BREAKINGVIEWS-Trump investment gifts only partly offset UK gloom

By Aimee Donnellan

LONDON, Sept 18 (Reuters Breakingviews) - Donald Trump has come to the UK bearing gifts. Having received the full state banquet treatment at Windsor Castle on Wednesday, the U.S. president's latest visit to Britain has coincided with some tangible chunks of foreign direct investment from big American companies: Microsoft MSFT.O, Blackstone BX.N and others will pump in 150 billion pounds ($204 billion) over the coming years. That's material, but not enough to reverse the recent dearth in growth-enhancing foreign cash.

The UK, which the International Monetary Fund only expects to grow 1.2% this year, could use a reset when it comes to inward investment. Since 2016 FDI has declined in the UK every year bar one. In 2023, the most recent year for which data is available, inward flows of long-term foreign investment in new factories and M&A - netting off disinvestment - was just 1.3 billion pounds. That compares with over 150 billion pounds in 2016 and roughly between 40 and 60 billion pounds in the years up to 2021.

Against that the U.S. cash is meaningful, but not an epic game-changer. The “tech prosperity deal” announced on Tuesday, which namechecks tech mavens like Nvidia NVDA.O and Google, is based around a four-year, 22 billion pound pledge from Microsoft to build items like data centres. The heavy lifting is a ten-year, 90 billion pound pledge by Blackstone, which was already flagged in the summer. Annually, the new cash probably amounts to around 15 to 20 billion pounds.

All this is still a lot better than nothing. FDI is a lumpy metric that jumps around: the 2016 data included the 79 billion pound purchase of SABMiller by AB InBev ABI.BR. The Windsor fussing around Trump also comes as Britain's investment case is in question. The UK's own pharma companies have been threatening to scrap research projects and have been reallocating their own capital expenditure elsewhere.

Still, while Trump's visit has seemingly cemented the U.S. "special relationship" with Britain, the final upshot will only become clear after harder-nosed negotiations on Thursday with UK Prime Minister Keir Starmer. The U.S. president's 10% average tariff on UK goods may be less than the European Union's 15%, but Trump's unpredictability makes it hard for UK policymakers to relax.

Starmer's growth strategy is all about opening up the country to FDI, whether that be from Europe, the Middle East or the U.S., and the latter is far and away its biggest backer. Hence Trump's visit is a qualified success. But it doesn't decisively get Britain out of its hole.

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CONTEXT NEWS

Britain announced on September 17 a 150 billion pound ($204 billion) U.S. investment boost which it hopes will create 7,600 jobs.

The announcement was made during U.S. President Donald Trump's visit to Britain. Some 90 billion pounds of the 150 billion pound investment will come from Blackstone, which it plans to spend over the next decade.

It followed a series of pledges on September 16 from U.S. tech firms including Microsoft, who vowed to spend tens of billions of pounds on data centres and other technology in the UK.