Foreign Direct Investment Between the US and UK Has Stalled

Recent figures published by the Department for Business and Trade reveal modest growth in investment flows between the two countries, prompting caution from industry experts.

Investment Is Needed for Long-Term Economic Growth

Jim Brown, Chief Operating Officer, expressed concern over the figures:

The latest statistics from The Department for Business and Trade show that US investment into the UK grew by 1.4% and investment from the UK into the US by only 0.3%. This is concerning as FDI levels are even more of a concern than trade for long term economic growth.

FDI has long been a cornerstone of economic development, contributing to job creation, innovation, and the international expansion of businesses on both sides of the Atlantic.

Both countries have benefited greatly from such investment in the past, which creates jobs and supports businesses to expand internationally. But the current uncertainty about long-term regulation and taxation in relation to cross border matters seems to have hit investor confidence.

The Role of Trade Policy and Market Uncertainty

The data covers a period prior to the UK’s introduction of the so-called ‘Liberation Day’ tariffs, which came into effect on April 2nd, adding further complexity to cross-border investment decisions.

However, the period covered by these statistics is pre the introduction of the ‘Liberation Day’ tariffs on 2nd April. Although many of the tariffs were deferred, tariffs and in some cases just the threat of tariffs, will have had a significant impact on trade and likely FDI levels, as uncertainty causes investors to lose confidence. The next trade statistics where we may see this play out are expected in mid-September, for the period to the end of June.

While early signs of trade recovery were evident before the implementation of the tariffs, the full economic impact may take time to emerge.

Before the introduction of tariffs there were significant increases in trade levels. Overall, the trade for the four quarters to the end of Q1 2025 was 6.8% up on the same period a year earlier. In this same period imports to the UK were up 5.4% and exports to the US were up by 7.8%.

A Vital Lifeline for Cross-Border Growth

Despite the current slowdown, there remains cautious optimism that ongoing trade discussions and policy developments could provide a much-needed boost to FDI.

Jim concluded:

US companies with global interests, including in the UK, were no doubt stockpiling ahead of tariffs being introduced, but others have struggled since to pass on all of the increased costs to their customers. Hopefully FDI levels will not follow the trend, and are buoyed by the US UK trade deal, as they are a vital lifeline for cross border growth.

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For more information, please contact your usual Blick Rothenberg contact or Jim Brown using the form below.