- Fewer firms would raise U.S. investment, more would cut back
- Survey of 500 corporations also shows Brexit would hurt EU
Foreign corporations would dramatically scale back their plans to invest in the U.S. if billionaire Donald Trump is elected president, according to a survey conducted in January for global management consulting firm A.T. Kearney.
The election of a populist such as Trump or Vermont Senator Bernie Sanders would prompt fewer companies to increase their spending in the U.S. and more corporations to scale back their outlays over the next one to three years, the survey found. The same result would hold for foreign direct investment in the European Union should the U.K. vote to leave the bloc.
“The rhetoric of the populist candidates of the right and the left has been very much anti open global economy, wanting to renegotiate trade deals,” Paul A. Laudicina, chairman emeritus of A.T. Kearney, said in an interview. “That gives people reasons to pause.”
Trump is leading the race to become the Republican Party’s presidential candidate, while Sanders trails former Secretary of State Hillary Clinton for the Democratic Party’s nod.
More than 500 companies with annual revenue of half a billion dollars or more took part in the survey. The participating firms are headquartered in 27 countries and span a wide range of industries from retail to infrastructure construction.
Warren Buffett, for one, doesn’t think a Trump presidency would be the blow to U.S. business that some fear.
The outcome of November’s presidential election is unlikely to change the fact that the U.S. is a “remarkably attractive place in which to conduct a business,” Buffett, who is chairman and chief executive officer of Berkshire Hathaway Inc., said at the company’s annual shareholders meeting Saturday in Omaha, Nebraska. “If either Donald Trump or Hillary Clinton becomes president, and one of them is very likely to be, I think Berkshire will continue to do fine.”
U.S. companies have enjoyed “terrific” returns on equity despite a sustained period of ultra-low interest rates, added the 85-year-old billionaire, who has endorsed Clinton for president.
Indeed, the U.S. comes out on top in the A.T. Kearney survey of multinational companies as the best place in which to invest. Global business executives are also more optimistic about the outlook for the U.S. than for any other country, with 42 percent more bullish on the American economy than they were a year ago.
The possibility that an unproven populist candidate might be elected president in November though is a “wild card” clouding the outlook, Laudicina said.
“If you had a candidate of the extreme right or left elected there would be greater concern about the openness and therefore the vibrancy of the U.S.,” he said.
Political risks also hang over the EU. A vote by the U.K. on June 23 to leave the union would prompt companies to reassess their investment plans for the region, according to the survey. Polls suggest that the vote will be close and that many remain undecided.
That said, three of the top 10 favored places for investment in the survey were in Europe: Germany, the U.K. and France.
“But for these two political developments that could diminish investors’ enthusiasm, the U.S. and Europe are clearly of great interest” to multinational companies, Laudicina said.