Direct Investment between the United States and the United Kingdom
“At a time where we need to use every tool in our toolbox to continue to put Americans back to work and grow the economy here at home, promoting foreign direct investment is an important opportunity to accelerate our economic recovery.”
– Barack Obama, President of the United States, June 20, 2011
The United States and the United Kingdom are among each other’s strongest commercial partners. With a strong legacy of bilateral trade and investment, it is imperative for both economies to continue exploring mutual areas of growth and development to sustain global economic competitiveness. Bilateral direct investment is one key element of this goal and SelectUSA can be a resource to British firms that already are or are considering doing business in the United States.
The United Kingdom is the largest source of foreign direct investment (FDI) in the United States. In 2010, the total stock of British direct investment in the United States was valued at $432.5 billion (approximately £275 billion), accounting for nearly one-fifth of all FDI in America. Similarly, the total stock of direct investment by US companies into the UK economy is valued at more than $508 billion (approximately £323 billion). These cross-border investments positively contribute to the host country’s economic climate while strengthening their economies at home.
In the United States, the impact of British investments is significant. They account for nearly 1 million US jobs in highly skilled and well-compensated positions with nearly $72 billion in annual wages. US subsidiaries of British firms have nearly $2 trillion in total US assets and devoted nearly $257 billion in property, plant and equipment investments in America in 2009. The same year, they accounted for nearly $6.5 billion in research and development expenditures and contributed $25 billion to total US exports.
These investments have shaped the US economic climate in such key industries as aerospace and defence, biotechnology, information technology and high-tech manufacturing. In fact, nearly 21 per cent of all British investments in America exist in manufacturing ($93.7 billion), with sectors like chemicals accounting for nearly $50 billion; while investments in the transportation and equipment manufacturing sectors are valued at $16.1 billion (figure 1).
Overall, FDI is an integral part of the US economy, equivalent to 18.4 per cent of its GDP in 2010 according to the OECD. FDI supports nearly 5.3 million US jobs in high-value and high-wage positions. Even with global economic volatility in recent years, FDI in the United States has remained steady. More than $220 billion in FDI flowed into the United States in 2010, a 30-per cent increase from 2009. And the United States consistently ranks among the top countries in the world in numerous confidence measures (figure 2). Given the sheer size and diversity of the US economy, its ability to offer a stable and predictable investment climate to domestic and international businesses is unparalleled.
Investors choose to conduct their valuable, proprietary activities in America to benefit from our skilled and creative workers, innovative industry clusters, strong protections for intellectual property and a predictable governance framework. For instance, the National Science Foundation (NSF) analyzed business data it gathered alongside the US Census Bureau and the US Bureau of Economic Analysis and found that foreign firms have a growing share of R&D investments in the United States. Firms recognize the hospitable climate the US provides for its most valuable assets in product development, innovation and commercialization.
According to Battelle Memorial Institute, 34 per cent of all global R&D in 2010 took place in the United States, with almost half of the developed world’s researchers working in America. This research has yielded impressive results, drawing 45 per cent of all Nobel Prize winners in the fields of chemistry, medicine and physics to complete their research in America. TheUnited Statesprovides a world-class framework to safeguard and grow such investments. As the Global Manufacturing Index published by Deloitte and the US Council on Competitiveness notes, “strong intellectual [property] protection not only encourages innovation, it provides a level of confidence in an economy needed to attract FDI and spur technology transfer.”
FDI’s impact on the US economy transcends its borders. In addition to introducing new capital, creating new jobs and strengthening US competitiveness, US affiliates of foreign-owned firms account for almost 19 per cent of total US exports. In recent years, the steady rise in the proportion of US exports originating from these firms is evidence that multinational companies locate in America not only to service the US market but to maximize the opportunities presented by its export platform as well. After all, the United States nearly doubles its exporters’ market access through strategic trade agreements that connect the United States with 610 million consumers worldwide. With Congress’s recent approval of US bilateral trade agreements with South Korea, Panama and Columbia, this market size is expected to grow significantly.
Foreign direct investment brings jobs to our shores and supports US economic growth. Firms recognize the unique opportunities presented by an integrated US platform – economic stability, open-market principles, a well-educated workforce, and access to global markets. They target theUnited Statesfor business investment and thereby help to strengthen the overall global competitiveness of theUnited States.
For British firms exploring strategies to enter and expand in the US market, SelectUSA is a federal resource to provide research and information, identify potential federal state, regional and industry partnerships, and respond to reported investment impediments involving federal rules and regulations.
The history of bilateral trade and investment between the United States and the United Kingdom has shaped our respective and collective economic strengths. As we strengthen our investment and trade ties with our partners around the world, we continue to seek opportunities to grow and maximize mutual commercial and economic relationship.
Established by Executive Order of the President, SelectUSA is a government-wide initiative to promote business investment in the United States by both domestic and foreign firms. To learn more, visit www.SelectUSA.gov.
American British Trade & Investment
This article was originally published in American British Trade & Investment 2012, the annual investment guidebook produced by BritishAmerican Business, the leading transatlantic organization dedicated to helping its member companies build their business on both sides of the Atlantic.
Topics: Getting Started, Insights & Statistics, Market Research, and Official Agencies