The United Kingdom and the United States have long valued each other as important and interdependent economic partners. Both countries enjoy investment-friendly legal, financial and market environments, with productive workforces, world-leading industry clusters and dynamic prospects across many sectors. From 1987 to today, the UK has remained the largest source of foreign direct investment (FDI) into the United States, with approximately $540.5 billion in total stock in 2013 (nearly one-fifth of all FDI in the United States). Similarly, the total US FDI position in the UK rose to nearly $571 billion in 2013.
These numbers have grown steadily during recent years as our bilateral investment relationship continues to expand; indeed, the value of the total UK stock in the United States has increased by a compounded annual growth rate of 3.4 per cent from 2009-2013.1
These data show that UK businesses have retained their confidence in the United States as a destination for their investment, and that their confidence is growing. In fact, companies around the world are reporting exceptionally positive outlooks on the US business environment. The World Economic Forum’s 2014-15 Global Competitiveness Index ranks the United States among the top five economies in the world, citing its strong institutional framework, business sophistication and innovation.2 In addition, A.T. Kearney’s 2014 FDI Confidence Index revealed that global business leaders once again ranked the United States as the top destination for investment. According to the report: “The message here is crystal clear: the United States is back in the minds of global business leaders as the prime destination for their investment. Never in the 16-year history of this index has a country had such a positive net position”.3
Although the US economic recovery can partly explain the increase in investor confidence during recent years, the question remains, why are UK companies and their global counterparts choosing the United States over other investment locations? One major reason is that entrepreneurs and managers in both countries understand the value of innovation. The United States is home to 31.1 per cent of the world’s total research and development (R&D) expenditures.4 US affiliates of UK corporations spent $34.7 billion on R&D in the United States between 2007 and 2011.5 The United States is also home to 18 of the world’s top 25 research universities and many more top-flight research institutions,6 which together generate a host of R&D partnership opportunities as well as a steady supply of researchers and highly educated workers.
Another reason that investors choose to operate in the United States is its culture of entrepreneurship and leadership in information and communications technology (ICT). As John Breidenstine, the Minister Counselor for Commercial Affairs at the U.S. Commercial Service (CS) in London writes on page 126, more than half of all ICT R&D takes place in the United States. The shared focus on innovation gives UK start-ups a leg up in global competition when they operate on both sides of the Atlantic. SelectUSA Tech, a new seminar series launched by CS London helps provide entrepreneurs with the tools they need to take the leap into the US market.
While the US ICT sector holds great interest for international investors, the main attractors of direct investment in the United States continue to be the manufacturing industries. According to estimates from the U.S. Bureau of Economic Analysis (BEA), more than one-third of FDI into the United States occurs in the manufacturing sector. International companies – including the UK’s BAE Systems, Rolls-Royce, Johnson Matthey and GlaxoSmithKline – maintain extensive US operations in chemicals, drugs and vaccines, primary and fabricated metals, transportation components ranging from aerospace to motor vehicles and more. Overall, manufacturing accounted for 20 per cent of US gross domestic product (GDP) in 2013.7 The United States ranks among the world’s top five countries in manufacturing competitiveness, due in no small part to its educated workforce and favourable regulatory environment.8
What is more, the United States is increasing investment in technological development in order to maintain competitiveness in manufacturing. President Barack Obama recently launched the National Network for Manufacturing Innovation (NNMI), a series of interconnected research hubs. This initiative brings together public and private sector partners to accelerate the design and implementation of state-of-the-art manufacturing technologies. Each Innovation Institute will focus on different advanced techniques and materials, including 3D printing and lightweight metal alloys. Four of these Institutes have already been established, and more are coming soon. By utilising advanced materials and digital production techniques, manufacturers in the United States can reduce the time and cost needed to move a product from idea to market: a clear advantage in today’s fast-paced marketing cycle.
