Ongoing trade talks between India and the UK could double bilateral trade by 2030 and are said to be ‘worth billions’, presenting huge opportunities for Indian businesses looking to set up shop in the UK. According to the UK’s Department for International Trade, the proposed arrangement between the two countries should be finalised by 2023 and would ensure the development of emerging technologies such as artificial intelligence and cybersecurity. So, what do businesses need to know when expanding to the UK?
Setting up a company in the UK may seem like a daunting task but with the right plan in place, it is relatively straightforward, even for those with no previous experience of doing business in a foreign country. It has never been easier or cheaper to register a company in the UK, making now the perfect time to consider this business move.
Many of the company structures available for new businesses in the UK will be familiar to Indian enterprises, as Indian and English laws share many similarities. The limited liability company (Ltd) is one of the most common corporate structures in the UK and it can provide an advantage for Indian entities looking to create UK affiliates, as the directors of the company do not have to live in the UK on a permanent basis. Registering a limited company can cost just £12 and take as little as 24 hours.
However, it’s worth bearing in mind that limited company structures confine a business to only seeking private investment to fund their growth and development. A public limited company, in tandem with a listing on a stock exchange, allows access to a broader range of investment, and investment structures, and is more appropriate for expanding businesses and/or larger, more established companies seeking to tap markets. Other structures, such as limited liability partnerships (LLPs), have the advantage of not being required to pay corporation tax.
Further UK governance that companies should be aware of when expanding to the UK includes the form of a company’s articles of association, which forms the rules and constitution governing a business. Shareholders and board members should be aware that certain decisions must be made in accordance with these rules and evidence of some decisions will need to be filed publicly at Companies House, the UK registrar of companies, or else a fine may be issued.
Businesses setting up shop in the UK can either opt for model articles, provided under the Companies Act 2006, or create their own Articles of Association tailored to meet their individual set-up. Generally, model articles may be a suitable choice for small companies, whereas more tailored articles may better suit larger companies, or those with complex shareholding classes or structures.
Whilst it is not necessary to have a UK bank account to conduct business in the UK, it can provide administrative convenience for companies looking to make and receive payments in the country. Setting up a UK bank account can be a time-consuming process, so businesses should make a start on arranging one as soon as possible to avoid unnecessary delays.
While having a business plan is not a legal requirement for starting a UK business, it is useful to have a blueprint for the company’s future development. As well as helping to provide the rationale behind securing additional investment as the business grows, it can also help in flushing our and then navigating any potential obstacles that may arise in the first few years of settling in the UK.
Many Indian companies in sectors such as garments, agriculture, and advanced technology, are already setting up UK based affiliates to take advantage of the country’s new trade opportunities. It’s important to remember that when it comes to setting up a business, location is everything.
London remains a prestigious destination for global businesses, but other UK cities also have competitive advantages to offer companies in specific sectors. For example, the Southeast of the UK is home to globally linked service industries, such as banking, finance, and legal services with easy access to the main UK airports and transport links. London and the Southeast are also hotbeds for finance and fintech start-ups, and as of 2022, almost one third of entrepreneurs in the UK were based in the region. However, property in the Southeast, and particularly London, can be very expensive. Therefore, new businesses should carefully weigh up whether having a headquarters in these locations is essential.
Birmingham, Manchester, Humberside, and the Northeast have taken the lead in sectors such as driverless cars and industrial hydrogen technologies, with the Midlands and the North of England having strong connections to the automotive and energy industries. Developments in driverless cars and clean energy technologies will likely happen in these locations first.
As the UK undertakes its ‘net zero’ energy transformation, companies involved with new technology hubs in these regions will have a clear advantage, due to their proximity to a host of potential new partners, collaborators, and customers. Warehouse and property space, as well as rent and living expenses, are much cheaper outside of the Southeast. As such, Indian companies may want to consider basing themselves in the Midlands and Northeast, especially those in the automotive and energy industries, to take advantage of both the areas’ reputations and their cheaper costs. Easy connectivity to rail, road, air, and sea transport links makes these locations (particularly the northern cities) even more desirable.
From a global immigration perspective, business owners will need to consider visa types and requirements for any workforce members that will be migrating from India to the UK. There are a range of immigration visas available for business and staffing requirements, including Innovator, Start-up, Global Talent and Tier 1 Entrepreneur visas. Each of these should be researched thoroughly, with advice sought from a legal professional, to ensure the correct decisions are made.
The UK offers a legal and business framework that is conducive to the growth of Indian businesses looking to thrive in a new and promising marketplace. By making prudent and well-informed decisions early on, they can ensure that they are positioned to capitalise on the opportunities that are likely to arise from the India-UK trade partnership in the coming years.
Sneha Nainwal, partner and Head of India Desk at Shakespeare Martineau