Investing in Britain
Rhian Chilcott, CBI Washington, explains why it is still viable to invest in the UK
Over the course of the last year, the striking
similarities between the British and
American economies have been underscored
in a rather dramatic, and extremely
unpleasant way: both have shown the same
pattern of economic decline. Upheaval in
our once-mighty financial services sectors,
with credit markets freezing up completely.
A bursting of asset price bubbles – particularly
in the housing markets – leading
to a loss of consumer confidence. Both
investment and consumer spending grinding
almost to a halt, and consequent loss of
economic growth.
There can be no doubt that these are difficult times, both for the US and the UK economy. (And for everywhere else, it should be said. This is a synchronised, global downturn.) In Britain, the economy contracted by 1.5% during the fourth quarter of 2008. In America, growth fell off a cliff: GDP fell at a 6.2% annualised rate. The CBI forecasts that the recession will last throughout 2009 in both countries, and will move into a muted recovery during 2010.
In such a climate, it seems hard to think about investing abroad. Our corporate focus is inevitably on just getting through this difficult time – controlling costs, managing headcount, inventory and cash flow – frankly, just surviving. But companies also know that this is time when they must begin positioning themselves for the upturn. And for the best, that involves thinking about new opportunities overseas.
The UK has a long history of welcoming American investment, and vice versa. We have been each other’s largest overseas investors for many years now. The figures are always worth repeating: at the end of 2007, the UK had a stock of investment in the US of over $410 billion. America had a stock of some $399 billion invested in the UK.
The underlying strength of our relationship allowed us, partially at least, to buck the trend of a global decline in foreign direct investment (FDI). In the first half of 2008 (the latest period for which data is available), FDI from France to the US fell by 80%, and FDI from Germany fell by 40%. FDI from the UK, by contrast, held up at previous levels. Overall, American FDI into Europe fell by 11%, but again, the figure for the UK held steady.
This report from BritishAmerican Business highlights many of the reasons why the UK remains such an outstanding destination for American investment:
- Our common culture, language and legal structures;
- The UK’s outstanding skills base and quality of life;
- Competitive tax and regulatory regimes – even amidst all the global turmoil;
- The number of organizations that stand ready to support you – including the CBI, one of only seven foreign business associations to have a permanent operation here in Washington DC;
- The UK remains the best possible launching pad into Europe and beyond.
I would draw your attention to one other way in which investing in the UK is a forward- looking action to take. As the global community figures out how to deal with the looming issue of climate change, the UK’s politicians and its business leaders have already put the UK at the forefront of the action. The CBI’s Climate Change Board – comprising CEOs and Chairmen of some of the UK’s biggest and best companies – have set out a strategy that we believe will position the UK business community to exploit the potential $1 trillion international market that would flow from an agreement in Copenhagen in December 2009.
The UK is already part of a functioning capand- trade framework that sets a price for carbon; in addition, British politicians are keenly focused on how best to support the development of low-carbon technologies.
2009 will be a tough year economically on both sides of the Atlantic but to prosper in the future we must look ahead – and that, we believe, means more UK/US investment.
Rhian Chilcott is head of the CBI’s
Washington Office. Contact her at
rhian.chilcott@cbi.org.uk
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