Tax rises seen as biggest threat to UK investment, Teneo finds

New Teneo research finds 58% of senior investors think the UK is now less attractive than five years ago, with tax hikes seen as the most immediate risk to capital flows. The survey also shows a major gap with MPs on what investors want, especially on political stability and closer ties with Europe.

Why it matters: - Investment decisions shape jobs, productivity and economic growth. - Teneo’s findings suggest the UK is still investable, but confidence is fragile. - A sharp rise in taxes could push capital away from the UK within the next 12 months. - Policymakers and investors appear to disagree on what most affects the UK’s competitiveness.

What happened: - Teneo surveyed 100 senior investment decision-makers from global asset managers, banks and multinational companies. - Those firms collectively manage more than £30tn in assets. - Every respondent was responsible for at least £5 million of annual capital allocation. - A quarter of the sample, 25 respondents, were making or planning an investment decision worth more than £500 million. - Teneo also surveyed 100 MPs, weighted to represent the House of Commons. - The research was published on October 19, 2026.

The details: - 58% of investment decision-makers said the UK has become less attractive as a place to invest, grow or do business than it was five years ago. - 28% said the UK has become more attractive over the same period. - 32% said a sharp rise in taxes affecting UK businesses or investors would be the development most likely to make their organisation pause, reduce or stop UK investment over the next 12 months. - 32% said political instability and policy churn are the main reason the UK is not a compelling investment destination today. - 18% pointed to tax as the main problem. - 18% cited regulation and bureaucracy. - MPs expected different priorities: 12% thought political instability and policy churn would be investors’ main concern, 13% said tax and 9% said regulation and bureaucracy. - MPs were more likely than investors to focus on EU friction, at 26% versus 20%, and energy costs, at 21% versus 2%. - Just 25% of investment decision-makers said MPs understand what they need to view the UK as an attractive investment destination. - 47% said the UK should seek to rejoin the EU as soon as possible. - 45% wanted greater alignment with the EU without rejoining. - That means 92% want closer ties with Europe overall. - Only 27% of MPs predicted that investors would favour rejoining the EU. - 75% still described the UK as an attractive place to invest, grow or do business. - 80% said the UK has the talent and research base needed to succeed over the long term. - 74% said the UK’s legal system, institutions and rule of law are a significant competitive advantage. - 57% viewed the UK as one of the world’s leading destinations for international investment. - 60% said the strongest case for investing more in the UK is its established commercial strengths, including its service economy, global connectivity and deep capital markets. - MPs were less likely to expect those strengths to be decisive, at 40%. - MPs placed more weight on universities and innovation, at 14% versus 2% among investors, and on long-term economic strategy, at 22% versus 13%. - Teneo’s Iain Dey said the UK needs to listen carefully to the people deciding where capital will go. - Dey said the UK has not stopped being attractive, but is losing ground. - Dey said a sharp tax rise risks sending capital elsewhere. - Dey said investors want greater certainty. - Teneo’s Deborah Mattinson said the study shows a profound gap in understanding between investors and MPs, especially on political stability and the desire for a closer relationship with Europe. - Mattinson said MPs underestimate both the appetite for rejoining the EU and the importance of political stability. - The UK held £2.13 trillion of inward foreign direct investment at the end of 2024, according to the Office for National Statistics. - Foreign direct investment projects created more than 69,000 new UK jobs and safeguarded more than 16,000 existing jobs during 2025–26, according to the Department for Business and Trade. - 45% said better access to EU markets and reduced trade barriers would do most to improve the UK’s attractiveness. - For that group, 23% selected better access to EU markets and 22% selected reduced trade barriers.

Between the lines: - The survey points to a credibility gap between Westminster and major capital allocators. - Investors see tax, stability and regulation as the main UK risks, while MPs appear to overestimate the importance of energy costs and understate the pull of closer EU alignment. - The results suggest the UK’s investment case still rests on strong fundamentals, but those strengths may no longer be enough without clearer policy direction.

What's next: - The pressure point is likely to be fiscal policy, especially any move that raises the tax burden on businesses or investors. - The findings also put the UK-EU relationship back into focus as a competitiveness issue, not only a political one. - Investors appear to want more policy certainty before committing more capital.

The bottom line: - The UK still draws investor support, but tax risk and policy instability are eroding its appeal, and the people allocating capital want clearer signals from government.