united kingdom

GLOBAL MARKET BRIEFINGS INVESTORS’ GUIDE TO THE

UNITED KINGDOM

A guide to investment opportunities and business practice

Third Edition Consultant Editor: Jonathan Reuvid

Published in association with: HSBC, UK Trade & Investment and Watson, Farley & Williams

Investors’ Guide to the United Kingdom

GLOBAL MARKET BRIEFINGS

Investors’ Guide to the United Kingdom Third Edition Consultant Editor:

Jonathan Reuvid Published in Association with:

UK Trade & Investment

The views in this book are those of the authors and are not necessarily the same as those of UK Trade & Investment

Publishers’ note Every possible effort has been made to ensure that the information contained in this publication is accurate at the time of going to press and neither the publishers nor any of the authors, editors, contributors or sponsors can accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editors, authors, the publisher or any of the contributors or sponsors. Users and readers of this publication may copy or download portions of the material herein for personal use, and may include portions of this material in internal reports and/or reports to customers, and on an occasional and infrequent basis individual articles from the material, provided that such articles (or portions of articles) are attributed to this publication by name, the individual contributor of the portion used and GMB Publishing Ltd. Users and readers of this publication shall not reproduce, distribute, display, sell, publish, broadcast, repurpose, or circulate the material to any third party, or create new collective works for resale or for redistribution to servers or lists, or reuse any copyrighted component of this work in other works, without the prior written permission of GMB Publishing Ltd. GMB Publishing Ltd. Hereford House 23-24 Smithfield Street London EC1A 9LF United Kingdom www.globalmarketbriefings.com

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This third edition first published 2007 by GMB Publishing Ltd. © GMB Publishing Ltd. and contributors Hardcopy ISBN 978-1-846730-68-9 E-book ISBN 978-1-846730-69-6 British Library Cataloguing in Publication Data A CIP record for this book is available from the British Library Library of Congress Cataloguing-in Publication Data

Typeset in 10/12pt New Century School book by Integra Software Services Pvt. Ltd, Pondicherry, India

Contents

Foreword

ix

List of Contributors

xi

Regional and City Profiles

PART 1

xvii

Economic Overview

1.1

The UK Economy and Investment Environment Jonathan Reuvid and UK Trade & Investment

3

1.2

The United Kingdom and the European Union Jonathan Reuvid

9

1.3

Trade Information for Investment Decisions Roy Chegwin, Editor of Export Focus Magazine

12

PART 2

Investment and Start-up Considerations

2.1

Overview for Inward Investors Jonathan Martin and Anna Halliday, Watson, Farley & Williams LLP

17

2.2

Grants and Incentives within the United Kingdom John Devonald, PNO Consultants Ltd

27

2.3

UK Competition Law and Policy Andrew Bailey, Watson, Farley, & Williams LLP

33

2.4

Company Formation – Methods and Legal Implications Ian Saunders, Artaius Company Services Limited

42

2.5

Commercial Banking Services Nick Stephens, HSBC

50

2.6

Finance for Companies Nick Stephens, HSBC

60

2.7

Financial Reporting and Accounting – An Overview Michael Bordoley with Jitendra Pattani and Bee Lean Chew, Wilder Coe

69

vi

Contents

2.8

Business Taxation Tim Cook, Wilder Coe

79

2.9

Key Business Taxation Planning Pointers Tim Cook, Wilder Coe

90

2.10 Outsourcing Alfred Levy, Artaius Ltd

PART 3 3.1

3.2

96

Key Investment Sectors and Locations

AIM – The Alternative Investment Market of the London Stock Exchange Jonathan Martin, Watson, Farley & Williams LLP Roles of the Nomad and the Broker on the Alternative Investment Market Tony Rawlinson and Simon Sacerdoti, City Financial Associates Limited

103

113

3.3

Mergers & Acquisitions and Joint Ventures Jonathan Martin and Tanvir Dhanoa, Watson, Farley & Williams LLP

119

3.4

Financial Services Jonathan Reuvid

127

3.5

The UK Commercial Property Market EMEA Research, Jones Lang LaSalle, London, UK

132

3.6

Residential Property Investment Lucian Cook, Director, Savills Residential Research

150

3.7

Agricultural Property Investment Richard Binning, Savills

156

3.8

Technology and Innovation – The Cambridge Phenomenon Alan Barrell and Mark Littlewood, Library House, Cambridge

160

3.9

Renewable Energy: A UK Perspective Neil Budd, Watson Farley & Williams LLP

171

3.10 Offshore Oil and Gas: Exploration and Production Michael Wachtel and Philip Mace, Watson, Farley & Williams LLP 3.11 Liquefied Natural Gas, Gas Storage and Access to Infrastructure Anna M. F. Soroko, Watson, Farley & Williams LLP 3.12 London – As a Premier Investment Location Michael Charlton, Think London

