This article by Carl Richardson was first published in the Express & Star newspaper on 30th December, 2024.
Much has been written and said about the prospect and value of a Free Trade Agreement (FTA) between the UK and the US since the Brexit referendum in 2016 and the UK’s subsequent departure from the European Union four years later.
Negotiations between the two countries did begin in 2020, towards the end of Donald Trump’s first Presidency. However, despite initial hopes and some early signs of progress, negotiations stalled and never truly got going again under the current Biden Administration.
Now, as Trump prepares to return to the White House, there are calls for the government in London to renew efforts to secure a comprehensive deal, even in the face of much publicized talk of trade tariffs coming from Mar-a-Lago.
There is little doubt that an FTA between the two countries would bring considerable benefits, if also some costs. At a minimum it would increase market access and offer better protection for businesses, helping to stimulate trade by up to $20billion according to the UK Government.
With that said, many trade experts on both sides of the Atlantic remain sceptical that the UK and US can reach agreement on a “full fat” FTA. While tariffs may attract the headlines, it is the more meaty specifics around agricultural trade that appear fundamental to placing such a deal beyond reach.
Fortunately, even without an FTA, trade between the two countries is strong and growing.
The value of existing trade between the UK and US currently totals nearly $400bn, with the US clearly positioned as the UK’s single largest national trading partner. Indeed, the proportion of UK exports going to the USA has risen significantly over the last decade, up from 17% to 22%, mainly powered by a big increase in services.
The UK and the US are also each other's main foreign investors. In 2022, the US had $1.1 trillion in FDI stock in the UK, while the UK had $663.4 billion in FDI stock in the US. To put that into some context, the FDI position held by American companies in Britain was more than the entirety of such FDI held by all of the countries within the EU.
In light of this, and in order to build on the excellent personal business relationships that have long existed across all parts of the US and UK, perhaps the focus should be less on a headline grabbing FTA and more on creative approaches that can help to stimulate an even greater trading relationship?
Over the past four years, in the wake of the breakdown of FTA talks, the UK’s previous Conservative government put significant effort into securing Memoranda of Understanding (MoUs) on trade and economic cooperation with particular US states.
While non-binding, these had a consistent focus on sectors identified as areas of mutual growth, including advanced manufacturing, life sciences and fintech, and were designed to make it easier for companies on both sides of the Atlantic to do business by facilitating new commercial, investment, and R&D partnerships, as well as finding solutions to trade barriers.
The approach met with considerable success, and eight such MOUs were signed with Indiana, North Carolina, South Carolina, Oklahoma, Utah, Washington State, Texas and Florida. The latter of these alone has an economy with a GDP of over £1 trillion, approximately the same size as Spain, which gives a sense of the scale of the opportunity that could be gained by UK businesses without requiring a full trade agreement.
With the recent change in government in the UK, it is still unclear exactly how the new Labour administration might proceed with future such state-level MOUs. Jonathan Reynolds, the new Secretary of State for Business and Trade, has highlighted international commerce as a key opportunity for generating growth within the UK economy but details of how he intends to do this have yet to emerge. It is surely to be hoped that cross-party politics do not get in the way of a good idea such as the MOUs.
These state-level agreements should also give encouragement to the UK’s own ‘city-regions’ to seize the initiative and promote themselves more deliberately across the US. There are extraordinary business opportunities across the vast American market and offer newly elected mayors in the West Midlands and other regions of England an excellent opportunity to boost growth in both countries.
Indeed, the UK Government has just published a White Paper on the granting of greater devolution powers to the English regions – as part of a push to decentralize control away from London. Could this offer ambitious regional mayors and areas the opportunity to lead their own regionally focused trade missions in the future, playing to regional economic strengths, or even to strike their own state-level trade deals in the future?
Our own international investment business (www.richardsons.co.uk) certainly continues to regard the US as a key market, alongside the likes of Singapore, Canada, Australasia and of course the UK.
We have long admired the American ‘get up and go’ business culture and subsequently now have a wide range of interests and investments in the US, spread across sectors and from coast to coast.
Earlier this year we partnered with New York City-based Leeds Equity Partners to invest in education and training sectors across North America and we continue to explore a range of new investment opportunities from east to west coast.
Trade between the UK and US is strong but has significant potential to grow further. An FTA would be very welcome but there’s no reason to wait for that. The opportunity for business across both countries exists now. We just have to seize it.