In the latest edition of BCW Global Issues, my UK colleagues Nick Williams, John McTernan and John Young look at the profound implications for American business as a result of a truly historic week in British politics. This culminated today, Friday 20th December, in a decisive vote in Parliament for UK to leave the European Union on January 31st, 2020. We will be providing more analysis on this important topic as events unfold.
Happy Holidays
Geoff Beattie, BCW Issues & Crisis Lead, North America

What the UK General Election Result Means for U.S. Companies

The decisive election UK General Election result on 12 December has huge opportunities and implications for U.S. businesses with interests in the UK. This note outlines the facts, alongside forward-view implications.

1. UK Election Result

• Prime Minister Boris Johnson’s Conservative Party secured a significant 80 seat majority in the House of Commons in the General Election. This result means that the Prime Minister can govern with a strong majority in the House of Commons for the next five years. This stable majority has injected clarity into the British political system following three years of paralysing uncertainty.
• As a result of the election, Boris Johnson now has the Parliamentary numbers he needs to pass his Brexit Withdrawal Agreement. The legislation was reintroduced to Parliament today, Friday 20 December, and passed with an overwhelming majority of 358 to 234. Consequently, it is almost certain that the UK will leave the European Union on or before 31 January 2020.
• Domestically, the newly installed Government has a very strong mandate to deliver a sweeping set of manifesto pledges, most notably pouring significant funds into infrastructure investment and the National Health Service.

2. A Possible UK-U.S. Free Trade Agreement?

• After 31 January EU exit, the UK will enter into a formal transition period until 31 December 2020, during which time it will remain aligned to EU rules and regulations.
• Critically, this transition period will see the UK enter into negotiations with the EU and other states on future trade relations and, most significantly, the U.S. given the sizeable economic relationship.
• Prime Minister Johnson has set out his express desire to secure an FTA with the U.S. to deepen transatlantic economic relations, and the UK Government has already consulted on trade negotiations with the U.S. and published the consultation responses.
• Key areas highlighted in the UK Government’s consultation on a U.S.-UK Trade Deal were: Tariffs, Rules of Origin (RoO), Customs Procedures, Digital, Product Standards Regulation and Certification, Sanitary and Phytosanitary (SPS) Measures, Competition, Government (Public) Procurement, Intellectual Property (IP), Investment, Labour & Environment, Trade Remedies and Dispute Settlement, Small- and Medium-sized Enterprise (SMEs) Policy. In reality, any area of trade between the UK and the U.S. could be impacted, providing expansive opportunities for U.S. companies.
• Many large-scale companies and lobby associations will already be seeking specialised advice on how to amplify their influence with the correct audiences. The largest single volume of responses was from campaigning NGOs. As a result, companies and lobby groups will need campaign strategies prepared to mitigate such NGO campaigns. Examples would be: 38 Degrees: (Concern over the inclusion of the healthcare in FTA discussions); Global Justice Now: (Concern over trade dispute mechanisms that may benefit corporates).
• Sizeable regulatory and political hurdles exist on both sides of the Atlantic before an FTA can be ratified by Congress and the UK Parliament. Nonetheless, there is significant political will in Washington, D.C. and London to secure a deal to deepen economic ties whilst providing a major political boost to the respective governments.
• The U.S. Presidential elections in 2020 and initial UK Government focus on the EU-UK FTA will mean a larger window for U.S. companies to lobby around a U.S.-UK FTA into 2021–22.

3. U.S. Response to UK election result

• Following Johnson’s election, the U.S. State Department reiterated its commitment to expanding the UK and U.S.’s “robust economic relationship by reaching a comprehensive free trade agreement with the UK once it formally withdraws from the European Union.”
• This aligns with previous on-the-record comments from U.S. Trade Representative (USTR) Robert Lighthizer setting out the U.S.’s express commitment to negotiate and ratify an expansive U.S.-UK FTA. See USTR update here.

4. The Business Opportunity

• The U.S. and UK hold a significant trade and investment relationship and companies and business groups on both sides of the Atlantic will be keen to capitalise on the U.S.-UK trade negotiations beginning in February 2020.
• The UK is the single largest investor in the U.S. British companies have invested more than $540 billion in the States, accounting for more than 15% of all inbound foreign direct investment (FDI). The U.S. is also the largest investor in the UK. American firms have invested nearly $750 billion in the British market, accounting for more than 12% of all U.S. FDI worldwide.
• Target sectors include the pharmaceutical and agriculture industries — both already the subject of huge political controversy in the UK over possible inclusion in a US.UK-trade deal.
• Digital industries are particularly concerned about privacy and data regulation, as well as the SME sector which has expressed concern over the needs of their business community.

For more analysis on the future of US-UK relations at this critical time, please contact Nick Williams(nick.williams@bcw-global.com) or Geoff Beattie (Geoff.beattie@bcw-global.com)

Copyright © 2019 BCW. All rights reserved.