Fed Holds Rates at 3.75%: Over 1 Million London-Based Companies Face Elevated US Borrowing Costs

The Federal Reserve held US interest rates between 3.5% and 3.75% on 17 June 2026^[1], maintaining elevated borrowing costs for many UK companies with American operations or subsidiaries. The decision, announced after Kevin Warsh's first meeting in charge of the central bank, came despite US President Donald Trump's public pressure for rate cuts^[1].

Analysis of the CompanyPulse company register^[2] shows the geographic and sectoral concentration of UK businesses potentially affected by the Fed's rate environment, with real estate, consultancy, and technology sectors showing the highest representation among companies that may have US exposure.

London Dominates UK-US Business Concentration

Geographic data from the CompanyPulse register reveals 1,055,802 companies registered in London^[2], representing a significant concentration of the UK's potential US-facing business activity. Manchester follows with 102,352 registered companies, while Birmingham accounts for 92,553^[2].

The capital's dominance reflects its role as the primary hub for international business operations, with financial services, professional services, and technology companies typically headquartering in London before expanding to US markets. Scotland's two major cities show substantial business populations, with Glasgow recording 70,836 companies and Edinburgh 57,411^[2].

Regional centres including Bristol (56,141 companies), Leeds (50,416), and Cardiff (47,417) demonstrate that US-exposed business activity extends well beyond the capital^[2], though London's concentration remains disproportionately high relative to population.

Real Estate and Professional Services Lead Sectoral Exposure

Sectoral analysis of the CompanyPulse database shows real estate activities dominate among UK companies that may have US operations. Companies classified under "Other letting and operating of own or leased real estate" total 443,418, while those in "Buying and selling of own real estate" number 273,759^[2].

Management consultancy represents another major category, with 272,866 companies classified under "Management consultancy activities other than financial management"^[2]. This sector frequently operates across both UK and US markets, with consultants serving multinational clients or establishing American offices to access the larger US market.

Technology and digital services show strong representation, with 166,486 companies in IT consultancy and 100,534 in business and domestic software development^[2]. These sectors have historically shown high propensity for trans-Atlantic expansion, driven by access to US venture capital and the Silicon Valley ecosystem.

E-commerce businesses classified under "Retail sale via mail order houses or via Internet" total 201,311^[2], reflecting the borderless nature of digital retail and the importance of the US market for UK online sellers.

Fed Rate Decision and Forward Guidance

The Federal Reserve's rate-setting committee unanimously decided to maintain rates steady despite inflation running at 3.8%, above the central bank's target^[1]. In a statement backed by 12 members, the Federal Open Market Committee (FOMC) said: "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East"^[1].

The BBC^[1] reported that nine of the 18 central bankers who participated in the FOMC's rate-setting process predicted an interest rate hike this year, while just one expected a cut. The remaining eight predicted rates would stay the same, according to the "dot-plot" grid of central bankers' expectations released alongside the decision.

Samuel Tombs, chief US economist at Pantheon Macroeconomics, said the "big news" from the meeting was the "dot-plot" pointing to potential interest rate hikes before the end of the year^[1]. This forward guidance suggests UK companies with dollar-denominated debt or US financing arrangements may face increased borrowing costs in the months ahead.

Implications for UK Companies with US Operations

The sustained high rate environment affects UK companies with American operations in several ways. Companies that have borrowed in US dollars to finance American subsidiaries or operations face continued elevated debt servicing costs. The 3.5-3.75% federal funds rate translates to higher commercial borrowing rates for corporate debt^[1].

For UK technology companies that have raised venture capital or growth equity in the US market, the rate environment influences both the cost of debt financing and equity valuations. Higher rates typically compress technology company valuations as future cash flows are discounted more heavily.

Real estate companies with US property portfolios face particular pressure, as commercial real estate values are sensitive to interest rate changes. The CompanyPulse data showing over 700,000 UK companies in real estate-related activities^[2] suggests a substantial portion of the business community may be exposed to US property market dynamics.

The Fed's statement removed a hint that it was leaning towards lowering interest rates in the future^[1], signaling that UK companies should plan for an extended period of elevated US borrowing costs rather than anticipating near-term relief.

Dormant Companies and Holding Structures

The CompanyPulse database shows 115,718 dormant companies and 111,349 classified as "Activities of other holding companies n.e.c."^[2] These categories often include entities established as part of international corporate structures, potentially including vehicles for US operations that remain dormant during certain periods or holding companies that own American subsidiaries.

The presence of substantial holding company activity suggests many UK-US corporate relationships involve complex structures designed for tax efficiency or regulatory compliance, adding layers of financial engineering that may be sensitive to interest rate differentials between jurisdictions.

With the Fed maintaining rates at 3.5-3.75% while the UK's own rate environment evolves separately, UK companies with trans-Atlantic operations must navigate diverging monetary policies, creating both risks and opportunities depending on their specific financing arrangements and operational footprints.