180

188 196

Contents

vii

PART 4 The Corporate and Personal Legal Environment 4.1

Intellectual Property Mark Tooke and Rachel Kennedy, Watson, Farley & Williams LLP

207

4.2

Regulation of Financial Services Jonathan Martin and Ravinder Sandhu, Watson, Farley & Williams LLP

216

4.3

UK Employment Law Liz Buchan, Asha Kumar and Devan Khagram, Watson, Farley & Williams LLP

223

4.4

Pensions, Insured Benefits and Option Plans Liz Buchan and Rhodri Thomas, Watson, Farley & Williams LLP

236

4.5

UK Taxation for Foreign Nationals Tim Cook, Wilder Coe

246

4.6

Money Laundering Regulations Mark Saunders, Wilder Coe

256

4.7

UK Immigration Angharad Harris and Melissa Vangeen, Watson, Farley & Williams LLP

261

PART 5

Industry Sectors of Opportunity

5.1

Art and Antiques James Goodwin

273

5.2

The Automotive Industry Mark Norcliffe

280

5.3

Biotechnology Jeanette Walker, ERBI

291

5.4

Chemical Industries Neil Harvey and Alan Eastwood, Chemical Industries Association

302

5.5

Creative Industries Jonathan Reuvid

309

5.6

ICT

313

5.7

Life Sciences

316

5.8

Pharmaceuticals Lilly

318

viii

Contents

5.9

Retail Jonathan Reuvid

322

5.10 Software Charles Ward, Intellect UK

324

Appendix I – Contributors’ Contact Details

330

Foreword

I am delighted to provide this foreword to the 2007 edition of the Investors’ Guide to the United Kingdom. UK Trade & Investment is pleased to have contributed to the content for this independent book. I hope you find it useful. The United Kingdom’s success at attracting foreign direct investment remains outstanding and all the signs are that this trend will continue in the coming year. Offering a solid business-friendly environment in which companies can prosper, the UK economy’s strength is underpinned by large investments in public services and infrastructure, including education, health and transportation. Combined with the global scale of resources on offer to companies, this makes the United Kingdom the location of choice in which to conduct business. Renowned for its traditions, and being recognized as an open, globally engaged society, the United Kingdom is also increasingly acclaimed as an innovator, with a unique spirit, eccentricity and all-round creative energy. The United Kingdom has a constant appetite to challenge, invent, question and create and we are a recognized leader in creativity and innovation, acting as a magnet that attracts the best of global creative talent, not least linked into our many world-class universities. For companies to grow they need outstanding support networks and the United Kingdom has well-established clusters of business services that are truly world class. As well as boasting a large market and quality suppliers, the United Kingdom also offers global business leaders the opportunity to interact with the very best of their international peers. In short, it plugs companies into a vital international network of connections. Just like the most successful global businesses, UK Trade & Investment is constantly looking at ways to improve its offering. In 2006, we launched a new five-year strategy, Prosperity in a Changing World, which aims to ensure that the United Kingdom will continue to attract the best investors from overseas. To this end, the organization is committed to building on the strengths of its overseas network and improving its services to customers. All this will help to ensure that the United Kingdom – and the overseas companies that invest here – stay ahead of the game. In the United Kingdom, companies, including many of the world’s major corporations, are connected directly into the heart of global finance, global creative and professional services, global media and global talent. They enjoy access to world-class science and academia and link into a wide-ranging network of smaller enterprises, many of which are also world leaders in their fields.

x

Foreword

A unique, multicultural and entrepreneurial economy, the United Kingdom is at the hub of international business, bringing the world to every company’s door. In short, it is a springboard to global growth. Digby, Lord Jones of Birmingham Minister of State for Trade and Investment

List of Contributors

Watson, Farley and Williams LLP Corporate Jonathan Martin is a partner in the International Corporate Group of Watson, Farley & Williams LLP, dealing with a range of corporate and commercial transactions and advisory matters, including equity fundraisings and other corporate finance transactions, mergers and acquisitions, joint ventures and restructurings. Tanvir Dhanoa is an associate in the International Corporate Group of Watson, Farley & Williams LLP, specializing in general corporate and corporate finance transactions with experience in international mergers and acquisitions, joint ventures and business reorganizations. Ravinder Sandhu is an associate in the International Corporate group of Watson, Farley & Williams LLP, specializing in a broad range of general corporate and corporate finance transactions including mergers and acquisitions, equity fundraisings, group reorganizations and joint ventures. Anna Halliday is an associate at Watson, Farley & Williams LLP, specializing in a broad range of corporate work including corporate finance, joint ventures, group reorganizations, mergers and acquisitions and commercial transactions.

