The UK could be the jumping off ground to both EU and US markets after Brexit.
Nilesh Shah, CEO of Blick Rothenberg, said: “The UK for many years has been the largest beneficiary of US investment and could further benefit in a post-Brexit era when the corporate tax rate comes down to 19% on 1 April this year, and 17% on 1 April 2020.”
US companies currently face relatively high domestic corporate tax rates but this is set to change under the new administration, which also plans to reverse the migration of intellectual property ("IP") and non-US profits to lower tax jurisdictions with a series of incentives and penalties.
Shah said: “US companies planning to expand to Europe are now going to have to consider whether it is worth transferring IP and non-US profits to a relatively small market with low rates such as Ireland, where the corporate tax rate is 12.5%, as this involves considerable set up and ongoing costs.
“Instead the UK offers the biggest market and still low tax rates, therefore it is more than likely that US companies may ignore Ireland and set up their international holdings here. This would provide a much bigger footprint for them and more jobs for the UK.”
Alexander Altmann, Director at Blick Rothenberg and head of the German desk, said: “More and more German companies are thinking about the possibility of tariff free trade from the UK to the US if the UK secures a free trade agreement with the US post-Brexit.
“From a German point of view, the US is the country’s biggest export market, followed by the UK as the second largest. Combining the two and setting up a hub in the UK for major international trade would make a lot of sense for a lot of German corporates and most certainly also for other European businesses.”
Shah said: “This is where a potential soft Brexit may have implications. If we end up having to give something in return for easy access to EU markets, the two concessions are likely to be taxation and immigration.
“As part of a negotiated soft Brexit, we may have to give an undertaking not to reduce our corporate tax rate further. However, this would not be detrimental to making the UK an attractive location for US companies. Whilst Ireland offers tax as the main attraction, the UK offers a bigger market and a tax rate that is still low – even if the US tax rate is reduced from 35% to around 20% or even to 15% as President Trump has indicated.”
He added: “If we do end up with a soft Brexit, the negotiation on immigration could also work in our favour. One of the main concerns from international companies is that they will not be able to get the skilled manpower they need if the UK stops all migration from the EU or imposes a very high threshold of skill for entry. Any easing of these requirements for skilled EU nationals would continue to make the UK attractive for international businesses.”
“All of the above assumes that any measures announced are for the long term. Businesses need certainty and they may not change behaviour if they believe that measures are likely to be short term in nature due to political uncertainties.”
For more information please contact Nilesh Shah at firstname.lastname@example.org
or Alex Altmann at email@example.com