On March 23th 2018, Robert Wood Johnson, Ambassador of the United States of America to the United Kingdom of Great Britain and Northern Ireland stated on Twitter that it is “Great to see agreement between the UK and EU27 on the Brexit implementation period”. He continued to say that “This is a positive step towards an orderly Brexit” and “in everyone’s interests, including the USA”.
This statement was well received by the transatlantic business community in Britain. First, it was noted because until recently leading US Government officials seems to have been fairly cautious to publicly comment on the status of the Brexit negotiations since the referendum took place on June 23rd, 2016.
Second, the statement highlighted the importance of the agreement made on March 19th, 2018, between the British and European Brexit negotiators on a transitional period. With the UK officially leaving the EU in March 2019, transatlantic businesses had been calling early on such a period so to minimise disruption and allow for a fully negotiated framework to be completed. It was clear from the beginning that the time set aside for the withdrawal would not be enough for businesses and people to adjust.
The transitional period agreed in March 2018, will still mean that the UK will no longer be a EU Member State as of March 30th, 2019, and no longer participate in the decision-making process of the EU. It will, however, maintain all the advantages and benefits of the Single Market, the Customs Unions, and EU policies until December 31st, 2020, when the transitional period ends.
Third, the Ambassador ’s statement emphasised a commonly known fact and reality: The UK is an extremely important economic partner to the US. Available data shows that more than 40,000 US firms export to the UK. 7,500 US businesses are active in the UK. Those businesses employ over a million people in the UK. No other country receives more American foreign direct investment (FDI) than the UK. Almost 200,000 US citizens are residents in the UK; forming a vibrant American community there.
This impressive commercial foot print does not come as a surprise: The US and the UK share a historic cultural and political link and friendship; the UK is considered to provide a business-friendly environment, with a solid track record and leading institutions in innovation and research. For many US firms, the UK had been the first foreign market where they established operations outside America.
In addition, through its membership of the EU, the UK has offered access to a market even bigger than the UK, the European Single Market. Indeed, the EU accounts for the highest share of total exports from UK-based firms. Many foreign businesses, particularly US businesses, had come to the UK with the attraction to use the country as a gateway to a much larger market and consumer base. At the same time, businesses in the UK had enjoyed the access to talent from all over Europe. We know that the UK’s departure from the EU will change the UK’s current access to the EU market and talent.
It is in that context that American businesses in particular, as the largest investor in the UK, follow quite closely the developments in the Brexit negotiations. It is in that context, among others, that the Ambassador expressed that an orderly Brexit is in everyone’s interest, including the USA. It emphasises how an event like Brexit does impact not only the UK and the EU; but it matters to everyone who has a strong relationship with this part of the world, particularly the US.
There is no doubt, the UK’s decision to leave the EU continues to present transatlantic businesses with a great challenge. It is a rupture to existing political certainties and business models. Leaving the EU, in whatever form that may be, will come with an economic and operational cost for businesses as they need to re-visit if and how they can best service their customers in the UK and the EU. It will also come with a cost to people who now may have to consider the new border between the UK and the EU in their personal planning for the future.
Yet, while the final details of the UK’s departure have yet to be agreed, there is also reason to be optimistic: First, the UK economy has done better than predicted since the 2016 referendum result. The UK Government is now working actively to build and implement a credible plan for a post-Brexit innovative, competitive and growing UK economy, which, among others, will hopefully include a smart and reasonable immigration system for EU and non-EU workers.
Second, the Brexit talks, while no less complex in nature, seem to be back on track after much time had been lost on the way in 2017. With the transitional period agreed, the danger of a ‘cliff edge scenario’, in which the UK would have broken away from the EU in March 2019 without any agreement, has luckily been avoided.
Third, while sorting the future relationship for the UK and the EU will remain the biggest political and economic priority for the months to come, there are promising signs that the UK and US will also seek to further tighten their economic relationship.
Since July 2017, both the US and the UK Governments have convened regular talks in form of a US-UK Trade and Investment Working Group. The talks are meant to explore tangible measures that help businesses to trade across the Atlantic and to lay the groundwork for a future bilateral trade arrangement.
While generally high-level in nature, the tangible outcome of these talks so far is worth noting: On March 20th, 2018, both Governments launched a Small Business Dialogue that is meant to discuss ways to deepen trade and investment for smaller and medium-sized enterprises in particular, to identify resources currently available from both Governments to assist them, and to hear from companies and relevant stakeholders directly as to what the specific challenges and opportunities are when trading bilaterally.
This initiative should be very welcome. It builds on what is the largest and most successful economic relationship between two countries in the world. It is an encouragement to companies who are thinking about going abroad, that the UK and the US are good places to do business, no matter the political times of changes we are in.
Emanuel Adam is a Director at BritishAmerican Business (BAB), overseeing the organisations policy & trade portfolio in the UK and the US.
BritishAmerican Business (BAB) is an exclusive corporate network and the voice of transatlantic business, dedicated to advancing economic growth for companies with operations in the US and the UK. They provide their members with first class networking opportunities to enable them to meet people that will help their business, including potential suppliers, customers, competitors and relevant people from government. Visit www.babinc.org/membership-london.
