How ‘Britshoring’ turned the UK into a US economic colony
Melissa Lawford
14 min read
US flag in City of London
Edward East moved to the US at the start of 2023 to chase deals with US conglomerates for his marketing agency, Billion Dollar Boy. But while the British entrepreneur is now based in New York, he has kept most of his staff based in the UK for one simple reason: cost.
“If you earn £100 in London, you would earn $200 in New York,” he says. “Things like HR, finance, operations, business affairs, legal – we will outsource as much of that to our UK business as we can.”
The 38-year-old is among a growing number of bosses exploiting the widening US and UK salary gap. But East’s experience is not the dominant one. In fact, there are far more American companies outsourcing jobs to Britain than plucky entrepreneurs seeking to crack the US.
Decades ago, there was a rush to outsource call centres and factory jobs to countries such as India and Vietnam where labour was far cheaper. Now US companies are increasingly outsourcing to Britain.
Nearly one in six jobs advertised in the UK so far this year was listed by a company headquartered in the US, according to an analysis by LinkedIn. This was up 30pc on last year.
Cheaper salaries and an advantageous time zone make the UK a prime target for US companies, many of which are more open to remote working in the wake of the pandemic. Stronger economic growth is also allowing US companies to poach the best talent, outbidding weaker British companies.
The flood of money and booming services exports to the US have become a lifeline for the British economy, which is grappling with sluggish growth and anaemic levels of overall investment.
But the trend itself is also a warning sign.
Edward East, 38, is among a growing number of bosses exploiting the widening US and UK salary gap - Dan Callister/LIS
Recruiters say it is symptomatic of Britain’s own hiring drought. In the global war for talent, particularly in high-tech industries such as AI, US companies are taking some of Britain’s best talent away because they are the ones that are expanding more aggressively.
Many home-grown companies are struggling to compete. What is a short-term cash injection could take a longer-term toll on British innovation, leaving the country even more stuck in the mud on growth and productivity.
UK ‘fundamentally cheaper’ than US
Outsourcing jobs overseas has always been a cost-cutting measure and the trend for “Britshoring” jobs is no different.
American companies are outsourcing white-collar roles to the UK because the workers can be “half the cost” of similar staff in the US, says Michael Stull, managing director at recruitment giant ManpowerGroup UK.
“There is definitely interest in accountants, lawyers, consultants. Those are all areas where we’re seeing demand for the UK workforce,” he says.
Job listings in the US, particularly in media and tech, highlight the stark difference in wages. Californian tech giant Netflix last year advertised for a flight attendant to look after bosses on one of its private jets, promising an annual salary of $385,000 (£298,000).
In job adverts for US burrito chain Chipotle, applicants are told they can quickly make $100,000 (£78,000). This is more than double the average annual wage in the UK and only around £10,000 less than what the average chief executive earns here, according to the Office for National Statistics (ONS).
The Dreamhouse featured in the Oscar-nominated film Barbie was built in an old airfield in Hertfordshire - Warner Bros/AP
Hiring in the UK, where wages are cheaper, is now an established strategy for American companies looking to keep costs down.
“I have been given advice by people who are far more experienced than myself and one of the first things they asked was ‘have you considered using more UK support?’ Lots of businesses do it,” says East.
Hollywood has been at the forefront of embracing Britshoring. The 25ft-tall Dreamhouse created for the Oscar-nominated film Barbie was not built in California but in a Second World War airfield in Hertfordshire.
“The UK’s competitive edge is that it is fundamentally cheaper than the US. That’s a fact,” Jay Rosenwink, an executive at Warner Bros, the studio behind the film, told the Wall Street Journal earlier this year. As well as lower wages, British film industry workers do not have such powerful unions as in the US, meaning their contracts are not as strict, he said.
The giant Warner Bros Studios in Hertfordshire where Barbie was filmed was also used for the Willy Wonka prequel, Wonka, and is now expanding in a move set to create 4,000 UK jobs. Netflix and Amazon have also invested heavily in production facilities in the UK.
British wages are so much lower than US pay largely because the economy on the other side of the Atlantic is healthier.
