It is difficult to write an article about the UK which doesn’t mention Brexit. I should disclose that I personally voted to stay within the EU and for the UK to push harder to change some of the things we don’t like. More accountability and openness surrounding the EU’s own accounts, expenditure and budgets would be high on the list. I also voted to remain because of a lack of clarity on the consequences of the UK leaving.
Attracting FDI
Ever since Article 50 was triggered in March 2017 following the vote to leave, the UK has continued to develop its already successful infrastructure for attracting Foreign Direct Investment (FDI). The UK offers an ever-improving environment for research and development (R&D) projects which go hand-in-hand with a large pool of highly skilled and experienced workers. R&D incentives are available for all company sizes, provided that certain relevant criteria are met. The UK is also following a policy of reducing corporate tax rates (from 23 per cent in 2013 to 19 per cent today, with plans to reduce further) and to simplify tax regulatory requirements – particularly for overseas businesses. There are also more opportunities than ever for foreign investors to raise capital through the UK markets. The UK remains one of the world’s preeminent global financial centres.
Expenditure on new transport links within the UK continues to reach record levels, and there are also plans in place to further enhance transport links with the rest of the world. The UK’s central time zone position means it is ideally placed between east and west. Putting these factors into the mix with the UK’s reputation for providing a solid, reliable and well-established structure where companies can build a business, means it should be no surprise that the UK is still an attractive option for FDI and is very much open for business.
Despite the uncertainty brought on by Brexit, the UK has not seen any decline in foreign investment, with double-digit growth continuing each year since 2015. Investment levels from Asia are growing rapidly and the US is weighing in with its highest levels ever. The UK has been named as the best country for business for the second year running (Forbes). The publication ranks how hospitable 161 nations are to investment based on 15 factors, including workforce strength, innovation, lack of red tape, political risk, infrastructure, taxes and property rights. The UK was the only one in the top 30 for each factor.
Financial services
The financial services sector has seen an influx of more FDI than any other industry, attracting GBP 385 billion into the UK. This is an increase of 19.5 per cent on the previous year. The UK’s technology sector outperformed the rest of Europe in 2018, attracting USD 7.9 billion (GBP 6.3 billion) in venture capital investment. The UK is home to 13 of Europe’s 34 tech unicorns (private companies valued at USD1 billion or more), making it the continent’s premier location for fast-growing technology firms. The UK remains the fifth largest economy in the world and it doesn’t look like FDI and funding into UK companies will slow down any time soon.
All this long term investment has continued to flow into the UK even with the knowledge that Brexit, in whatever form it takes, is on the horizon.
What if there is a ‘No Deal’ Brexit?
I remain optimistic. The UK is a large and dynamic marketplace in its own right and an attractive option for overseas investors. I am hopeful that the business leaders, entrepreneurial influencers and hardworking employees across Europe and the UK will adjust and do what is best in the new market conditions.
The UK will continue to be an important trading partner for the EU because the UK has the second largest economy of the current EU members. The top six economic powers within the Union account for 75 per cent of total EU GDP.
Of the other five, the UK is:
• the 4th largest export market for Germany;
• 6th for France;
• 5th for Italy and for Spain; and
• 3rd for The Netherlands.
So, in all cases, the UK is a significant trading partner and none of the top six, or indeed any of the other EU member states, will want to see a prolonged reduction in trade.
What next?
At the time of writing, there is still no agreement in place for the UK’s exit from the EU, which is currently scheduled for 11:00 pm (GMT) on 29th March 2019. The UK’s Prime Minister has been asked to go back to the EU and renegotiate the backstop clauses relating to the Northern Ireland border with the Republic of Ireland.
I hope I’m right in being optimistic. The irony that the first working day after 29th March is April Fool’s Day has not passed me by!
No matter what shape Brexit eventually takes, it is going to be a challenge and I, for one, am up for that challenge.