What might a Joe Biden presidency really mean for the UK economy?

Joe Biden is the next President of the United States, having reportedly polled a record number of votes in an election that had the highest voter turnout since 1900.

So, what can we expect from Biden – who seems almost in every policy aspect the antithesis of Trump – regarding the UK and our relationship with the USA?

This article looks to answer this question by speaking to business leaders and professionals across tech, the investor space and education.

Eric Silvestre, who is CFA Senior Investment Research Analyst at Alpha Portfolio Management, gives his view: “Over the last four years, the UK Government has been perceived by the general public as a net beneficiary of a Trump administration. After all, Donald was always keen on the ideas of separation, independence, a level playing field and a strong national identity.

“These values resonated well with the likes of Nigel Farage and many Brexiteers, including some senior Tories. Outside of his American Heartland Trump’s rhetoric wasn’t always crowd-pleasing. Pragmatism is king in a post-Brexit world and building closer commercial ties with the US became imperative in the trade deal agenda.”

Considering the projected change in US president, should we be worried about business relations with our allies across the pond?

Eric says: “From his campaign messages President-elect Joe Biden is expected to promote an economic model which is more akin to those within Europe.  A higher degree of government intervention in areas such as fiscal spending, social security and a refreshing stance on climate change.

“Therefore, leaving aside first impressions and Biden’s personal opinion about the UK, it would be reasonable to expect a closer alignment of policies as favourable, in particular when negotiating non-tariff barriers.

“In addition to that, both countries have a multi-decade relationship in critical sectors, including defence and intelligence, which combined with a more aligned approach in terms of Covid-19 response, provide some comfort in the prospect of our future relationship.”

In terms of the impact on markets, Eric believes that determining who’s in control of the Senate will be a key factor.

He says: “At the moment, it seems that Republicans are more likely to remain in charge. However, this won’t be decided until a special runoff election in January, as neither of the two candidates in Georgia managed to achieve the 50% of vote required. Assuming that Republicans win the race, some of the most ambitious Democrat proposals are likely to be watered-down, resulting in a smaller Covid-19 support package, lower-than-expected infrastructure spending and a smaller increase in corporate taxes.

“Whilst the market reaction was distorted by Pfizer’s Covid-19 vaccine announcement, the outcome of the election didn’t trigger any surprise move in prices. In the short-term investors perceived a combination of a Biden administration and a Republican Senate as the lowest risk outcome for markets.

“Whilst the prospect of any increase in corporate taxes will be felt as a negative for equities, we believe this will be offset by more generous fiscal stimulus, a more ambitious infrastructure agenda and a general improvement in international trade relationships. Or at least less nerve-racking than under the previous administration.”

What about the Irish border and Brexit?

It has been suggested that Joe Biden will have the strongest Irish association and ‘roots’ of any US President, since John F. Kennedy. Biden has also reaffirmed his support of the Good Friday agreement,

With the Irish border such a contentious issue in sealing the Brexit deal – could Biden – a vocal ‘remainer’ – have any impact at this point?

Eric comments: “Trump has been a stated fan of Brexit and has previously sought to leverage his position within the UK and with Boris Johnson. In contrast to a previously frosty relationship it experienced with Trump, the outcome of the election is likely to be a boost to US – Irish diplomacy, at the possible detriment to the UK. With a powerful ally by its side, Ireland could carry greater sway within the EU and beyond.

“Thereby giving Ireland greater prominence with the Brexit withdrawal agreement and potentially the look and feel of any prospective US trade deals involving the UK, Ireland and even the EU.  Biden has been critical of the UK’s plans to override parts of the Brexit divorce agreement in relation to Northern Ireland, if no trade deal is reached with the EU.

“It was not surprising that Boris Johnson was one of the first heads of government to speak with the President-elect. Boris was also keen to woo the US with a green agenda, aiming to bring the US back on-board with climate awareness and invited Biden to attend the COP26 climate change summit that the UK is hosting in Glasgow next year.

“Post-election it might well be true, that Irish eyes are indeed smiling, and Boris has fresh obstacles in the way of Brexit.”

In regard to the wider trade implications between the UK and the US, Tony Syme, finance and economy expert from the University of Salford Business School, comments: “The contrast could not be sharper between the ‘America First’ agenda of President Trump and the multilateralist approach of Joe Biden. Trump consistently sought to undermine the legitimacy of organisations such as the WTO, the WHO, the UN and the EU. The President-elect has vowed that, under his administration, America will lead by the ‘power of example’ rather than the ‘example of power’.

“Biden’s Irish roots have been well-documented. He visited Ireland while he was Vice-President and he offered support to the Irish Government after the UK Government published the Internal Market Bill in September. It reinforces the expectation that he will not support a US-UK trade deal unless the withdrawal agreement is maintained and the Good Friday Agreement protected.

“This will not be the same as Barack Obama’s punitive statement in 2016 that the UK would be at the ‘back of the queue’ in any trade deal if the UK left the EU. Biden is too diplomatic and a firm believer in multilateralism to take the same approach. For example, he will need the help of the UK government if he is to repair relations in NATO. However, even though often exaggerated, that ‘special relationship’ between the UK and the US will be much less special following Brexit.”

