Since
records began, the United States has been the UK’s largest source of foreign direct investment. Accounting for around a third of new projects and responsible for
15,000 jobs each year, the US continues to be the major focus for inward
investment agencies, so what difference will a Barack Obama presidency make?
The
Irish, traditionally among the most savvy at attracting foreign investment,
have already begun to raise concerns about the new president’s attitude to US
firms creating jobs overseas. The Irish Times has noted with alarm the way that
Obama attacked John McCain for proposing tax breaks for big business and was
quite specific about ending tax breaks for US firms that create jobs overseas.
He has also promised to give tax breaks to companies that create good jobs
“right here in America”. Speaking in Ohio on the eve of polling, Obama
committed to tax inducements to discourage the offshoring of jobs with $3,000
tax credits for each job companies create domestically.
Michael
Casey, a leading economist and board member of the International Monetary Fund
wrote:
“Irish
agencies charged with attracting foreign investment to Ireland have always been
more wary of Democratic administrations than Republican ones. When a strong
Democratic candidate like Obama makes such a clear statement of intent and
when, if elected, he will clearly need every cent of tax revenue he can get
from big business, then this promise has to be taken seriously by the
Government. Potentially, it could be far more damaging than the sub-prime
crisis.”
There
are fears too in India that Obama could be bad news for their economic miracle
which has been built on outsourcing. Shares in Infosys and Tata Consultancy
fell as results began to confirm Obama as the next president.
Every
region of the UK is spending millions on promoting its sector strengths in the
US; they should take particular note of the potential winners and losers under
an Obama presidency:
According
to Christopher Rugaber of Associated Press, the industries that will fair best
will be:
Biotechnology:
Support for stem-cell research after years of Bush opposition.
Automotive:
Additional support pledged to major car firms.
A
few industries that might suffer though include:
Defence:
Likely reductions in overseas commitments and associated budgets.
Pharmaceuticals:
Squeeze on government programmes and push to drive down costs.
Telecommunications:
Possible tougher regulations on mergers.
Any
upside for US companies must be set against the likely increasing influence of
unions who will be pushing for greater rights and will be steadfast in holding
Obama to his pledge to keep more jobs in the US. With the US federal government
now controlling so much of the financial services industry in the wake of the
sub-prime crisis, it has more influence than ever before on where new jobs are
going to be created.
If
(and it’s a very big if) the new president uses his mandate to revitalise the
US economy, that should, in a globally-connected world, be good for everyone;
including the 50,000 US companies with a presence in the UK. A prosperous
America usually means that US companies will create new investment and jobs in
the UK… if President Obama lets them.
