KNOWLEDGE BASE Ways To Do Business In The UK

 

On March 29, 2017, UK Prime Minister Theresa May triggered Article 50, which formally started the process whereby the UK will leave the European Union. Article 50 was just the beginning of the withdrawal process, as it allows the UK two years to negotiate its leave with the other EU member states. UK laws and regulations did not and will not change overnight. We will update our site with any relevant changes and information as it becomes available. You can learn more on the UK government site.

 

Ways To Do Business In The UK

 

There are many ways for a company to do business in the UK - ranging from testing the market before committing, to fully engaging with a significant investment. We’ve compiled information on the commonly used business options to save you time and money and help you understand what is available to you. 

 

Ease of Doing Business in the UK - Regulatory Environment

 

The World Bank Group ranks the UK 7th out of 190 countries for ease of doing business within the country as a small or medium-sized company. Specifically, regulations applying to companies through their life cycle were studied by the World Bank Group. A high ranking indicates that the regulatory environment is relatively more conducive to starting and operating a company locally. The World Bank Group ranking takes into consideration the following parameters:

  • Starting a Business

  • Dealing with Construction Permits

  • Getting Electricity

  • Registering Property

  • Getting Credit

  • Protecting Minority Investors

  • Paying Taxes

  • Trading Across Borders

  • Enforcing Contracts

  • Resolving Insolvency

Learn about the annual report and download the World Bank Report, Doing Business 2017: Equal Opportunity For All. You can see all of the World Bank Group's rankings and also specifically the World Bank Group Ranking information on the UK.

 

Options for doing business in the UK

 

Every country has different options for allowing companies from foreign countries to do business with their citizens. The business environment in the United Kingdom is considered by many to be one of the most sophisticated in the world, making it an attractive prospect for businesses of all sizes. The United Kingdom is one of the largest markets in the world and is one of the World’s major economies; that coupled with a high standard of living make it attractive to a large number of businesses. Often considered the gateway to Europe for business expansion, that status may very well change with its eventual exit from the EU.

Depending upon your business type, the speed you want to enter a market, your risk tolerance, and available funding, some options for doing business in the UK will be more attractive to you than others.

When setting up a business in the UK, it is important to be familiar with:

  • the legal system—specifically, the laws and regulations that could affect your business

  • the tax, national insurance, and VAT (value-added tax) systems

  • employment laws and procedures

  • immigration

  • intellectual property rights, including patent, copyright, and trademark

  • licensing

 

Direct Exporting

 

E-commerce from your base location via web or mobile phone

If your company is online, are are probably already doing international business.  Most of the major commerce platforms are prepared to sell into the UK. Digital payment options are easy to find and the process of figuring out what the ‘landed price’ is, meaning that it includes the product cost, packaging, customs and any tariffs that may apply, shipping insurances, currency conversions, and handling fees is more straightforward than in other countries.

Consumer e-commerce sites and mobile apps should have a country specific internationalized website which is localized for the language and culture for each country. In the case of the UK, while you are working with an English-speaking country, remember that there are differences in how words are spelled.  Country specific SEO and marketing will be required to optimize your ecommerce business.

In this business model, you are responsible for marketing, selling, exporting and customer support when you sell internationally.  B2B commerce businesses can decide if a country-specific web or mobile offering is necessary, depending upon the product category and market expectations. Even though English is the international language of business, and certainly is for the UK, having a localized B2B offering may increase your opportunities for doing business abroad.

For more guidance on adapting your website and marketing for the UK market, go to our Product Localization sections and use our step-by-step UK Expansion Plan to help you get started.

 

Import distributor

Often the easiest, fastest, lowest cost and lowest risk options are working with distributors or sales agents. These may not be the ones with the highest return in the long-term but can help you to learn about the market before considering higher risk opportunities.   

Import distributors purchase your product so they can then resell it into their local markets to wholesalers, retailers, or both. One reason to consider using import distributors is when you need to store products in the export country and these distributors already have those services set up. Another is that the import distributor already has a network of buyers they can tap into and it’s faster to enter the market.

