The United Kingdom (UK) actively encourages foreign direct investment (FDI). The UK imposes few impediments to foreign ownership and throughout the past decade, has been Europe’s top recipient of FDI. The UK government provides comprehensive statistics on FDI in its annual inward investment report: https://www.gov.uk/government/statistics/department-for-international-trade-inward-investment-results-2016-to-2017.
Long-term political, economic, and regulatory stability, coupled with relatively low rates of taxation and inflation, has made the UK attractive to foreign investors. Market entry for U.S. firms is facilitated by a common language, legal heritage, and similar business institutions and practices. The UK is well supported by sophisticated financial and professional services industries and has a transparent tax system in which local and foreign-owned companies are taxed alike. The British pound is a free-floating currency with no restrictions on its transfer or conversion. Exchange controls restricting the transfer of funds associated with an investment into or out of the UK do not exist.
UK legal, regulatory, and accounting systems are transparent and consistent with international standards. The UK legal system provides a high level of protection. Private ownership is protected by law and monitored for competition-restricting behavior. U.S. exporters and investors generally will find little difference between the United States and UK in the conduct of business, and common law prevails as the basis for commercial transactions in the UK.
The United States and UK have enjoyed a “Commerce and Navigation” Treaty since 1815 which guarantees national treatment of U.S. investors. A Bilateral Tax Treaty specifically protects U.S. and UK investors from double taxation. There are no signs of increased protectionism against foreign investment, and none are expected.
The United States is the largest source of FDI into the UK. Many U.S. companies have operations in the UK, including all top 100 of the Fortune 500 firms. The UK also hosts more than half of the European, Middle Eastern and African corporate headquarters of American-owned firms. For several generations, U.S. firms have been attracted to the UK both for the domestic market and as a beachhead for the European Union Single Market. On June 23, 2016, the UK held a Referendum on its continuing membership in the European Union (EU) and the British public voted to leave the EU. On March 29, 2017, the UK initiated the formal process of withdrawing from the EU. Under EU rules, the UK and the EU have two years to negotiate the terms of the UK’s withdrawal. The terms of the UK’s future relationship with the EU are unknown at the time of writing. UK political leaders have said the UK intends to leave the EU Single Market and Customs Union and negotiate a comprehensive economic partnership with the EU, but the EU and UK presently intend to maintain the status quo on the customs union and single market until at least December 2020. Continued uncertainty surrounding the terms of the UK’s departure from the EU and the terms of the future UK-EU relationship may impact the overall attractiveness of the UK as an investment destination for U.S. companies.
As of May 2018, companies operating in the UK will need to comply with the EU General Data Protection Regulation (GDPR). The UK presently intends to transpose the requirements of the GDPR into UK domestic law after the UK withdraws from the EU. The impact of the UK leaving the EU on the free flow of data between the EU and the UK, and the UK and U.S. is unknown at this time.
|TI Corruption Perceptions Index||2017||8 of 180||www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2017||7 of 189||www.doingbusiness.org/rankings|
|Global Innovation Index||2017||5 of 127||www.globalinnovation
|U.S. FDI in partner country (M USD, stock positions)||2016||USD 682,400||www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2016||USD 42,360||data.worldbank.org/