Our latest View from Abroad, written with Kevin Brown, Managing Director at CliftonLarsonAllen LLP.
Each week that passes brings closer the day when the UK and EU must finalise the former’s exit from the latter.
Although many opinions, predictions and outcomes have been discussed, the truth is that none of us really know what effect Brexit will have on the UK and global economy. It is likely we won’t know until the experts and scholars have had time to digest and reflect in years, if not decades, to come.
Many, if not all, of my clients work in the global economy, with a focus on UK-US trade. In this context, I was particularly interested in foreign secretary Boris Johnson’s “Ode to Brexit” as one commentator called it, that he penned for The Telegraph; swiftly followed by PM May’s speech in Florence.
Unfortunately, I feel neither Johnson’s article, nor May’s speech, gave further indication as to where the UK sees itself post-Brexit. Although both missives were certainly on the positive side, they lacked much detail, as pointed out by the EU’s chief negotiator, Michel Barnier.
UK businesses: coming to America?
Since the triggering of Article 50 in March 2017, most of the businesses, boards and their owners that I have come across have sought to address certain concerns that they have with their businesses in the UK and their evolution. These clients, as is the way with successful entrepreneurs, seek new opportunities from uncertainty. In my view, Brexit has given them the impetus to do so; these companies are increasingly looking to the US for that continued growth.
UK businesses come to the US for many reasons, but the main one is plain and simple; it’s the largest economy in the world. My clients have offered several other reasons, including:
Common language. There is no need to have command of a new language or hire dual linguists to assist with growth. Companies can understand what potential customers, employees, authorities and advisers say and require and can make decisions quickly and effectively with little guesswork or misunderstandings.
US-based clients. Most UK companies already have US-based clients they serve in the UK. Many of our clients have looked to leverage that relationship, which they seek to do by moving to the US.
Funding. New ventures require seed or venture capital or private equity - the largest of whose investors still sit here in the US. For companies seeking access to the investment required to grow a business, coupled with the market to reach those growth goals, moving to the US is seen as a win-win situation.
Stability. Brexit has created uncertainty in the UK market; businesses with growth aspirations and their owners have looked to alternative sources of growth. Some UK businesses see a move to Europe as potentially fraught with greater uncertainty. In that context, the US offers a stable economy that allows a business to move forward on solid foundations, in the anticipation that the historically close UK-US ties will abide.
The elephant in the room
I have yet to refer to the elephant in the room – not POTUS himself, but the political uncertainty that the current White House administration finds itself in since January 2017. Regardless of your political views, the reality is that many of the policies that Trump’s campaign relied on have thus far proven impossible to get through the Senate. This has even required the President to consider brokering deals with the Democrats - something that many thought that neither side would ever countenance.
What many of us in the professional services industry thought we would get, particularly in the tax and accounting professions, was a more business-led, focused tax regime that would encourage investment in the US by reducing both the complexities and the rates of the tax system, coupled with reduced regulations. We have yet to see either come to fruition, but the anticipation is that we will see movement in one of these areas, if not both, during Trump’s first term - if not exactly in the form he would have hoped for.
Despite the negative coverage that Trump has garnered, there is still a great appetite in those UK businesses able to see through the bluster and concentrate on what matters most to them: how do I grow my business and where can I do so outside the UK? The answer I have seen time and time again, is the US of A - and I don’t see that changing any time soon. Apparently, neither do UK businesses.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.