 

Sales representative

Sales representatives represent a variety of products from different countries  in their local markets for an agreed-upon commission for each sale. They will not purchase your product or warehouse them. The reps can also advise on go-to-market ideas, local advertising, make local sales presentations, and assist with customs clearance.

 

Indirect Exporting: Partnering with Local Experts  

 

Partnering, agents, distributors, remarketers

Partnering up with a company via an agreement, agent relationship, or distributorship with an established business within the country you’re interested in is one of the quicker and more affordable ways to do business in new markets. Especially if the partner has a complementary business to your own and the same target market, the efficiencies could be good for both partners. EMC’s and agents will work with a variety of companies and are experts in bringing in goods from other countries.

Pros:

  • Low cost entry into a new market

  • Experience in market

  • Established customer network

  • Speed to entry

  • An opportunity to learn about a market from experts

Cons:

  • Less control over how your product is marketed, sold, and managed

  • Less direct feedback from your customers

  • Since most of these companies also work with other brands, your brand may not get the attention you would like it to

  • If your business partner is not respected by your target customers it may have a negative impact on your brand

  • If in the long term you’d like to do business in that country without a partner it may be hard to establish yourself with a very powerful partner you’ve helped to build up

  • If your partner could become your competitor and they are just learning from your business before starting a competitive product

  • If the partner applied for and owns the trademark for your brand they could own your business in that market

  • If your partner runs into legal and financial troubles, understand what your liabilities are

 

Contractual Strategies

 

Licensing abroad

Company A from one country will create an agreement with Company B from another country to transfer the right to manufacture or distribute their product or service into a foreign country for a set amount of time and money. Company A can also license the right to use their intellectual property including patents, trademarks, and other IP, give their company name, technology, and technological know-how, design and/or business methods to Company B.

Pros:

  • Quick, easy entry into foreign markets for both

  • Speed to market

  • Expertise in market

  • Lower cost

  • ROI could be significant

  • Lower risk to Company B with an established brand

  • Lowered financial risk for both companies since they are working together with each providing their expertise

Cons:

  • Company A that owns the product will have less control over Company B

  • The licensee Company B may become a competitor after learning about Company A’s business

  • Intellectual property may be lost

  • License has a limited time period

  • Company A’s brand and reputation could be at risk if not managed well by Company B

 

Franchising

Franchising is another type of licensing agreement that offers a highly standardized and tested model for creating a business. Franchising is often the choice for new entrepreneurs since they can license a well-known brand with a tested plan and more support from the brand that is licensing the franchise. A lot of restaurants and other service businesses use the franchise model because it allows both the original franchisor and franchisee to share costs for starting businesses.

Franchisees have some control over the operations but often the regulations are well established in advance and require compliance. Especially for famous brands, franchises can be revoked if franchisees don’t comply. In exchange for a paid franchise license, the franchisee will be provided product resources, designs, training, operations and marketing support.

Pros:

  • Lower risk entering new markets for both licensor and licensees in regard to costs, legal ramifications and political risk

  • Economies of scale by ordering with owner and other franchisees

  • A proven business model that removes some of the unknowns in starting a new business

Cons:

  • Both licensor and licensees have less control than if they created a new business

  • Franchisees are often inexperienced and can harm the original brand if they don’t do a good job

  • While a licensee has lower risks, they also have lower profits than if it they owned their own business since they pay the licensee for the license and also often a share of revenue

 

Equity strategies

 

Acquiring  a company or joint venture

The United Kingdom does allow mergers and acquisitions. In fact, mergers and acquisitions are becoming increasingly popular for foreign companies that want to invest in the UK. There will be very specific legal implications, including tax and finance, so we highly recommend that you work with your legal, banking, and tax resources to understand the impact on your business, as well as your responsibilities and obligations.

