LONDON—June 12, 2023—The confidence of US companies operating in the UK in Britain’s business environment has dropped markedly, and for a third year in a row, as a continuing toll from Brexit on American business sentiment towards the UK is aggravated by US firms’ anxieties over political stability, economic growth prospects and corporate tax.

The third edition of the Transatlantic Confidence Index, issued today by BritishAmerican Business and Bain & Company, shows continuing overall strength in the trade, business and economic relationships between the UK and US.

But its findings also starkly emphasise the impact on business confidence from the past year’s political and economic turmoil in Britain, with multiple changes of government alongside market turbulence, as well as the ongoing impact of Brexit.

For the third consecutive year, US investors’ confidence in the UK fell. On the Index’s 1 to 10 scale, the average business confidence rating for the UK dropped by almost a full point, to 6.5 for 2023 – nearly double the half-point decline to 7.3 in 2022’s results.

The confidence slide delivers a clear call to action for the UK government from business. It comes on the heels of the UK Prime Minister Rishi Sunak’s meeting with President Joe Biden last week and their ‘Atlantic Declaration’ announcing a new economic partnership between the UK and US, aiming to strengthen both economies and their ties, and to spur new investment.

Three years on from Britain’s departure from the European Union, US companies remain consistently concerned about the repercussions of Brexit, with the UK-US political and trade relationship the number one priority that US businesses want the UK government to tackle to attract more investment. Nearly 40% of US survey respondents rated this their top priority while 75% placed it in their top three concerns.

Notably, the BAB-Bain survey was conducted after the signing of the Windsor Framework agreement between the UK and EU in March. But while survey respondents acknowledged improvements in the UK-EU relationship, with confidence in this creeping up from 5.1 in 2021 to 5.6 this year, the pace of improvement did not appear to be enough to allay US companies’ concerns over the issue.

In addition to following through on the implementation of the Windsor Framework, US companies are keen to see the UK prioritise, among others, enhanced labor mobility and short-term mobility visas for service providers, mutual recognition of professional qualifications, and extending cooperation outside the Trade and Cooperation Agreement to areas such as digital policy in its relationship with the EU.

The findings also highlight that worries for US firms over the UK-EU split are being compounded by their anxieties over UK political stability, Britain’s growth outlook, productivity and taxation. 

In 2022’s edition of the Index, respondents’ 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 while US businesses also reported a drop in the attractiveness of the UK’s regulatory environment and the certainty this provides.

US investors asked about confidence in the UK’s ability to bolster economic growth and productivity gave a rating of only 5.8 out of 10, despite Mr Sunak’s efforts to rebuild confidence in UK economic policy after the political and market upsets over the past year.

Tax also rose up the rankings of US companies’ concerns over the UK, with more than 60% of companies naming this as a top-three issue. More than half of US respondents said the planned rise in the UK’s main corporate tax rate from 19% to 25% would affect their confidence in Britain as a place to do business, while the UK tax environment emerged as the second highest priority among American investors.

Despite their increased concerns, US companies also continued to highlight the UK’s historic strengths as a business location, with more than half of respondents reporting they will continue or increase their investments in Britain.

UK business confidence in the US business environment continues to run at high levels

In contrast with US businesses declining sentiment over key aspects of the UK business environment the Transatlantic Confidence Index found that British businesses’ confidence in the US remained stable at high levels, with an average confidence rating of 8.4 out of 10. About three-quarters of UK respondents said they believed they will increase their investments in the US over the next two to three years.

The Index findings again showed attractiveness of the US to UK companies continued to be buoyed by the size of the American market, access to capital and the US workforce’s skills base, while the US also emerged as a more attractive innovation hub than the UK. But new business incentives in the US such as the Inflation Reduction Act received mixed responses from companies, dependent on sector.

The findings also showed a dip in UK companies’ perceptions of regulatory certainty in the US, concerns over US labour mobility, and signs of an increased focus among British firms on political risk in the build-up to the next US presidential elections.

