George Gibbs Mercatus Center Political Economy Chair Véronique de Rugy weighs in on the outcome of U.S.-UK negotiations and more on ‘Varney & Co.’
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Britain’s reputation as a dynamic country appears to have risen and left the kingdom. Much of the blame lies with British Prime Minister Keir Starmer and his colleagues, who led the left-wing Labor Party to an epic victory in the middle of last year, but that landslide victory was not good for the British economy.
The truth is that Britain’s primary income deficit – the difference between what the government collects from taxpayers and what it spends, excluding debt repayments – has deteriorated rapidly in recent years. In the second quarter of this year, the primary deficit totaled 16.8%, more than double the deficit in the fourth quarter of last year and the worst result since the second quarter of 2023, according to government data.
“The biggest problem is that the current British government is ruthlessly negative,” said Alan Mendoza, executive director of the Henry Jackson Society, a London-based think tank. “It’s not a conducive environment for investment.”
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May 22, 2025, Great Britain, London: A red telephone box stands in front of the clock tower with Big Ben. (Julia Kilian/photo alliance via Getty Images / Getty Images)
In many ways this explains negatively why many foreign investors have openly stated that they will not invest in Britain.
Compare this approach with that of the current US administration, which is more than friendly to business owners and managers. “In America, one of the things that President Trump did was say, ‘USA, USA, USA,’” Mendoza said. In other words, the current American president encourages American businesses.
The difference in foreign investment between the US and the UK is huge. Foreign direct investment in America, which involves the creation of businesses, increased by $83 billion in the second quarter of this year. Compare that with the UK, which saw FDI fall by £5.6 million ($7.3 million) over the same period, according to Trading Economics data. This clearly proves that the United States is much more attractive to investors.
But there are other concerns in Britain beyond the negatives, such as questions about the government’s current policy, which appears to be flip-flopping with alarming regularity.
Week after week, there is uncertainty about the next British budget, Mendoza said. Many critics say he is right to be concerned as rumors circulate daily within the political class about whether or not UK Chancellor Rachel Reeves (the Treasury Secretary’s equivalent) is about to raise tax rates and break the party’s election platform. “This does not encourage the UK to invest,” he said.
Requests for comment from the chancellor’s office were not responded to.
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US President Donald Trump, left, and Keir Starmer, UK Prime Minister, sign the Tech Prosperity Deal during a business reception at Checkers, near Aylesbury, UK, Thursday September 18, 2025. (Chris J. Ratcliffe/Bloomberg via Getty Images / Getty Images)
There is widespread disgust with the economic environment among UK-based entrepreneurs. Nearly two-thirds (63%) of business leaders said they believe the UK government is anti-business, according to a survey published Friday by Helm, a community for founders of high-growth companies.
“A year ago, our members were saying they were planning to hire,” said Andreas Adamides, CEO of Helm. But before embarking on hiring, the Labor government decided that employers would face an increase in National Insurance (similar to FICA payments in the US). “Once national insurance was set to increase, that hiring target reversed,” he said. In fact, it is a tax increase for businesses that want to hire. And of course, this tends to lead to fewer jobs available.
Other data from Helm shows that no member of the organization would vote for Labor. “I was surprised that it was zero. Furthermore, only 6% said they would vote for the right-wing Conservative Party. About three-fifths (58%) of members were undecided, according to the survey.
The London Stock Exchange Group Plc logo in the atrium of the company’s office in the City of London, United Kingdom, Wednesday January 3, 2024. The FTSE 100, launched on January 3, 1984, was one of many innovations that transformed the City of London in the 1980s. (Photographer: Hollie Adams/Bloomberg via Getty Images / Getty Images)
The concerns of British entrepreneurs are not just about money and government policies, he said. There are always serious downsides to starting a new business. Commercial successes tend to be publicized in the newspapers. But things don’t work out that way for some.
British entrepreneurs’ concerns are not just about money and government policies, Adamides said.. There are always serious downsides to starting a new business. Business successes tend to be publicized in the newspapers, but things don’t work out that way for everyone.
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“If a founder starts a new company, they’ve probably risked everything to build something meaningful,” he said. “They usually don’t have an adequate pension, and if they manage to grow their business, then they can be hit with high capital gains taxes.”
“I saw a founder commit suicide recently,” Adamides said. “This man’s business was built over 20 years, and he lost his home and his business and took his own life. It’s not a question that they weren’t successful.”
