Tax concerns have now become the primary reason US companies consider the UK an unattractive place for investment, according to research by trade association BritishAmerican Business.
Data revealed that while US investor sentiment towards the UK has stabilised after previous declines in the last two years, worries about the tax environment have surged.
This follows the increase of the UK's corporation tax rate from 19% to 25% under Rishi Sunak’s leadership, aimed at covering higher spending costs after the pandemic and the war in Ukraine.
"There is a genuine concern about what is the UK doing to make sure it remains as attractive a place to do business as it has been in the past?" said Duncan Edwards, Chief Executive of BritishAmerican Business.
Labour has pledged to maintain the 25% corporation tax rate in hopes of drawing more private investment to boost growth and prevent the need for extensive tax increases.
The UK ranked 30th out of 38 countries in the latest international tax competitiveness ranking by the US-based Tax Foundation, dropping 17 places from the previous year.
Among US investors surveyed, the UK’s tax environment and the cost of doing business were cited as unattractive aspects 28 times, more than any other factors, including political stability and regulatory certainty.
"I think there may also be a fear that there might be other tax rises coming, just looking at the fiscal situation in the UK," said Jonathan Frick at Bain & Company, the group which compiled the index.
Overall, US investor sentiment towards the UK improved marginally this year but remains below 2021 levels, the first year the survey was conducted.