Britain is missing its chance to divert investment from America
John Flint, the outgoing chief executive of Britain's National Wealth Fund, which has been capitalised with £28 billion to help accelerate private investment into the UK's clean energy and growth industries, told MPs last week: 'The world has got very strange in the last few months. The UK looks good right now on a relative or comparative basis.
'There is a government with a big majority, institutions that work, respect for the rule of law … The biggest consumer of capital internationally [America] is on a different track right now. We have a window and a moment where we can appear to be different.'
However, the view among some powerful Wall Street investors is that while more opportunities for investing outside the US would be welcome, the UK government hasn't given them any good reason to deploy their capital.
As one Wall Street executive told me: 'I think the UK has really significant challenges. It's not leading in enough places to attract capital. It doesn't have the innovation engine going and it has other structural challenges still lingering: inflation, very sluggish growth, very high social spend.
'They've got an entitlements problem, just like we have an entitlements problem. But we have a more innovative, dynamic economy. I don't see a real plan. And they're chasing away capital, not attracting capital.'
Flint, who is due to leave his role in August, told MPs that the UK does not yet have a list of investable projects ready to present to prospective investors. When asked how long it would take to create the list, he said: 'I cannot give you an answer, because it depends on so many different factors. Planning is one of them, which I know the government are reforming.'
Meanwhile, the government has no apparent plan to stop the decline in UK-listed growth companies. Overseas takeovers of UK-listed companies have accelerated, while those companies have not been replaced with new listings.
Worryingly, it was revealed last week that Sir Pascal Soriot, chief executive of AstraZeneca, Britain's most valuable public company, would like to move its stock market listing to the United States.
The government's series of U-turns and the rebellion within the Labour Party over welfare reforms have not helped improve the UK's image to global investors, instead raising questions about the government's ability to manage spending.
The uproar on Wall Street over Trump's 'liberation day' tariffs in April raised hopes elsewhere that Europe could reverse the increase in global inflows to the US since the pandemic. The US received 41 per cent of global gross capital inflows in 2022-23, the highest share of any country and nearly double its pre-pandemic share of 23 per cent, according to the US Council of Economic Advisers.
So far this year, outflows from US equity funds have more than doubled to nearly $87 billion, while more than $100 billion has flowed into European equity funds — up threefold on the same period last year, analysis from LSEG's Lipper Fund research database showed.
However, Wall Street is warning that the minor reallocation of capital from the US at the start of the year could be coming to an end as the early impact of Trump's tariffs is less severe than feared.
Stuart Kaiser, Citi's head of US equity trading strategy, said: 'There was a period of probably six out of nine weeks where you saw net selling of US ETFs [exchange-traded funds] and long-term mutual funds. So I think the initial shock of the tariff headlines did hurt consumer sentiment and did hurt investor sentiment, but it does also feel like those investors are kind of re-engaging back in.'
The UK cannot only rely on America's problems alone to attract more investment. Policymakers need to come up with a catalyst to entice more investment away from the US.
Louisa Clarence-Smith is US Business Editor of The Times
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