While US companies reported very clear and narrow priorities for the UK government, British firms reported a wide and varied set of challenges for the US government, with five different issues ranked as number one or number two priority by around a third of respondents. These topics included a future UK-US trade deal, the timely implementation of the Inflation Reduction Act and other incentives, greater bipartisanship in the US Congress, the tax environment and the relaunch of a global US trade agenda.

British and American companies united on need for greater UK-US economic partnership 

While the survey revealed divergence in confidence in the UK and US, it also found a strong alignment among companies on both sides of the Atlantic over their desire for increased economic collaboration between the UK and US and agreement on the actions the two governments should take to bolster the trading relationship. Companies from the US and UK prioritised the top issues almost identically. 60% of all respondents want to see improvements in business mobility, 55% want a data transfer agreement between the US and UK.

Strikingly, more than two-thirds of respondents said a comprehensive UK-US free-trade agreement was a priority, with 73% of UK companies rating this among their priority topics. The finding, despite the currently unfavourable US political climate for the striking of large trade deals, underlines how strongly companies wants to see greater UK-US economic partnership.

Duncan Edwards, CEO, BritishAmerican Business, said: “This year's results highlight that confidence in the transatlantic corridor remains strong. This is welcome news and indeed companies on both sides of the Atlantic are calling for greater economic collaboration and trade partnership between the US and the UK. Last week's talks between PM Sunak and President Biden were encouraging and we hope that the new Atlantic Declaration will lead to further progress in the year ahead.

“The survey results do however show a marked difference in investor sentiment in both countries. It is no surprise that the political turmoil seen in the UK over the last twelve months has taken its toll. This instability, coupled with ongoing concerns over Brexit, growth prospects and taxation have led to a drop of confidence in the UK for a third year in a row. The message from US investors is clear. They are calling for a stable political environment and business friendly policies from the UK government. In direct contrast, British businesses' confidence in the US remained unchanged and at strong levels, which the US government should continue to build on to attract further investment.”

Jonathan Frick, partner at Bain & Company in London, said: “The transatlantic economic relationship and wider UK-US partnership are crucial anchors for the security and prosperity of both nations, particularly in our current, turbulent times. At Bain, we partnered with BAB on this study as a reflection the reality that the transatlantic corridor has rarely been more critical.

“While it’s heartening to see the continuing vitality of the relationship between Britain and America, our findings also show important challenges, on both sides of the Atlantic, but especially in respect of US investors’ confidence in the UK. These are a call to action for both governments as well as businesses in the two countries to work together proactively to further strengthen our transatlantic ties.”

Media contacts

For any questions or to arrange an interview, please contact:

BritishAmerican Business:

Dominic Parker (London) – Tel: +44 7500 115352 Email: dparker@babinc.org

Bain & Company:

Gary Duncan (London) — Email: gary.duncan@bain.com

Notes to Editors

This is the third edition of the Transatlantic Confidence Index report issued by BritishAmerican Business and Bain & Company. The index survey measured the confidence of US companies that are active in the UK and UK companies’ confidence in the US. Seventy-nine large or growing companies that do transatlantic business responded to the survey, including 56 US companies operating in the UK and 23 UK businesses active in the US that together employ more than 320,000 people.

The respondents are based in all four nations and major regions across the UK and in all 50 US states. The respondents represent a range of sectors, including financial services, technology, healthcare, media, telecommunications, manufacturing, and others. While many factors influence confidence, our Transatlantic Confidence Index focused on overall confidence for investing and trading, short-term investment prospects, and the health of the US-UK relationship overall.

About BritishAmerican Business

BritishAmerican Business is the leading transatlantic trade association incorporating the British-American Chamber of Commerce in the US and the American Chamber of Commerce in the UK.

We are committed to strengthening the economic corridor between the United States and the United Kingdom by supporting policies and action that protect and enhance the environment for transatlantic trade and investment.

We convene and serve a growing network of companies and business leaders through networking opportunities, bespoke programming and marketing platforms.