Make sure you have all trademarking completed in each market being considered well in advance of entering the market because trademark law is different in each country.  In the United Kingdom you are not required to register your trademark. If you have a mark that is not registered, you may rely on your rights under the common law act of “passing off” to protect your mark against imitation or infringement. However, it can be difficult and expensive to prove a passing off action.

Here are some resources to help you understand trademarking in the UK:

Trade Marks Act 1994

Trade Marks Rules

UK Trade Mark Search

Trade Mark Search Tool

Institute of Trade Mark Attorneys

 

You can also learn more about trademarking in the UK on our Trademark page and in the Trade Marks & Patents Plan, which is part of the UK Expansion Plan.  

 

Acquiring an existing company

This is a big opportunity as well as risk. Many mergers never achieve their projected financial and market goals for a variety of reasons. Acquiring a new company requires significant investment of financial, stock, and staffing resources. There are cultural challenges, language differences, redundancies, and synergy inefficiencies integrating not only different business types but also different countries.

Pros:

  • Having an established business entity and tax expectations

  • An existing market of customers

  • Current revenue stream

  • A skilled workforce

  • The removal of a competitor in the market

  • An understanding of the culture and business landscape

  • Existing contracts and more

Cons:

  • Cultural differences

  • Language differences

  • Challenging integrations

  • Drain on existing internal resources - financial and staffing

  • Possible tax and legal challenges

  • Inconsistent technology bases for sharing resources

  • Disconnect between brand personas and target markets

  • May take a long time to realize synergies

 

Joint venture

Companies that are complementary to each other yet offer significant strategic advantages by working together are good candidates for making a joint venture work. Joint ventures are most interesting when the two companies have similar long-term strategic goals yet are not competitive in their markets. By combining, the companies are able to create one stronger company to compete against market leaders and leverage each other’s assets. In the United Kingdom, you are permitted to set up a joint venture with an existing UK business by forming a business that is part-owned by the UK business and part-owned by an foreign business.

Pros:

  • Stronger when combined

  • Shared risk

  • Opportunity to compete against market leaders

  • Complementary strategies

  • Speed to market

  • Lower costs

  • May reduce regulatory issues

Cons:

  • Risk associated with sharing proprietary knowledge and resources

  • Hard to combine two cultures

  • Limited term relationship

  • Lack of clarity in business issues such as ownership rights, control, length of term, pricing, profit sharing etc. may result in legal battles

 

Subsidiary company, AKA private limited company

A subsidiary company, also known as a UK private limited company, is a separate legal entity from the parent company even though it is wholly owned by the parent company. Many customers and suppliers prefer to deal with a UK company, so setting up a subsidiary is often the best option.

Pros:

  • Highest level of control over your product and brand

  • Opportunity for highest ROI

  • Often the best long-term strategy

Cons

  • High investment required

  • Long-term approach necessary to see results

  • Taxing on the organization

  • Additional taxation

  • More regulatory compliance requirements

  • Slower entry into market

 

Setting up your  business

When expanding into the United Kingdom, one of the first things you will have to do is decide what type of business entity you want to create, including whether or not you will create a new entity. There are number of business entity options in the UK, as discussed above, but you are not required to create a new entity at all. If you want to expand and carry out business from a UK address, you can register your overseas company in the UK. Gov. uk has compiled helpful information to assist in your overseas expansion, including how to decide what (if any) UK entity is right for you, how to create that entity, and where and how to register your overseas business.

Setting up a business in the United Kingdom is fairly complex and involves a lot of planning and decisionmaking. As part of the UK Expansion Plan, Globig provides a step-by-step process for setting up a business the UK. In our Doing Business In The UK Plan, you will learn more about the pros and cons for each option for entering the market, as well as find resources and steps to follow in order to enter the market with any of these options.

 

World Bank Report, Doing Business 2017: Equal Opportunity For All

To see the World Bank Group's Ease of Doing Business rankings

For specific World Bank Group Ease of Doing Business ranking information on the UK

 

 

KNOWLEDGE BASE Ways To Do Business In The UK