There is no escaping the fact that Brexit is still front and centre in most international investors’ minds, when it comes to the UK.
The good news is that the UK retained its status as the top destination in Europe for foreign direct investment (FDI) in 2017, according to the FDi Report 2018, produced by the Financial Times, despite a 10 per cent decline in project numbers and a 5 per cent retraction in capital investment.
More than USD33 billion was invested in the UK during 2017, giving it a European market share of 18 per cent, more than double its nearest rival.
These figures bear out the fact that, while uncertainty around trade and access to markets does affect capital, it is largely immune to wider political disagreements. The data would also suggest that, when Brexit is finally resolved and clarity around access to European markets returns, the UK stands to increase its dominance of the European FDI scene even further.
There are many things to recommend the UK, and each of its constituent countries, to international investors. Principal among those is the UK’s corporation tax rate, which, at 19 per cent, is one of the lowest in the G20. The UK also has a wide network of double taxation treaties with other countries, ensuring the majority of UK-based companies don’t pay corporation tax on foreign dividends.
Aside from these general tax incentives, there are also incentives for research and development (R&D) and technology. Companies located in the UK, can get a 100 per cent deduction of corporation tax for R&D-related work, while deductions from wider taxable income are also available. The UK operates a patent box scheme, which applies a corporation tax rate of 10 per cent on profits earned from patented inventions and innovations.
For smaller businesses, the Department for International Trade’s (DIT) Global Entrepreneur Programme helps overseas entrepreneurs and early stage technology businesses to relocate to the UK. The scheme has helped more than 340 businesses to relocate and raised more than GBP1 Billion of private investment. The scheme can also secure entrepreneur visas for those companies that have raised at least GBP50,000 in funding from approved sources.
Access to capital can be a concern for some foreign investors, and the UK has an extremely well-developed funding infrastructure, across both debt and equity. The British Venture Capital and Private Equity Association (BVCA) represents the private equity industry in the UK and its figures for 2017 show a healthy environment for venture capital investment, which increased by 45 per cent in 2017 to GBP820 million, effectively doubling since 2014. Backing was extended to 485 companies, a 36 per cent increase, while seed investments grew by almost 300 per cent, reaching GBP56 million. Early-stage financing doubled in size to GBP 313 million, while start-up financing increased by 75 per cent.
While London remains the major driver of the UK economy, there are also powerful regional cities that are developing rapidly, aided by the forthcoming high speed rail network HS2. These cities, including Birmingham, Manchester, Liverpool and Leeds, offer a range of attractive investment incentives, over and above those to be found in London and the South East region.
As an example, the Yorkshire region has a gross domestic product (GDP) in excess of GBP80 billion, and specialist industry clusters in advanced engineering and materials, chemicals, environmental technologies, digital and new media, healthcare and finance.
Regardless of the outcome of Brexit, the UK will remain an attractive destination for FDI, retaining its close relationship with the European Union and providing an ideal base for US and Asian companies wishing to access Europe.
In the following pages, we hear from a number of professionals with expertise in a range of legal practices critical to commercial investment. They will go into detail on UK-specific developments in areas such as employment legislation, data privacy, leveraged finance and immigration. The brochure provides a comprehensive roundup of information and contacts for foreign investors considering the UK as a business destination.