Competitive energy costs are yet another significant advantage for US-based manufacturers. According to estimates from the International Energy Agency, lower gas and electricity prices in the United States compared to Europe saved the US manufacturing industry close to $130 billion in 2012 alone.9 Investors in the chemical, metal (especially steel), and transportation sectors are in a particularly advantaged position to benefit from these lower energy costs.10
In addition to all these reasons why foreign investors are excited about the US market, the nationwide, high-profile commitment to facilitating FDI through the SelectUSA programme has made it clear that the United States is open for business. In 2011, President Obama created SelectUSA as the US government-wide initiative to provide assistance directly to firms that are considering establishing operations in the United States. SelectUSA assists companies of all sizes to find the information they need, connect with the right people at the local level, and navigate the federal regulatory system. SelectUSA coordinates related resources across US federal agencies to ensure that investors receive professional and timely service.
In line with this mission, SelectUSA will be hosting its second Investment Summit on 23-24 March 2015, near Washington, DC, in order to connect investors with opportunities throughout the United States and provide practical tools and information. President Obama hosted more than 1300 participants at the ground-breaking (and sold-out) 2013 Summit, including investors from 60 global markets. The 2013 Summit also welcomed representatives from 48 states, the District of Columbia, and four US territories, as well as officials from across the federal government to answer investor questions on the trade show floor.
The upcoming 2015 SelectUSA Investment Summit will be even bigger. This event presents an ideal opportunity for UK firms of every shape and size – whether start-ups, medium-sized enterprises, or multinationals – to learn how, where, and why to invest in the United States. Companies thinking about opening or expanding their operations in the United States will be able to find answers in a single location and meet one-on-one with federal, state, and local officials who can personally explain a variety of investor resources and incentives. With this wealth of information, best practices, important contacts and unprecedented opportunities available all under one roof, the 2015 Summit is one event UK businesses will not want to miss.
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1 U.S Bureau of Economic Analysis. Foreign Direct Investment Position in the United States on a Historical-Cost Basis, by Country of Ultimate Beneficial Owner, 2008-2013.
bea.gov/international/di1fdibal.htm (accessed October 22, 2014).
2 Klaus Schwab. Global Competitiveness Report 2014-2015.
reports.weforum.org/global-competitiveness-report-2014-2015/
3 AT Kearney. Foreign Direct Investment (FDI) Confidence Index. June 2014.
www.atkearney.com/research-studies/foreign-direct-investmentconfidence-index.
This annual index is based on a survey of more than 300 executives from 28 countries, which ranks countries on how political, economic, and regulatory changes will affect FDI
4 Batelle. Global R&D Funding Forecast 2013. December 2013. www.battelle.org/docs/tpp/2014_global_rd_funding_forecast.pdf?sfvrsn=4
5 U.S Bureau of Economic Analysis. Selected Data of Majority-Owned U.S. Affiliates by Country of Ultimate Beneficial Owner, 2007-2011.
bea.gov/international/di1fdiop.htm (accessed October 14, 2014)
6 Times Higher Education World Reputation Rankings 2014. October 2013.
www.timeshighereducation.co.uk/world-university-rankings/2013-14/world-ranking
7 U.S Bureau of Economic Analysis. Industry Data, Gross Output by Industry.
www.bea.gov/iTable/iTableHtml.cfm?reqid=51&step=51&isuri=1&5114=A&5102=15 (accessed October 14, 2014)
8 Deloitte Touche Tohmatsu Limited and the U.S. Council on Competitiveness. 2013 Global Manufacturing Competitiveness Index.
www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_pip_GMCI_11292012.pdf (accessed October 14, 2014)
9 International Energy Agency. World Energy Outlook 2013 Factsheet.
www.iea.org/media/files/WEO2013_factsheets.pdf
10 University of Michigan. Shale Gas: A Game-Changer for U.S. Manufacturing. July 2014. energy.umich.edu/sites/default/fi les/PDF%20Shale%20Gas%20FINAL%20web%20version.pdf