over further potential rises.

Similarly, in the US, the upcoming review of the Tax Cuts and Jobs Act has provoked worries for UK businesses trading in America, with more than 70 per cent citing a competitive tax environment as a top three priority, also up from 60 per cent in 2023.

For both the UK and US markets, access to capital and to talent were called out by respondents as key strengths, as they have been in prior years’ surveys.

UK investors highlighted US strengths in innovation and incentives for R&D investment as important to its attractiveness, while American investors in the UK also pointed to R&D incentives as an important strength for Britain’s business environment.

British and American companies were again united on the need for greater UK-US economic partnership and steps by both governments to bolster the transatlantic trading relationship.

Sixty-one per cent of all respondents supported a full free-trade agreement (FTA) between the US and UK, making this the second-highest priority for businesses for the US-UK relationship.

Most companies indicated a preference for a full FTA over sectoral trade agreements – while also expressing interest in measures short of a full FTA, such as existing transatlantic dialogues on AI and other technologies.

In addition, US companies in the UK rated the importance of greater economic collaboration with like-minded allies at 8.4, and UK companies in the US at 8.6.  

Alongside, the survey showed that US confidence in the UK-EU relationship, while still only at moderate levels, rose for a third year in a row, with a score of 6.1 for 2024, up from 5.1 for last year, reflecting recent improvements in UK-EU relations, the report suggests.

Duncan Edwards, CEO, BritishAmerican Business, said: “This year’s results underscore the strong confidence in the transatlantic corridor, which is encouraging news.

“Companies on both sides of the Atlantic are advocating for increased economic collaboration and policy stability.

“However, concerns remain over the tax environment and the cost of doing business in both countries. In fact, ensuring tax competitiveness is now the top issue for US investors in the UK.

“The new Labour government has insisted that growth is one of its biggest priorities and we urge them to create a favourable environment for attracting greater investment from the US.”