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Pre-Trip Paper
Lucas Colantoni
School of Business, Liberty University
ACCT 370-390
Professor Geisler
March 3, 2025
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Pre-Trip Paper
This paper compares and contrasts business landscapes of the United States and England and
how they impact business operations and decision-making. The paper focuses on three areas –
Economic Environment, Taxation Policies, and Labor Market and Employment.
Economic Environment:
There are different ways to measure economic growth but typically it is measured by real
growth in Gross Domestic Product (GDP) (Sources of Economic Growth, 2011). In 2023, world
GDP was $107 trillion. Of that, England accounted for $3.4 trillion, and the U.S. accounted for
$27.7 trillion, about 8 times as much as England (The World Bank, 2023). According to the
International Monetary Fund government expenditures as a percent of GDP is higher in the UK
(44%) than the U.S. (36%). The UK has broader social welfare programs than the U.S. Economic
stability, inflation rates, and the impact of governmental policies on businesses are comparable
between the two countries. Like the U.S., the Consumer Prices Index (CPI) is the main measure
of inflation in the UK. As of January 2025, inflation is running about 3% in England and 2.6% in
the U.S.
According to the House of Commons Library, the UK’s economy is dominated by services
industries, which includes retail, hospitality and finance, as well as public services like health
and education (Hutton and Zaidi, 2024). Other non-service industries, including manufacturing,
construction, agriculture and utilities, account for around a fifth of economic output altogether.
The share attributed to manufacturing over the past 30 years has decreased while the share
attributed to services has increased. In the U.S., the results are similar. Servicebased industries,
including professional and business services, real estate, finance, and health care, make up the
bulk (70%) of U.S. GDP. In comparison, goods-producing industries like agriculture,
manufacturing, mining, and construction play a smaller role (U.S. Bureau of Labor Statistics,
2024). Sometimes comparisons between the two countries are difficult due to the way they
aggregate industry data. For example, banking and finance is sometimes separate and other
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times it’s included as a service industry. As both countries population ages (baby boomers),
medical and health care costs become a larger share of GDP adapting to the change in
consumer needs.
Taxation Policies:
Tax structures in the U.S. and England differ in rates, frameworks, and principles. The
U.S. generally uses a progressive federal tax system for individuals with additional state and
local taxes. In contrast, England imposes higher income taxes and value-added taxes (VATs) to
fund extensive social welfare programs like healthcare. These policies reflect differing societal
priorities, shaping economic behaviors and government revenue.
Both the U.S. and England use progressive income tax systems so the amount of tax you
pay correlates to your income. England’s highest tax rate is 45% compared to the U.S. top rate of
37%. However, state income taxes can increase overall U.S. rates. While not all states in the U.S.
impose an income tax, high state income tax rates can drive combined corporate federal and
state taxes to levels comparable to England’s rates.
The U.S. corporate tax rate was set at 21% by the Tax Cuts and Jobs Act of 2017.
Additionally, 44 states and Washington, DC, impose their own corporate taxes, ranging from
2.5% to 11.5%. In England the corporate tax rate is 25% which is above the U.S. rate (Ali, 2024).
Sales taxes in the U.S. differ significantly from England’s Value Added Tax (VAT) system,
not only in the tax rate but also in the way they’re applied. In the U.S., state-collected sales
taxes are applied to consumers at the point of sale and vary widely by state and municipality. In
contrast, England’s VAT rate is 20 percent. While the VAT system leads to higher costs for
consumers, the tax is baked into the cost of the item or service, rather than charged to the
consumer at the point of sale. As a result, England’s consumers might not be aware of the taxes
they are paying (Ali, 2024).
Capital gains taxes differ significantly between the U.S. and England. In the U.S.,
shortterm gains are taxed at personal income tax rates, while long-term gains are taxed between
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0% and 20%, while in England the capital tax rate is generally 24%. The U.S. purposefully
differentiates between short-term and long-term capital gains taxation to encourage
investment, including research and development activities.
