05/12/2023Ten Observations from Ten Months of Revised BVCA Model Investment Documents
In February 2023, the British Venture Capital Association (BVCA) published revised standard form documents for… Read more
18/01/2018
Donald Trump is presiding over one of the most business friendly administrations in history. At the end of 2017, he signed major legislation which lowers corporation tax from 35 to 21%. The economy is growing at about 3.5% and the stock market is at a record high — up nearly a quarter since this time last year.
Businesses both big and small are overcome with optimism. “Not since the roaring Reagan economy has small business optimism been as high,” said the National Federation of Independent Business in its December report. Confidence among blue chips hit a near six-year-high at the end of 2017 according to a Business Roundtable survey.
But does this pro-business environment extend to British companies? On the campaign trail, Trump promised to put America first at every opportunity. So is he rolling out the welcome carpet for foreign business or slamming the door shut?
It’s important to remember that there’s never really been a bad time to expand into the US. Our friends across the pond are our biggest customers (by nation), accounting for £96 billion in exports every year. They clearly like what we have to sell.
At the same time, Brexit means an uncertain future with our continental cousins. China is flexing its muscles over steel and currency. The Russian state has been linked to cyber espionage on an industrial scale. Growth in hotly anticipated economies like Brazil has stalled.
Many would say the US is the safest bet out there.
And it’s getting safer, at least in terms of regulation. The Trump administration has moved fast to rescind various environmental red tape. This should benefit major UK blue-chips like Shell and BP. Post-2008 financial rules placed on Wall Street have also been relaxed to the relief of British banks like HSBC, Barclays and Lloyds.
The UK is the largest foreign investor in US manufacturing, investing $180 billion in 2014. Of the one million jobs across America that are supported by British companies, nearly a quarter are in manufacturing. You can see why the President’s campaign pledge to spend $1 trillion on infrastructure has British business licking its lips.
And yet.
Dan DiMicco, a key advisor to the president during the campaign, made it clear that American companies will be given first priority.
Trump said on the campaign trail last year “America first will be the overriding theme of my administration…no American citizen will ever again feel that their needs come second to the citizens of foreign countries.”
UK businesses would be right to wonder how this translates to doing business in the US. Would they face a fair fight in a two way tender against a local company?
One answer is to ‘get American’, and quick. NTT’s Data Unit has been selling to the US federal government since 1965. You might think a Japanese company would stand out like a sore thumb in America’s heartland.
This might explain their enthusiasm in acquiring Dell’s IT services business for $3billion. The company, previously owned and run by former presidential candidate Ross Perot, has no doubt bestowed a degree of establishment-status on Nippon Telegraph & Telephone.
When it comes to fitting in, the $1.5 trillion Trump tax reform may help.
US-based Venture Capitalists, investors and potential acquirers would far prefer an investment prospect to be incorporated in the US (Delaware, to be exact). Up to now, UK companies have resisted, arguing that our 19% tax rate made it more than worthwhile to stay put.
In reducing corporation tax to 21% the Tax Bill removes that argument. British businesses may chafe at becoming US residents for tax purposes, but given the current administration’s penchant for all things home-grown, that may help them in the long run.
30th January 2018, 6:00 pm – 9:00 pm
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