On 8th May, BritishAmerican Business (BAB), the trade organisation for US-UK trade and investment, will present its inaugural Transatlantic Growth Awards to 30 British and American companies. These awards will recognise businesses, from every industry and of every size, that have made a major commitment to the other market during the last year, either in the form of a capital investment or jobs. Discussion of trade policy is important, but what actually happens on the ground, decisions by companies to take risks, invest capital and hire people, are at the heart of successful international trade and investment.
Of course, there is nothing new about American companies investing in the UK or British companies building their businesses in the States; in fact, data suggests that more capital has been committed from both countries into the other than in any other bilateral relationship. There is more than a combined trillion dollars of capital that has been put to work by businesses over the years and far more than a million people in each market work for businesses owned by companies from the other. This combination of investment capital and jobs (together with a vibrant two-way trade in goods and services) makes the US-UK economic corridor the most successful in the world.
So why now? At a time of uncertainty over the UK’s future trade relationship with the EU, and lots of debate about the arcane intricacies of trade policy, it is worth reminding ourselves of what is actually happening on the ground. Ambitious companies with entrepreneurial leaders and willing shareholders are always looking to expand, and when international growth is on the agenda, for British and American businesses, the natural first place to look is at each other.
For British companies, the US has always represented market scale. The attraction is obvious – the largest economy in the world, a common language and almost familiar culture. A reliable legal system and a broadly liberal market economy all make the USA hugely attractive and entrepreneurial Brits have been doing business there successfully for two hundred years. From small start-ups in biotech or fintech to giant industrial and financial enterprises, the range and quantum of British businesses prepared to make the decision to invest in the States is phenomenal. Other markets may offer more rapid GDP growth but nowhere matches the combination of market scale and relative market predictability of America.
For American companies, the UK has been the natural first market to look at and the default choice for a European hub. Cultural and language familiarity, a helpful time zone and good transport links, legal certainty and a broadly business friendly environment all help; couple these with an educated and skilled workforce for all sectors of employment, liberal labour regulations that are a lot less scary for US owners than in most of the EU, reasonable corporate tax rates and a country where American management feel comfortable living are all factors behind this great inward investment success.
That the UK has been a bridge into the EU single market has also clearly been a huge factor in the capital allocation decision-making of large US corporates and the uncertainty over the UK’s future trading relationship with the EU is deeply unhelpful. At the time of writing there is no certainty about what will happen on March 29th and even if (as we expect) some version of the withdrawal agreement is finally approved, a further 21 months of debate and negotiation await us. Experience suggests that, whether Brexit is hard, soft or al dente, the negotiation of the future relationship will be difficult, slow and only resolved, if at all, at the last possible moment. Whilst all the other positive things about the UK remain in place, this uncertainty about free and open access to the EU market is causing delay to investment decisions, especially for manufacturing companies.
But, as our awards will show, the attractiveness of each of these great markets to businesses from the other remains very strong and the pipeline of future investment, much already announced, is healthy. Against this background, there is an opportunity to build an even stronger transatlantic trade and investment environment and with active support from the leadership in both countries, this should be a high priority for trade negotiators, government ministers and business.
The good news is that work has already started in London and Washington. The bilateral Trade and Investment Working Group of officials from the UK and US has met five times since the referendum, and current agreements governing trade between the US and EU are in the process of being re-signed between the US and the UK, ensuring continuity of business in the event of a hard Brexit. Next will come the negotiation and with the work done previously on the Transatlantic Trade and Investment Partnership (TTIP) we have a good place to start and a clear understanding of where conflicts might arise.
Now is the time for businesses, and those of us who represent them, to do the hard work talking to the US and UK governments at a central and local level. We need to remind legislators why business matters, as the source of the majority of jobs and driver of prosperity in each of these markets. If we do this well, there is no reason why the future of the US-UK trade and investment relationship will not be stronger in the future than it is today.
Duncan Edwards is chief executive of BritishAmerican Business.