The tax structures in the U.S. and England highlight different societal priorities, affecting
economic behavior and government revenue. The U.S. system favors disposable income while
England’s higher taxes fund extensive social programs like universal healthcare (United
Kingdom Corporate Tax Rate, 2024).
Tax policies can have a big impact on business decisions making. Regarding investment
strategies, tax policies influence how entrepreneurs organize their companies and optimize
investment and borrowing activities. Moreover, tax codes affect the global competitiveness of
the U.S. in attracting and keeping multinational companies. Payroll taxation can affect
companies; decisions on how many people to hire. Tax policies affect businesses’ borrowing
behaviors by changing rules on the interest expense deduction. In general, businesses can
deduct interest on their borrowing but cannot deduct dividends they pay to shareholders. This
is one of the advantages of debt financing over equity financing. All else being equal, countries
with lower taxes appeal more to multinational companies (MNCs) and foreign direct investment.
Labor Market and Employment:
Both countries have numerous labor laws and regulations and workers in both countries
are generally protected against discrimination. Also, both countries have minimum wage
requirements. England generally has more favorable treatment from the employee perspective.
Unions in both countries have faced an increasingly restrictive environment. In the U.S., every
state (except for Montana) is an “at will” state, meaning that an employer can effectively dismiss
an employee at any time, save for illegal matters. In the UK, just 22.3% of workers were part of a
union in 2022. In the U.S., the proportion is 10.1% (Daniels, 2023).
Both England and the U.S. are facing difficulty is attracting skilled labor across all jobs
and both face labor shortages. In the UK, the Institute for Employment Studies estimates there
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are 600,000 fewer people in work than before the pandemic, likely due to fewer migrants in the
labor market, older people retiring, and younger people in further education. In addition to this
growing labor shortage, there are also growing gaps between new jobs being advertised, and
the skills within the current workforce to do them. In the U.S., made of the trades and auto
workers are facing severe shortages as more people go to college and want to work “white
collar” jobs.
The UK unemployment rate is currently running at 4.3% and in the U.S. 4.2%. The
pandemic changed the dynamics of the workforce with more people working remote and
oftentimes living hundreds of miles away from their office (Hutton and Zaidi, 2024). In the
future, AI may enable machines to perform tasks that typically require human intelligence, such
as understanding natural language, recognizing patterns, solving problems, and learning from
experience. That could help mitigate the labor shortage in both countries.
References
Ali, N. (2024, August 28). Comparing Tax Structures: US, UK, and Europe . Heritage Financial
Consultants. https://www.heritageconsultants.com/comparing-tax-structures-us-uk-
andeurope/
Breese, E. (2023, March 29). Minimum wage UK: How does Britain compare to the rest of the
world? The Big Issue. https://www.bigissue.com/news/employment/minimum-
wagehow-does-britain-compare-to-the-rest-of-the-world/
Daniels, S. (2023, November 9). Trade unions in the UK and US have become more powerful
despite political interference and falling memberships. The Conversation.
https://theconversation.com/trade-unions-in-the-uk-and-us-have-become-more-
powerfuldespite-political-interference-and-falling-memberships-215842 de Souza, R. (2024,
October 27). Key Differences in Employment Law Between the USA and UK.
Raphael Law. https://raphaelaw.com/law-between-the-usa-and-uk/
Hutton, G., & Zaidi, K. (2024). Industries in the UK. House of Commons Library.
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https://commonslibrary.parliament.uk/research-briefings/cbp-8353/
Sources of Economic Growth - Trade and Investment Analytical Papers. (2011). In GOV.UK.
Department for Business Innovation & Skills.
https://assets.publishing.service.gov.uk/media/5a78f32240f0b6324769b6e0/11-
723sources-of-economic-growth.pdf
The World Bank. (2023). GDP (current US$) - United Kingdom . World Bank Group.
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=GB
United Kingdom Corporate Tax Rate. (2024, July 14). Trading Economics.
https://tradingeconomics.com/united-kingdom/corporate-tax-rate
U.S. Bureau of Labor Statistics. (2024, August 29). Bureau of Labor Statistics (.Gov).
https://www.bls.gov/
