Britain’s economy is struggling and the Labor government is driving investors
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Britain’s reputation as a country of ups and downs seems to have left the empire. Much of the blame falls on British Prime Minister Keirir Starmer and his colleagues, who led the left-wing Labor party to epic victories over the past year, but the world’s winnings have not been good for the British economy.
The truth is that Britain’s income deficit – the difference between what the government raises for taxpayers and what it spends, not including debt service – has declined rapidly over the past few years. In the second quarter of this year, the primary deficit reached 16.8%, more than doubling the deficit in the fourth quarter last year and the worst showing since government data.
“The biggest problem with the current British government is that it doesn’t do itself,” said Alan Mendoza, chief executive of the Henry Jackson Society, a London-based think tank. “It’s not in the nature to encourage investment.”
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A red telephone box stands in front of the clock tower and Big Ben in London on May 22, 2025. (Julia Kilian/Photo Alliance via/Getty Images)
In many ways, that explains why so many foreign investors have said publicly that they will not invest in Britain.
Contrast that with the approach of the current US administration, which is more than friendly to business owners and corporate executives. “In America, one thing President Trump has done is say, ‘USA, USA, USA,'” Mendoza said. In other words, the US President Cheerleads American businesses.
The difference in foreign investment between the US and the UK is huge. Foreign direct investment in America, which includes setting up companies, increased by $83 billion in the second quarter of this year. Compare that to the UK, which saw FDI drop by 5.6 million British pounds ($7.3 million) in the same period, according to data from Trade Economics. That is clear evidence that the US is very attractive to investors.
But there are other worries in Britain besides indifference, such as questions about government policies, which seem to grow alarmingly frequent.
Week after week, there has been a lot of uncertainty about the UK’s future budget, Mendoza said. Many critics say that it is wrong to worry because there are daily whispers within the political class that the UK Chancellor Rachel Reves (the equivalent of the Finance Secretary) is going to increase tax rates and break the party’s election and break the party’s election “That does not encourage the UK 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 Keirir Starmer signed the Tech Prosser regarding the time of business acceptance at Checkers, near the United Kingdom, 2025. (Chris J. Ratcliffe/Via Bloomberg/Getty Images)
There is a widespread dissatisfaction with the economic environment among UK-based entrepreneurs. Almost two-thirds (63%) of business leaders of business enterprises say they believe that the British government is anti-business, according to a survey released on Friday by Helm, a community of top business founders.
“A year ago, our members were saying they were planning to hire,” said Andreas AMadumide, CEO of Helm. But before they can be hired, the Labor government has decided that employers will have to face an increase in state insurance (similar to US FICA payments). “If national insurance went up, that hiring policy ended,” he said. Effectively, it is a tax increase on companies that want to hire people. And of course, that often leads to fewer jobs available.
Other information from Helm shows that zero union members voted for the labor party. “I was surprised it was zero.” Separately, only 6% said they would vote for a conservative party. About 78 (58%) members are not defined, according to the survey.
The London Stock Exchange at the Atrium office in London on Jan. 3, 2024. (Hollie Adams/Via Bloomberg/Getty Images)
The concerns of British businessmen are not limited to monetary policy and government policies, says Adamides. There is always a serious downside to starting a new business. Business success often gets hyped in the press, but things don’t work that way for everyone.
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“When an entrepreneur starts a new business, they may be risking everything to build something meaningful,” he said. “Don’t take them to have a decent pension, and if they do well in growing the business, then they can hit a high tax rate.”
“I’ve seen a founder commit suicide in recent times,” Adamides said. “This man’s company was built over 20 years, and he lost his home and business and ended his life. It’s not something he could do big.”
