Mercatus Center George Gibbs Chair of Political Economy Veronique de Rugy speaks about the outcome of the negotiations between the United States and the United Kingdom and more about ‘Varney & Co.’
Britain’s reputation as a country full of ‘get up and go’ seems to have up and left the kingdom. Much of the blame for this lies with them British Prime Minister Keir Starmer and his colleagues led the left-wing Labor Party to an epic victory in the middle of last year, but the landslide victory was not good for the British economy.
The truth is that Britain’s primary revenue deficit – the difference between what the government takes in from taxpayers and what it spends, excluding debt payments – has worsened rapidly in recent years. In the second quarter of this year, the primary deficit stood at 16.8%, more than double the deficit in the fourth quarter of last year and the worst deficit since the second quarter of 2023, according to government data.
“The biggest problem is that the current British government is relentlessly negative,” said Alan Mendoza, executive director of the Henry Jackson Society, a London-based think tank. “That’s not an environment to encourage investment.”
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There is a red telephone booth in front of the clock tower with Big Ben in London on May 22, 2025. (Julia Kilian/photo alliance via / Getty Images)
In many ways that negatively explains why many foreign investors have now openly stated this they will not invest in Britain.
Compare the approach to that of the current US administration, which is more than friendly to entrepreneurs and business leaders. ‘One thing in America President Trump has done it That means: ‘USA, US, US,'” Mendoza said. In other words, the US president is cheering on US companies.
The difference in foreign investment between the US and Britain is enormous. Foreign direct investment in America, setting up businesses increased by $83 billion in the second quarter of this year. Compare that to Britain, where foreign direct investment fell by 5.6 million British pounds ($7.3 million) over the same period, according to data from Trading Economics. That is clear evidence that the US is much more attractive to investors.
But beyond negativity, there are other concerns in Britain, such as questions about the government’s policies, that seem to be turning with alarming regularity.
Week after week there was enormous uncertainty about the upcoming British budget, Mendoza said. Many critics say he is not wrong to be concerned, as there are daily rumors among the political class about whether British Chancellor Rachel Reeves (the equivalent of the Chancellor of the Exchequer) is about to raise tax rates and break the party’s election manifesto. “That doesn’t encourage Britain as a place to invest in,” he said.
Requests for comment from the chancellor’s office were not returned.
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President Donald Trump and Prime Minister Keir Starmer sign the Tech Prosperity Deal during a business reception at Chequers, near Aylesbury, United Kingdom, on September 18, 2025. (Chris J. Ratcliffe/Bloomberg via / Getty Images)
There is widespread distaste for the economic climate among British entrepreneurs. Nearly two-thirds (63%) of entrepreneurial business leaders said they believe the UK government is anti-business, according to a survey published on Friday by Helm, a community of founders of high-growth companies.
“A year ago, our members said they were planning to hire,” said Helm CEO Andreas Adamides. But before they got around to hiring, the Labor government decided that employers would face an increase in national insurance (similar to US FICA benefits). “Once national insurance started to increase, that hiring goal was reversed,” he said. Basically it’s a tax increase on companies that want to hire people. And that of course often leads to fewer available jobs.
Other data from Helm shows that zero members of the organization would vote for the Labor Party. “I was surprised it was zero.” In addition, only 6% said they would vote for the right-wing Conservative Party. According to the survey, approximately three-fifths (58%) of members were still undecided.
The London Stock Exchange logo in the atrium of the company’s London office on January 3, 2024. (Hollie Adams/Bloomberg via/Getty Images)
The concerns of British entrepreneurs are not just about money and government policy, Adamides said. There is always a serious downside to starting a new business. Business successes are often hyped in the newspapers, but that does not apply to everyone.
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“When a founder starts a new company, he has probably risked everything to build something meaningful,” he said. ‘They usually don’t have a decent pension, and if they do well with the growth of the business, they could face… high capital gains taxes.”
“I’ve seen a founder commit suicide recently,” Adamides said. “The guy’s business was built over 20 years, he lost his home and business and took his own life. It’s not like they didn’t make it big.”
