With 22 Fortune Global 500 companies headquartered in the UK, the country has a large, diverse, and sophisticated economy. Britain is a base for many important companies, serving as a global hub for businesses across a variety of different industries, with considerable growth seen in the renewable energy market in recent years, the UK Government having established ambitious low-carbon targets.
London remains one of the world’s most important financial centers, providing excellent opportunities for companies operating in the financial services sector and related technologies.
Like many countries, Covid-19 has undeniably taken a toll on the UK economy. More recently, conflict in the Ukraine has driven up energy prices. However, the Bank of England has taken robust measures to keep inflation in check. With Boris Johnson recently stepping down, both candidates seeking to replace him as prime minister have proposed short and long-term tax cuts designed to kickstart the economy, a factor that Investec economist Sandra Horsfield observes could materially impact fiscal forecasts.
Growth in the UK Economy
According to its United Kingdom Economic Outlook report published in May 2022, Deloitte predicted growth in the UK economy through 2022. The summer of 2021 saw strong growth in the UK’s GDP, although this subsequently see-sawed through autumn and winter, largely due to labor supply and energy disruptions combined with the imposition of Plan B Covid-19 restrictions in response to the omicron wave. Although the inflationary effects of lockdowns in China and the war in Ukraine have added to existing price pressures, impacting consumer confidence and activity, despite this Deloitte precited that the UK economy would grow by 3.5% through 2022 — more than double the pre-pandemic growth rate.
The UK’s economy has remained stable, with savings accumulated through lockdowns supporting demand, particularly among high earners, who account for a disproportionately high proportion of total spending. Through the summer of 2022, Deloitte predicted that good weather combined with the relinquishing of social distancing restrictions would support economic activity.
Business leaders remained optimistic regarding prospects for revenue growth, according to Deloitte. In its latest CFO Survey, Deloitte reported that 75% of UK CFOs predicted revenue growth through 2022.
Supportive of Small and Medium-Sized Enterprises
Alex Chesterman, founder and CEO of Zoopla, suggests that although the last few years may have been tough from an investment perspective, the overall environment in the UK is supportive of small and medium-sized enterprises in the business community. Chesterman concedes that competition can be a big challenge in the UK, highlighting the importance of businesses standing out in terms of their ideas, people, execution, and products.
A shortage of skilled workers is presenting challenges in the UK as it is globally, with some companies struggling to recruit and retain people with the right skills. This is a common problem in terms of hiring individuals for leadership roles.
Finally, international competition is a commonly cited problem for UK businesses. As serial entrepreneur Stephen Fear points out, UK businesses competing on the world stage face increasing pressure, particularly from dynamic Asian entrepreneurs.
Many Advantages of Doing Business in the UK
For foreign businesses seeking to expand their company’s reach, the UK is a business-friendly destination that confers a variety of commercial advantages.
Firstly, it has a large and dynamic marketplace, with almost 5.6 million private sector businesses operating in the sovereign states, employing 26.9 million workers. The UK economy hosts countless industries, and is distinguished for its creative, financial services, fintech, hospitality, and tourism sectors. Outside of London, the economic focus is typically construction, agriculture, and manufacturing, with automotive, shipbuilding, textiles, and steel particularly strong manufacturing sectors.
The UK has left the EU. However, its physical location makes the country an ideal gateway to Europe, providing easy geographical access to more than 68 million EU citizens while offering the convenience of operating in an English-speaking country. In fact, compared with much of the EU, the UK is one of the easiest countries to do business in, with the World Bank Group ranking the UK as the eighth most business-friendly nation in the world.
Operating in the UK provides businesses with the benefit of access to highly educated, skilled, specialized workers. With more than 30 million working-age adults, the country boasts the second largest-talent pool in Europe. With a meritocratic, points-based immigration system, the UK also makes it easier for businesses to attract and hire highly skilled foreign employees.
Finally, but very importantly, the UK government has incentivized business expansion and investment in the UK through the creation of enterprise zones. Presenting the added benefit of governmental support, simplified local authority planning, and significant tax breaks, enterprise zones are ideal locations for companies branching out in the UK to establish new operations.