The confidence of US companies with UK operations has declined over the past year due to poor post-Brexit UK-EU relations, worries about labour shortages and rising corporate taxes, new research shows.

A survey of 54 American companies doing business in the UK for British American Business, a transatlantic business association, found that 20% said their confidence in the UK had increased, up from 25% last year.

On a scale of 1 to 10, the average trust score for US companies was 7.8 in 2021 to 7.3 in 2022.

The survey conducted by Bain & Company in April and May this year found that the lack of constructive relations between London and Brussels after Britain left the European Union had a negative effect on sentiment.

“What US companies want is clear: to attract future investment, US investors want the UK government to restore its political and commercial ties with the EU,” the report said.

The study comes as candidates for the Conservative Party leadership race have expressed support for legislation to unilaterally tear up part of British Prime Minister Boris Johnson’s exit deal with the EU, prompting Brussels to warn of a possible trade war.

When asked what makes the UK more attractive as an investment destination, nearly 80% of US businesses cited improving relations with the EU as one of their top priorities.

More than 1.5 million people are employed by US companies operating in the UK and remain attractive due to their common language, compliance with the law and access to finance.

The post-pandemic reopening of Britain’s economy has created a labor shortage in many industries, including tourism and hospitality, after many workers were made either redundant or unemployed.

The survey found that a significant number of US companies reported a “continuing shortage of labour” in the UK, which could not be met locally, reflecting concerns from the UK business community.

Just last week, the British Chamber of Commerce urged the government to ease immigration restrictions after it reported in a quarterly recruitment survey that more than 75% of construction, manufacturing, logistics, and hospitality companies were struggling to fill vacancies.

Meanwhile, the Department for International Trade said US investor confidence in the UK was high.

“Through our ambitious programme of US state-level agreements, our bilateral joint dialogues and drive to break down market barriers, we are boosting UK-US trade and unlocking opportunities for businesses on both sides of the Atlantic”, according to the department.

The future of the local economy remains uncertain. Despite signs of recovery due to boom in holidays and GP visits, the country is still battling the highest inflation rate it’s ever encountered since 1991.