Despite the obvious appeal, companies entering the UK market can face complicated and disparate laws, tax brackets, other bits of red tape - and the implications of Brexit.
The UK is one of the world's leading business locations, based on the World Bank Doing Business 2020 report, where it ranked 8th for "ease of doing business". It also ranks 53rd in TMF Group's Global Business Complexity Index 2021 - which covers 77 jurisdictions according to the complexity of their business environments - an improvement from 44th in 2020.
Corporation tax is the joint lowest in the G20 at 19 per cent, which is further reduced by up to 100 per cent for work related to R&D, and tax on patents is just 10 per cent. From 1 April 2023, the main rate of corporation tax is set to rise to 25 per cent.
Despite the obvious appeal, companies can find complicated and disparate laws, tax brackets, and other bits of UK red tape rather challenging, particularly with the additional requirement of navigating the potential implications of Brexit. Here are ten key challenges you are likely to face when entering the UK market.
The UK left the European Union (EU) on 31 January 2020, with a transition period that ran through to 31 December 2020. The rules governing the new relationship between the UK and the EU took effect on 1 January 2021.
The true impact of Brexit on doing business is yet to be fully assessed. This is mostly because the Covid pandemic has made it somewhat challenging to ascertain exactly how Brexit has changed doing business in the UK. Limited trade, additional customs checks and deepening labour shortages are among the issues that have started to emerge since the UK's departure from the bloc.
As the UK moves forward, as much as it is possible with the Covid pandemic still very much masking Brexit's threats and opportunities, a lot will depend on changes to rules and regulations we are about to see emerging from the UK Parliament and how these shape the future of the UK economy.
The UK now needs to find the right balance - to update its legislation to make doing business in the UK attractive, but at the same time not to overstep the mark with its current biggest trading partner, the EU.
2. Starting a business
A company can be formed and incorporated in the UK within 48 hours, but it takes an average of 18 days to complete all of the administration, with the lion's share of that time spent dealing with Her Majesty's Revenue and Customs (HMRC) and registering for a withholding tax on incomes called PAYE (pay-as-you-earn).
Foreign businesses coming to the UK should be aware that the accounts of all UK companies are subject to public disclosure through the Registrar of Companies. Although there are few fees charged, the number of procedures can make the process quite laborious for businesses.
The UK has been known for its internationally mobile and highly skilled workforce, as well as the favourable supply of European retail and hospitality staff. Since the Brexit vote, however, there has been a marked reduction in Europeans applying to UK retail and hospitality roles and there are limited answers to questions from the highly skilled workforce about their future rights now that the UK has left the EU.
With the exception of Irish nationals who have the right to live and work in the UK through a route outside their status as EU nationals, nationals of European Economic Area (EEA) countries will require a visa to live and work in the UK, now that Brexit has come to pass. Working with TMF Group to fulfil your support staffing needs can ease your entry into new markets.
4. Construction permits and registering property
Construction is relatively streamlined in the UK, taking under 100 days and requiring only nine procedures. Obtaining planning permission from the relevant authorities and getting water and sewerage connections takes the longest time and are the costliest elements. However, registering a property is the most arduous task of setting a business up in the country, according to figures from the World Bank 2020 report - with a total of six procedures that take 22 days on average.
5. Getting electricity
UK Power Networks handles electricity connections and can take up to 50 days to complete proceedings for new premises. This involves submitting plans, obtaining inspections and waiting for the external connection works to be carried out. Choosing an electricity supplier with the best rates for your needs can also be difficult.
6. Getting credit
The UK ranks 37th in the World Bank Doing Business 2020 report for ease of getting credit. The robust financial sector and diversified nature of acquiring credit gives both start-ups and developed businesses good access to much needed funds. However, knowing which type of credit will suit which business is a daunting task that often requires assistance.
7. Protecting investors
Solid treaties and a robust financial climate mean that investors are well protected in the UK, although it is always worthwhile taking out assurance and conducting thorough due diligence when expanding into the country.
8. Paying taxes
The tax system in the UK is notoriously tricky, largely because the country's legal system has been developed in a piecemeal fashion. It takes around 110 hours per year to complete all necessary tax obligations, which can involve anything from corporate and labour charges to environmental and sales taxes. Having local tax support can be crucial to easing this burden.
9. Enforcing contracts and resolving insolvency
Enforcing contracts and resolving insolvency are both relatively seamless processes thanks to the developed nature of the UK's legal system. It takes on average around 440 days to enforce a contract and one year to resolve insolvency - both less than the OECD average.
10. Cultural barriers
The British can come across as quite reserved and distant at first, and it can take some time to get down to the nitty-gritty elements of business proceedings. Time is an important factor, although reaching a decision can be slow and laborious, involving multiple parties and many layers of and bureaucracy.
Ideally, business introductions are initiated through a connected third party. In older companies, business may still centre on the "old boy network" with schools, universities and family ties being important. Newer companies are more progressive.
Talk to us
TMF Group has the local knowledge to help you identify and face any challenge or opportunity for your business. Whether you want to set up in the UK or just want to streamline your UK operations, we can help.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.