Britain is significantly less attractive as an international business location because of Brexit but remains well positioned compared with other major economies, according to a German study.
The UK slipped behind the US to second place in the latest ranking published by Germany’s Foundation for Family Businesses, though it remains ahead of the rest of its Group of Seven partners. Canada was fourth, followed by Germany in 17th, France in 18th, Japan in 20th and Italy in 21st and final spot.
“Brexit has been a major liability for the UK,” the authors of the study wrote. “Future British governments have a long road ahead if they wish to regain its economic dynamism, as promised by Brexit advocates.”
The eighth edition of the ranking, which is prepared by the ZEW research institute and was first published in 2006, assessed the business environment in six categories: taxation; labor costs, productivity and human capital; regulation; financing; infrastructure and institutions and energy.
Britain suffered the biggest overall decline of all the countries included, with “Brexit-related uncertainties” having the greatest impact in the area of “financing” and “infrastructure and institutions.”
The US tops the list mainly due to “outstanding performance” in regulation, financing and energy, and it also scores well on labour costs, productivity and human capital. A clear weakness is taxation: “While Trump’s tax reform was beneficial, the US still trails most countries in this area,” the
“Our analysis sheds important light on the extent to which countries will be in a position to ward off the long-term effects of the coronavirus pandemic,” they added.
UK urged to act fast to save 250,000 small firms At least 250,000 small companies in the UK are set to close in 2021 unless the government provides more assistance, threatening a further blow to an economy heading for a double-dip recession.
The warning from Federation of Small Businesses (FSB) comes with country back in lockdown to contain a resurgent coronavirus, hospitals at risk of being overwhelmed and job losses mounting. Lobby groups said the $6.2 billion of emergency aid announced by Chancellor Rishi Sunak at start of the lockdown is short of what’s needed.
“The development of business support measures has not kept pace with intensifying restrictions,” said FSB Chairman Mike Cherry. “We risk losing hundreds of thousands of great, ultimately viable small businesses this year, at huge cost to local communities and individual livelihoods.”
The FSB’s quarterly survey found confidence at the second-lowest level in its 10-year history, and just under 5% of the 1,400 firms questioned expect to close. There are about 5.9 million small businesses in the UK, according to the government.
Sunak’s latest injection of funding adds to the 280 billion pounds it has cost the Treasury to support firms and workers through the pandemic so far. He has said that level of spending and borrowing isn’t sustainable, raising the prospect of tax rises once the crisis is over.
The new restrictions are due to run until mid-February at least, prompting Bloomberg Economics to predict a 4.5% contraction this quarter. Output probably falls in the final three months of 2020, capping the worst year for the economy in three centuries.
The FSB’s Small Business Index confidence measure stood at minus 49.3 at the end of December. Twenty-three percent of small firms cut headcount over the past quarter, while 14% expect to in the next three months. Official forecasts suggest unemployment could rise by almost a million by the summer.
“This government can stem losses and protect the businesses of the future, but only if it acts now,” Cherry said.