The US economy has long been the biggest in the world and is still growing at the fastest rate of any G7 nation. Its GDP is forecast to expand by 2.8pc this year, more than double the 1.1pc growth rate expected in the UK, according to the International Monetary Fund (IMF).
American companies also have deeper pockets because they cater to a far larger market of consumers, meaning bigger sales and profits.
“It is a staggeringly bigger market,” says East, whose clients include the likes of Amazon and Meta Platforms. In Billion Dollar Boy’s case, advertising contracts in the US can be eight times the size of those in the UK.
A report from the Social Market Foundation think tank found earlier this year that Americans are a third richer than the average British person. The average salary was more than £52,000 in the US last year, according to the US Bureau of Labor Statistics, while the UK equivalent was £35,000, according to the Office for National Statistics.
Pay in Britain has long lagged behind the US and in white-collar jobs the disparities can be particularly stark.
The median salary for a communications manager in the UK is £48,250, according to Robert Half – 31pc less than the same role would command in the US, based on the current exchange rate.
Hiring an IT director in the UK would cost 24pc less than recruiting the same position in the US. A chief information officer in the UK is paid £138,750 per year on average, £55,139 less than if they worked in the US.
Glenn Murphy, a managing partner for tech recruiter Riviera Europe, adds that senior software engineers in the UK typically get 20pc less on cash compensation and 25pc to 30pc less on non-cash pay such as shares.
Britain’s reputation in the US for low wages sometimes exceeds reality.
“There are times when they might think they’re getting it cheap in the UK and it’s not as cheap as they expected,” says Duncan Smorfitt, a market director at recruiter Robert Half. “There have been some instances where it’s almost been amusing. We’ve had to remind clients we’re not somewhere you go offshore.”
Lawyers in London are now earning a similar rate to their American counterparts after US law firms triggered a bidding war for talent in the capital. Starting salaries of up to £180,000 for newly qualified lawyers are now not unusual – more than £10,000 above what Prime Minister Keir Starmer earns, himself a former lawyer.
Desperate to compete, top UK law firms now pay junior lawyers as much as 50pc more than they did five years ago. Bosses are concerned that the pay race is unsustainable. One British chief says: “UK firms are now struggling to keep up with US wage levels.”
“The US just doesn’t seem to slow down,” says Smorfitt. “There is this sort of endless demand, it is relentless.”
Playing off the pay difference can create tensions. One London-based legal executive who does not earn the same as her US counterparts complained to her boss after discovering that someone she managed in New York was earning “way more” than her.
After flagging the “staggering” difference in pay, she was told to put up with it – life is more expensive on the other side of the Atlantic. The reply left her seething.
“I’ve lived in New York with work and can tell you that although it’s expensive, it’s no different to London. You hear the excuse that the rent is much higher in Manhattan – and I just think, well it would be [in London too] if I lived in the City or in Mayfair and wanted to walk to work,” she says.
“Instead, like most people, I live in the suburbs with cheaper rent and pay the £300 or so a month to get a train to work.”
Perfect hunting ground
Britain is a perfect hunting ground for American companies looking for cheap, well-educated labour.
We are English-speaking and in a time zone that offers an advantage for US companies looking to expand globally, says Smorfitt. Some US tech firms are “following the sun, recruiting people so that they can have a labour force that can work while their US counterparts are asleep”, he adds.
The strong dollar helps too. In autumn 2014, the pound was worth $1.71; today, it is worth around $1.30. The decline has made wages in Britain look even cheaper to cost-conscious US executives.
While hiring decisions still come down to who is the best candidate, this can give Britons an important edge.
“If it’s a £100,000 [salary] here in the UK, it is going to be $300,000 or more in the US,” says Andrew Harvey, the chief executive of recruiter VMA Group, which specialises in communications and public affairs jobs.
Even if companies have to fly their UK-based staff over for important meetings, the “cost of travelling to New York from London or Glasgow is not that much more than from, say, Wyoming”, points out Stanford University economics professor Nicholas Bloom.
A weekday return flight from New York to Wyoming’s Jackson Hole valley currently costs around £600 and takes seven hours. Flights for the same date from London to New York cost £400, and take a similar amount of time.
