Although geopolitical volatility and supply chain issues and a persistent inflationary environment have served to fragment global trade flows this year, global growth continues to be a long-term trend.
A survey by HSBC, for instance, found that, although 51% of global businesses expect international trade to be more difficult, 76% are expecting to grow, targeting growth by entering at least one new foreign market (Business Balancing Act, 2022).
This equally applies to Asian businesses, including those across the tech, manufacturing and retail spaces, looking to diversify into Western markets.
As the UK continues to navigate its way post-Brexit as a key player in global commerce, the indications are that it could play a pivotal role in this global dynamic as we look further ahead into 2024. The UK has some 38 free trade agreements now in place, covering more than 60 countries, including a number of ‘new’ agreements that have been negotiated since Brexit, and with more in the pipeline.
Significantly, in July 2023, the UK signed a treaty with the Trans-Pacific Partnership (TPP) trade bloc, bringing it together with 11 other economies across Asia, the Pacific, the Americas and Europe – an avenue that presents a number of advantages for the UK and international businesses alike. Primarily, these include:
- Access to a thriving market: the primary allure of the TPP is access to an expansive and dynamic market, with the 11 other member countries collectively representing nearly 500 million consumers. For international businesses, this means tapping into a broader customer base with fewer trade barriers.
- Enhanced economic diversification: with diversification a key strategy for Asian growth businesses, the TPP offers a valuable opportunity to diversify trade partners. In particular, the TPP contains dedicated annexes for financial services and professional services, which help to ‘lock-in’ legal certainty for firms in these sectors.
- Strengthened economic ties: the TPP fosters stronger economic ties between member countries through reduced tariffs and trade barriers, and provides added legal certainty. Internationally-dynamic businesses can benefit from these strengthened ties by using the UK as a gateway to the broader TPP market.
- Sustainability and innovation: the TPP places a strong emphasis on sustainability and innovation, encouraging member countries to adopt environmentally friendly practices and promote innovation in various industries. It also contains among the most modern rules for digital trade.
The opportunities presented through the TPP, which is expected to be ratified in 2024, means that the UK has the potential to play a key role in facilitating international business growth on a greater scale.
In addition, the UK is continuing to pursue a free trade deal with India, and a deal remains on the cards, following discussions in September this year. India is already the 16th-biggest destination for British goods exports and that is only expected to grow, with the UK government aiming to double trade between the UK and India by 2030.
Should an agreement be reached in the near future, it would represent another major step for the UK within the Asian market and further underline its appeal for supporting trade flows between Asia and Europe.
There are good reasons for Asian businesses to look to the UK to support their global growth strategies too – its extensive tax treaty network, political stability and well-regarded judicial system, for example.
When it comes to setting up, scaling and growing a business, the analysis points to the UK’s mature, high-spending consumer market and its liberal economy, cultural diversity, world-class talent pool, geopolitical stability and a business-friendly regulatory environment as key drivers.
In particular for Asian businesses, the UK provides a strategic entry point into the EU and an attractive location for serving customers across the continent. The lure of London is also a big play, with Asian businesses increasingly seeking opportunities to tap into the UK’s financial services sector and its well-established platform for raising capital.
The UK is also seen as a hub for technological innovation and research, with world-class universities and research institutions. Asian businesses – particularly those in the medtech and fintech sectors – are drawn to the collaborative opportunities and cutting-edge research facilities available in the UK.
From a structuring perspective, meanwhile, the UK offers a range of options, including companies and partnerships, and provides an attractive environment for international holding companies.
The UK also has good form in turbo-charging cross-border investment. Government figures show, for example, that between 2021 and 2022 a total of 1,589 foreign direct investment (FDI) projects landed in the UK, adding more than 84,000 new jobs to the economy across diverse sectors including software and computer services, environment, infrastructure and transportation, and financial services.
There are, however, a number of challenges specific to the UK that Asian businesses should be alive to – which are explored in our recent e-book. They include the need to understand tax and reporting obligations, company incorporation and bank account opening processes, and the unique employment market. These are critical factors for businesses looking to expand at scale.
The UK has the right tools and experience to be able to support rapid and ambitious growth strategies of Asian businesses – whether a start-up, medium-sized or family business, corporate or an institutional investor.
However, businesses considering expanding their operations internationally through the UK need to have an understanding of local practices and compliance. Planning is an absolutely critical part of the expansion and growth process.
As the world continues to evolve in 2024, the UK’s role as a gateway for Asian businesses into Europe and beyond is likely to strengthen. Moves to nurture international ties, such as those it is pursuing in Asia, underline the commitment the UK has to asserting its stature as a leading centre for foreign investment and as a springboard for businesses seeking global growth.