The UK tech sector

To find out if a Biden presidency will be positive for UK business sectors, Business Leader also spoke to Russ Shaw, the founder of London and Global Tech Advocates, to get this view on the tech sector, which is known for its transatlantic cross-pollination around funding and knowledge.

He comments: “After a much closer race than originally predicted, a Biden Presidency is looking increasingly likely and will largely be met with positivity by the global tech sector. His approach to digital policy seems much more actively geared towards partnering with private industry and other governments to set the technology agenda.

“For Big Tech companies, Biden still intends to impose stringent antitrust measures, as well as tough taxation and privacy regulations. However, with his history as the Vice President of a Silicon Valley-friendly Obama Administration – and California-elected Kamala Harris on his ticket – a victory would likely be the outcome of choice compared to Trump’s ongoing allegations of anti-conservative bias from social media giants.

“Beyond Silicon Valley, there are hopes that Biden will be more open to a multi-lateral approach on key regulatory issues such as a digital tax. Following the lack of involvement from the Trump Administration with OECD talks on digital tax matters, bringing the US back to the table will help to potentially heal the Transatlantic division caused by the imposition of retaliatory tariffs in response to European countries progressing with a tax impacting US tech firms.

“Elsewhere, Biden’s approach to immigration reform suggests he will be more favourable to global tech, particularly given how regularly US tech companies come up against caps limiting the number of overseas employees who can obtain visas. Compared to Trump’s resistance to the H1-B visa route, Biden’s more accommodating stance on temporary and permanent employment immigration policies are a clear positive for the tech industry.

“For the UK, a Democratic victory presents something of an unknown when it comes to negotiating a post-Brexit trade deal, particularly on topics such as data flows, although we know that Biden is in favour of GDPR-style privacy regulation. It is likely that this will happen but perhaps not until 2022. Ultimately, the UK and global tech sectors can be hopeful that a Biden victory will bring with it a more collaborative approach to international digital diplomacy, as the Administration looks to rebuild relationships with allies around the world.”

Christian Stadler, Professor of Strategic Leadership at Warwick Business School, says that Biden victory could not be all good news for businesses though: “The most pressing issue is COVID-19 and in that respect, a Biden victory appears to be good news for US businesses. He has shown a greater desire to deal with the health issues and has put together a massive investment programme to help businesses come out of this epidemic.

“It’s not all good news for businesses though. Biden plans to increase corporate income tax from 21% to 28% and he is likely to bring in more regulation. However, some sectors might welcome more regulation. For example, Silicon Valley welcome clearer rules on issues such as freedom of speech, which is currently an ethical minefield.

“There are other key benefits for businesses under a Biden administration. Stability is very important for businesses and they can expect less policy flip flops under Biden than Trump. Indeed, the University of Chicago has observed that policy uncertainty was greater under Trump than it has at any other time since 1985.

“US businesses will also welcome an end to the trade wars pursued by Trump. That’s not to say there won’t be ongoing tensions with countries like China on human rights issues, but we don’t expect Biden to adopt the same harsh attitude to international trading partners that we have seen in the last few years.

He comments further: “Biden’s victory is also likely to have a significant impact on businesses in Britain too. The Johnson government would have been more likely to pursue a no deal Brexit following a Trump victory, as they would be hoping for a quick and favourable trade deal with the US, though it is impossible to predict what kind of deal you will get with Trump.

“Under Biden, the US is more likely to favour a close relationship between the UK and the EU and a fairly comprehensive deal. As business leaders in the UK have repeatedly raised concerns about the prospect of a no deal Brexit, they will welcome a Biden victory and the prospect of a closer relationship with the EU.”

President Biden’s ambitious plans to hit the ground running by tackling climate change and being net zero by 2050 is good news for UK tech industry which should see increased investment in the UK, say tax and advisory from Blick Rothenberg

Simon Gleeson, a partner at the firm said: “America has shown huge interest in green transport start-ups and this will now grow still further. The President’s intention to increase spending in public transport, electric vehicle development, manufacturing and road-side infrastructure as well as offer tax incentives similar to what we have seen in UK and across Europe to increase uptake.

“The demand for carbon-free, energy efficient solutions is global, and the UK is extremely well placed to take full advantage of this with the UK Department of Trade heavily focused on supporting this sector.

He continued: “UK-headquartered green transport start-ups from early-stage Beryl, an urban mobility start-up focused on pedal bikes, e-bikes and scooters, to Arrival, a designer and manufacturer of mobility and transportation solutions, have seen VC investment as the demand and market for sustainable mobility solutions really opens up.

“US investors have been flocking to such early-stage opportunities given the potential returns on larger scale as demonstrated by more mature investments like Arrival which makes zero-emission public transit vehicles and is forecasting to sell nearly 260k vehicles with a $14bn profit by 2024.

Regarding the future of the UK tech scene now that Biden is officially in office, he said: “The UK tech scene continues to be a leading player in developing environmentally friendly technologies, building on the talent eco-system in AI, electric vehicle design, engineering and machine learning. Now is the time for UK companies to put out their wares on the American stage and let them know that we are open for business and can provide the sorts of technology that will assist both countries going forward.”