Great Britain has finally exited the European Union, and now foreign investors are trying to assess a complex situation with many unknowns. The good news is there are new opportunities created out of uncertainty.
— By William Bell
The United Kingdom’s process for leaving the European Union (EU) is finally completed in terms of being officially separated. The challenge now for foreign investors is determining what this means in terms of cross-border trade, immigration, currency rates, labor availability, and even the relationship of Great Britain with other countries.
It took more than three years from the vote approving withdrawal from the EU to the final exit, and during that time, foreign investments in the country declined. The expectation is that the picture is about to change, meaning there are many new opportunities emerging from uncertainty for companies ranging from import/export consultants to technology specialists to manufacturing. The foreign investors who take advantage now will be poised to grow with the new UK economy.
Investors Waiting in the Wings
The uncertainty of when and how Brexit would take place has taken a toll on foreign investments over the last couple of years.
Financial Times research found the number of new jobs in the UK created through foreign greenfield investments declined by 19 percent over a recent three-year period. A greenfield investment is one in which a foreign investor constructs new operational facilities from the ground up. UK manufacturing jobs funded by foreign investors fell, too.
Here is the most important point: Investors are not planning on leaving the UK in large numbers now that Brexit is official. They are following more of a wait-and-see strategy due to uncertainty.
The actual end of EU membership is a strong first step toward returning to a growing economy and increasing foreign investment. The UK government will spend 2020 finalizing issues, like trade with other European countries, labor mobility and stabilizing the currency.
Resilient and Ready to Thrive
One of the most important characteristics of the UK economy is its resiliency. London is still the financial capital of Europe and home to approximately 60 percent of Fortune 500 European headquarters. Per the Doing Business 2020 ranking, the UK was eighth out of 190 economies. Brexit has created a remarkable opportunity to blend low-risk investing with innovative opportunities to help the country maneuver through the shifting economic landscape on the world stage, while forging ahead on planned growth.
For example, trade and investment consultants will be in great demand to help international companies monitor and adapt to the unfolding new rules. As the UK is now free to develop trade on its own terms, new markets may open up. Establishing business in the UK and taking advantage of new export markets is a potential success strategy. Trade negotiations can take a while, but there is no doubt the UK government will work as quickly as possible to reposition itself in the global trade market. Consultants can also help UK global businesses assist their customers with solving problems related to Brexit.
The main sectors attracting foreign investments are utilities, auto repair, financial services, metal and machinery products, and administrative support services. The large numbers of retail and hospitality projects are attracting retail and wholesale investments. An area with room to grow is in information and communication technologies. Implementing business process automation and advanced technologies is one of the largest areas of opportunity – robotics, artificial intelligence, machine learning, office automation, etc. There is also a need to help penetrate the country with 5G mobile broadband.
The way the UK labor market adapts depends on the UK response to issues like immigration and migration. Realistically, automating business processes may become a critical strategy if the labor market is smaller and needs to be more efficient and productive.
Many Ways to Stay up-to-Date on Post-Brexit Opportunities
SelectUSA, a government program promoting business investment in the United States, looks at the picture from both angles – UK FDI in the USA and U.S. FDI in the United Kingdom The top six industries it names are business services, software and IT services, financial services, communications, industrial equipment, and textiles.
In February 2020, Alan Farkas, business analyst with Dorsey & Whitney law firm, said during an interview the UK may see a “significant uptick” in foreign investment after Brexit. The reason is that the UK can develop its own zero-tariff, zero-quotas laws and other incentives that promote investing.
There are private and governmental resources dedicated to promoting foreign investments through foreign direct investment (FDI) and import/export activities. InvestUK2 matches foreign investors and entrepreneurs with UK business opportunities. The firm ensures that its assistance is aligned with UK government policies which can be especially helpful during the early post-Brexit time period.
As the UK is now free to develop trade on its own terms, new markets may open up. Establishing business in the UK and taking advantage of new export markets is a potential success strategy.
The UK government agency Department for International Trade is another business resource. The website offers a listing of the top investment opportunities at any given time. They include many state-of-the-art projects like hydrogen infrastructure, advanced manufacturing innovation in District Scotland, research and development park at Bexhill Enterprise Park, integrated energy systems and Smart City in Bristol City, and dozens of retail and hospitality projects. Additional investment opportunities post-Brexit are found by working with U.S. agencies like export.gov and the U.S. State Department.
There are also a number of business groups that provide invaluable networking opportunities and information. The U.S.-UK Business Council is actively involved in advancing the interests of U.S. investors, securing open market access through existing trade agreements and having substantial input into the new U.S.-UK trade agreement.
Another is the British-American Business Association, which was created by merging the British-American Chamber of Commerce in the U.S. and the American Chamber of Commerce in the UK. This trade association advocates for pro-business policies and regulations and promotes trade and investment between the U.S. and the UK. With a membership of 400+ companies of all sizes, it is a good networking and information resource.
Always Strong Partners
No one knows at this point what the future holds for foreign investors in the UK, except for one fact: The U.S. and the UK are strong partners in promoting each other’s economies, and this is good for business.
There are some exciting changes coming to the UK business environment now that it is post-Brexit.