According to a BritishAmerican Business trade association, tax has surpassed political stability as the number one reason US companies cite for not wanting to invest in the UK.
The index showed that the overall US investor sentiment towards the UK had stabilised, after having fallen in the two previous years. The fourth annual transatlantic trust index revealed that UK tax issues have risen to the top of the list for investor concerns.
The UK’s corporation tax was falling under successive Conservative governments to increase Britain’s competitiveness. After the pandemic, and Russia’s invasion of Ukraine, Rishi sunak increased the tax from 19 to 25% to help fund higher expenditure costs.
Duncan Edwards is the chief executive officer of BritishAmerican Business. He said, “There’s a genuine concern over, what are the UK doing to ensure it remains as appealing a place to conduct business as it was in the past?”
The survey results are released as Rachel Reeves prepares to travel to New York in order to attract Wall Street titans to increase US investment in the UK.
Labour has promised to freeze corporation taxes at 25% to encourage private investment in the UK and boost growth without the need for tax hikes.
Tax Foundation, a US-based organization, published the latest ranking of international tax competitiveness. The UK was ranked 30th among 38 countries within the Organisation for Economic Co-operation and Development. It dropped 17 places in the corporate tax category compared to the previous year, after raising the tax rate.
Bain & Company’s management consultancy, in conjunction with 51 large US companies that operate in the UK and 25 UK companies that have US operations, totaling 320,000 employees, compiled the transatlantic confidence Index. The survey was conducted before the general elections in April.
The UK’s tax climate and the cost of doing business were selected as the least attractive aspect of the country by US investors 28 times, which is more than other factors, such as political stability, immigration and regulatory certainty.
The cost of doing business or tax was not mentioned by any respondents as a concern last year. Instead, political stability came out as the biggest complaint against the UK as an investing destination.
Jonathan Frick of Bain & Company believes that the rise in concerns over tax is linked to the increase in corporation tax. I think that the fear of further tax increases is also a result of the UK’s fiscal situation. “I think there are also other concerns, more generally, about the cost to do business, whether or not it is tax,” he said.
After two years of steep declines in confidence in the US, the overall sentiment of US investors towards the UK has improved slightly this year. This is due to the political and economic turmoil in the UK, the multiple changes in prime ministers and the ongoing impact of Brexit. It was however still below the sentiment levels of 2021, which was the first year that the survey was conducted.
Frick stated that the English language, rule of law and time zone will always provide a level of trust among US investors.
He said: “But they then watched things that occurred over the course 2021 and 2022 and I think that, seeing that there wasn’t going to be immediately a lot constructive actions on the relation with the EU, and then multiple changes in ministers and policies in the UK, it (confidence) started to slip.”
Frick stated that US companies have expressed their enthusiasm for the signing last year of the Framework Windsor, the amendment to the controversial Ireland Protocol, and the agreement to allow the UK to join the EU Horizon science program.
He said: “There’s a feeling that a new administration might be able turn the page.” So I think that you are hearing cautious optimism but it hasn’t translated into headline numbers yet.
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