Britain is being overlooked for American investment because of soaring energy prices, senior executives and US officials have told representatives of Keir Starmer’s Government.
Business leaders said at a London conference this week that the cost of power in the UK was making it increasingly difficult to justify new spending, adding that high taxes and labour expenses were also undermining the country’s international competitiveness.
The concerns were relayed to Varun Chandra, Sir Keir’s adviser on trade and investment, at an event organised by the lobby group BritishAmerican Business. Mr Chandra acknowledged that Labour was not “getting it all right” and appealed for “patience” as reforms were pursued.
Sophia Oliphant, the UK chief executive of US manufacturing group 3M, told delegates that the argument for investing in Britain had “become weaker and weaker”.
“When we make any decisions about investment at headquarters … the UK loses out on labour costs, if it’s labour intensive manufacturing. It loses out on energy costs,” she said.
Iain Wood, Amazon’s director of digital in the UK, said high power prices were “widely understood” to be a problem and added that difficulties in securing grid connections were also deterring expansion.
Przemek Szuder, European president of engineering group Honeywell, said simply: “We need to tackle the energy cost.”
The warnings follow criticism of Labour’s energy policies by Donald Trump at the World Economic Forum in Davos earlier this month. The US president accused Britain of failing to exploit oil and gas reserves in the North Sea and argued that net zero policies were constraining generation and pushing up electricity prices.
Research published last year by the International Energy Association found that British industry was paying about 50 per cent more for electricity than firms in France or Germany and up to four times more than manufacturers in the United States and Canada.
Ms Oliphant said those pressures had already reshaped 3M’s UK footprint.
“If we were to start a new manufacturing facility or bring a product to manufacture, the UK’s case for [being] a manufacturing base has become weaker and weaker,” she said.
The company, known for products such as Post It Notes and Scotch tape, previously operated 14 manufacturing sites in Britain but now has three.
She added: “It seems that the Government is focusing on [the] living wage, [the] living cost crisis. Instead, we really need to focus on growth in the private sector, which will improve the living costs and overall economy.”
Jennifer Bachus, a senior economic diplomat at the US embassy in London, urged ministers to expand domestic energy supply by making greater use of the North Sea.
“These costs deter investment in the UK. To grow domestically and to compete internationally, the UK cannot afford to discard any form of energy, including oil and gas,” she said.
Louise Kingham, BP’s UK head of country, echoed industry calls for changes to the windfall tax imposed after oil and gas prices surged following Russia’s invasion of Ukraine, noting that prices had since eased.
“The main barrier to bringing forward new, bigger investments in the UK oil and gas sector is the fiscal regime that we currently have,” she said, adding that a replacement system was “sitting on a shelf ready to go”.
Ms Kingham also suggested momentum had slowed after Labour’s initial flurry of policy announcements.
“After the new Labour Government got off the blocks really fast, with early proposals on planning, infrastructure and carbon capture and storage, the pace seems to have fallen away a bit within the last nine, 12 months,” she said.
Mr Chandra urged delegates to allow more time for change.
“I’d ask for a little bit of forbearance and patience, because we’re definitely not getting it all right,” he said.
He added that ministers were prioritising economic stability, a more active industrial strategy, improved trade relationships and regulatory reforms in areas such as planning.
“Everyone makes missteps, but the general direction of travel is very clear,” he said.