Demand from US employers for UK workers has doubled since the pandemic began, according to Smorfitt. The pandemic triggered a mass shift to remote working and led to more recruitment overseas.
“At the very least, we are talking to US clients twice as much as [we] would have been in 2019, and it seems to be growing,” he says.
The shift to home working since Covid also means that more staff aren’t travelling at all, making it easier for recruiters to convince cash-rich US employers to hire further afield.
“A hell of a lot more people aren’t travelling,” says Harvey. “They do stuff on Teams and Zoom and people are comfortable doing that.
“Pre-Covid, I doubt any of my team would have called any organisation directly in the US. Now, there are people in my team who are talking to organisations in the US on a daily basis.”
London-based VMA has seen the share of its business coming from US companies grow from zero to around 10pc since Covid.
Yet this is not just a good news story about the appeal of British workers – many recruiters are chasing US business because the economy is so poor at home.
Harvey says: “2022 was a great year for the UK recruitment industry. 2023 and 2024 have been really challenging. A lot of recruitment firms have looked to the US to see what opportunities may be there.”
US calling the shots
Mired in debt and struggling with a productivity crisis that is now approaching its second decade, investment in British jobs from UK companies has provided a crucial lifeline.
Services exports to the US more than doubled between the second quarter of 2016 and the second quarter of this year. The annual trade is now worth £129bn.
The European Union is still the biggest buyer of UK services exports, with the US in second place. But exports to the US are growing at a far faster rate.
Still, the bottom line for Britain is that in many cases it is American companies calling the shots. Their brains, creativity and skills are now feeding US profit margins instead of British ones.
“Because things haven’t been as buoyant in the UK, there is a lot of talent that are putting their hands up [and going for US jobs],” says Smorfitt.
What this means for British dynamism remains to be seen. There is an argument to be made that working for a US company can help impart the skills and training needed to make the UK competitive again.
But the flip side is that our best and brightest may end up moving to the US, leaving Britain little more than the back-office to the biggest economy in the world.
Then there is the question of how long this hiring boom will continue. Donald Trump has campaigned with a slogan to “stop outsourcing” and has pledged to introduce tariffs of up to 20pc on the value of goods entering the US from other countries.
A threat could also come from UK economic policy. Interest in Britain from US companies dipped in the wake of the September 2022 mini-Budget, when UK markets were volatile.
In order to raise £25bn through employers’ National Insurance contributions, the Government is also lowering the level at which employers have to start paying them. Then there is the looming overhaul of workers’ rights, which will mean employers have to give new staff full protections from day one in a job and will strengthen the power of unions.
“If American bosses in boardrooms in the States know anything about the UK market, it’s that compared to France and Germany, labour laws are more flexible,” says Duncan Edwards, the boss of transatlantic trade association BritishAmerican Business.
The imposition of more rigid rules will be “a concern for US companies who already have big numbers of employees here”, he says.
“Whether that turns into hiring less people, we’ll see. But it’s certainly an issue for the managers in the UK trying to attract investment from their parent company.”
If the costs of doing business in the UK suddenly spikes, it’s inevitable that the appetite for hiring here will cool as companies turn to cheaper options elsewhere.
Stanford’s Bloom says: “The big competitor with the UK is central and South America, in that US firms do a lot of off-shoring of jobs to Argentina, Brazil and Mexico.
“These have a lot of skilled coders and technical staff, so to compete Brits need to have some cultural or language edge. So yes, US firms will offshore to British workers, but it’s a narrow realm of jobs where fluent English is important.”
Trends can quickly turn. A senior manager at a US company with staff in Britain is now “seriously questioning whether it’s worth staying” following Reeves’s mammoth tax raid, a person familiar with the plans says.
As for East, he is now hiring people in the US on local salaries. Today, they make up a quarter of his 180-strong workforce. The US makes up 40pc of his business, and it is growing rapidly.
Local, on-the-ground expertise is crucial for growth in the US, says East. “Hiring American talent will continue to be focus for us.”
But for now, he still plans to keep a large chunk of his workforce in Britain. “We want to continue to take advantage of the cost efficiencies.”
