US investors demand clearer picture of UK Brexit strategy
The UK’s special relationship with the United States will take on added significance in the post-Brexit world, according to a leading US economist.
However, before Washington opts for closer economic ties with the UK, US investors will need to have a clearer picture of Prime Minister Theresa May’s plans for her trade policies once Britain leaves the European Union.
That’s according to Joe Brusuelas, chief US economist for RSM.
Addressing an invited audience of leading businesses from across the Midlands, Mr Brusuelas said: “The Trump administration is on record as saying that once matters have been settled in the UK and Europe then that administration wants to move towards discussing a UK/US free trade agreement.”
However, risk-averse investors will want to see some kind of surety that their funds destined for UK businesses will be safe, he added.
“The US economy is becoming more integrated with that of the UK through developments in sectors such as life sciences and TMT (Technology, Media and Telecommunications),” he said.
“A billion dollars of foreign investment is exchanged directly between the two countries every year and is part and parcel of a larger economic narrative of economic integration that continues regardless of whether we have a hard or soft Brexit.
“I would think proposals out of Washington would be warmly welcomed here – and the sooner we get to that then the better for both countries and their economies.”
His message to the UK Government was a blunt one.
“Global investors would like to see a lot more clarity about what the (Theresa) May administration intends to do and what its (EU) negotiation objectives are,” said Mr Brusuelas.
“Simply stating one is willing to endure a hard Brexit is neither necessary nor sufficient to support the current growth path of the British economy or improvement of its trade position.”
If the UK fails to negotiate a satisfactory settlement that it could potentially jeopardise a lucrative future trade deal, he added.
“The US is going through an upswing with rising employment and wages. Therefore, there is an increased demand for foreign goods in the US,” he said.
“Put simply, US investment is not going to go away.”
However, he said there was still a lot required from the UK before it was seen as a safe haven.
“The UK economy is not going to go away but the growth trend will be lower than before the referendum,” he said.
“Hopefully a UK/US free trade agreement will follow shortly after a Brexit deal is concluded but when the time comes there will have to be some hard choices.
“The island race will have to be more outgoing.”
Research conducted by RSM suggests that most UK businesses see the US as their preferred trading partner post-Brexit.
Its new report, The Global Economy – where next?, details preferences on what kind of trade agreement firms in the UK want to see introduced after it leaves the EU.
A hybrid agreement, similar to the deals concluded by Canada and Norway, which would provide the UK with unrestricted access to the single market whilst still giving it the freedom to conclude agreements with countries outside the EU is the preferred option.
Respondents also pinpointed the United States (40%), Germany (26%), China (23%), France (21%) and India (12%) as their top five trading partners post-Brexit.
Simon Hart, lead partner – Brexit, RSM said he remained optimistic about the special relationship post-Brexit.
“Look at the opportunities inward investment offers businesses in the UK. We are going to see, because of the relative weakness of the pound and strength of the dollar, more US businesses looking to expand and acquire within the UK,” he said.
The findings of the research were outlined to businesses at a special presentation held at The Belfry Resort, organised by RSM in partnership with TheBusinessDesk.com.