Its prime minister is resigning. The leader of its main opposition party is facing an internal revolt. Its currency is at the lowest level against the dollar in three decades. But British Treasury chief George Osborne insists his country is still open for business despite its decision to leave the European Union — and that foreign investors should feel just as welcome as they did before the shocking Brexit vote.
That’s the pitch Osborne, the chancellor of the exchequer, is making during a whirlwind tour of New York Monday. Osborne is meeting with Wall Street investors in an effort to reassure them that the UK is not retreating from the international scene, despite the fact that the Brexit vote was fueled by a backlash among voters against immigration and a feeling that the costs of belonging to the European Union outweighed the benefits.
“There are those who want our exit from the EU to signal that we should now turn our back on the world, resist the free-market forces of globalization and become a more insular, less tolerant place,” Osborne wrote in a Wall Street Journal op-ed published late Sunday. “We must not be afraid to confront them head-on. I am determined that — on the contrary — we now set out to build a more outward-looking, global-facing Britain, with stronger links with its friends and allies around the world.”
In the run-up to the Brexit vote, President Barack Obama said the UK would move to the back to the line when it came to trade deals if Britain chose to leave the EU. That means the United States would negotiate the massive Transatlantic Trade and Investment Partnership with Brussels before it began hashing out a bilateral deal with London. Speaking on MSNBC Monday, Osborne said he met with House Speaker Paul Ryan over the weekend to discuss trade, and that he is set to meet with U.S. Treasury Secretary Jack Lew later this week in London.
“I think we can demonstrate a Britain that is more non-European, more outward-facing, by starting those strong relations with the U.S. and building on them,” Osborne said.
Trade with the United States is vital to the British economy. American is the largest destination for British exports, and Britain is the largest U.S. trading partner in Europe. In 2014, the last year which data is available, British exports to the United States totaled $114 billion, or 17 percent of all UK goods sold abroad.
For now, the trade relationship between Washington and London won’t change; Britain has two years to negotiate its exit from the EU, and has yet to invoke Article 50, which would actually trigger its departure. But few believe the Brexit will be good for Britain. Nearly three quarters of economist surveyed by Bloomberg believe the UK will sink into recession when the Brexit happens.
It’s also a burden on the U.S. economy. Minutes from the U.S. Federal Reserve’s June meeting show that the central bank is reluctant to hike interest rates because it fears the UK leaving Europe could negatively impact the American economy. The Brexit has also added to the strength of the U.S. dollar, making visiting the U.S. or purchasing American goods more expensive for those holding pounds, euros, or other currencies. Companies from Macy’s to Tiffany’s have complained that fewer foreign tourists are shopping at their American stores. The U.S. Travel Association’s Travel Trends Index, released last week, shows international inbound travel to the U.S. has been down for three straight months.
Capital flight out of Britain, meanwhile, has already begun, with investors looking for more stable places to stash their money. Last week, M&G Investments suspended a 4.4 billion-pound ($5.7 billion) real-estate fund there, following in the footsteps of Aviva Investors and Standard Life Investments after a number of investors pulled out of their funds.
Osborne, in other words, has a tough sales job ahead.
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