Employment Liz Buchan is a partner of Watson, Farley & Williams LLP, specializing in employment law and employee incentives and a former member of the Law Society’s Employment Law Committee. Asha Kumar is an associate at Watson, Farley and Williams LLP specializing in employment law and cross-border employment law issues. She has gained wealth of experience and has advised on all aspects of employment law including issues associated with recruitment, employment and termination. She has also assisted with the implementation of global business restructures.

xii

List of Contributors

Rhodri Thomas is an associate at Watson, Farley and Williams LLP, specializing in employment law and a contributor to Discrimination in Employment – Law and Practice, 2006, Law Society Publishing. Devan Khagram is a trainee at Watson, Farley & Williams LLP. He joined the firm in September 2005 and will be qualifying into the firm’s employment and immigration department in September 2007.

Energy and Projects Anna Soroko joined Watson, Farley & Williams in January 2006 as a consultant and has over 20 years experience advising major utilities and oil and gas companies on a wide range of international matters, particularly on projects relating to infrastructure including being the Central Area Transmission System (CATS) pipeline lawyer for 3 years. Anna is both an English and a Texas qualified lawyer and has worked in a number of countries, including the United States, Saudi Arabia and UAE, both inhouse in major international organizations and in private practice. Anna is also an elected director of the East of England Energy Group, which business-driven energy industry association represents over 280 companies throughout the energy chain. She has wide commercial and legal experience in Mergers & Acquisitions, corporate restructurings, negotiation of Gas/LNG Sales arrangements, carbon capture and storage, and negotiation of a US$1 billion LNG/Power project in Turkey, project lawyer for the Great Yarmouth Power Plant. Recently, Anna has been advising on and managing all legal work for the Excelerate Energy Teesside GasPort Project for which she won The Lawyer 2007 Infrastructure Team of the Year Award. Neil Budd is an associate at Watson, Farley & Williams LLP, specializing in energy and construction. He has worked on a number of renewable energy projects, both in the UK and internationally, including onshore and offshore windfarms and biomass power plants. Philip Mace is a consultant at Watson, Farley & Williams LLP, specializing in energy related M&A, private equity and project work. He has worked in the oil and gas industry for many years and has experience of major transactions in the North Sea, the Middle East and most other major oil and gas regions. Fabiola Céspedes is a consultant at Watson, Farley & Williams LLP, specialized in dealing with M&A transactions, onshore and offshore upstream operations and joint ventures. She has advised on transaction in Norway, UK, Trinidad and Tobago, Spain and Bolivia and has dealt with major industry oil and gas players such as BP, Repsol, Shell, ExxonMobil, Petrobras and Total.

List of Contributors

xiii

Law EU & Competition Andrew Bailey is an associate at Watson, Farley & Williams LLP specializing in EU and competition law. Andrew advises clients in relation to UK and EC merger control, market investigation in both the UK and throughout the EU and the behavioural aspects of competition law.

Immigration Angharad Harris is a partner at Watson, Farley & Williams LLP, specializing in all aspects of employment law and business immigration and is a member of the Law Society’s Employment Law Committee. Melissa Vangeen advises on business immigration, including work permits, the Highly Skilled Migrant Programme, applications for sole representatives, investors, business persons and retirement as well as applications for indefinite leave to remain and naturalization. Melissa also advises in relation to immigration applications outside of the Immigration Rules and on applications to come to the UK.

Intellectual Property Mark Tooke joined Watson, Farley & Williams in 2001 and is an associate in the International Corporate Group. Mark has particular experience of assisting clients in the technology and media sectors. Identifying the most advantageous was to protect, exploit and finance intellectual property assets. Rachel Kennedy is a trainee at Watson, Farley & Williams LLP. She joined the firm in September 2006 and will be qualifying as a solicitor in September 2008.

Wilder Coe and Artauis Limited Robert Coe is the senior and founding partner of Wilder Coe. Within the practice, Robert’s key role is advising on corporate finance transactions including mergers and acquisitions, pre-flotation restructuring, fund raising and business financing. Robert has vast experience in the public arena, having acted as nonexecutive chairman of Sterling Group plc, senior independent director of Hercules Property Services plc, Finance director of Probus Estates plc, finance director of New Media plc during its transition from Ofex to AIM and finance director of Hardy Amies plc. Currently, Robert is a non-executive director of City Financial Associates AIM listed companies.

xiv

List of Contributors

Tim Cook is a tax partner at Wilder Coe, which he joined in 1996. He now heads up the firm’s personal tax department. In addition to managing the personal tax team, Tim handles tax returns, capital gains tax, trusts, inheritance tax and Inland Revenue investigations. His areas of expertise include tax planning, pensions, emigration and trusts. He works primarily with entrepreneurs, families and gentry. Mark Saunders has been with Wilder Coe since 1984 and has almost 30 years accountancy experience. His technical areas of expertise include audit, the preparation of financial statements, taxation, business planning and the UK management of subsidiaries of US companies with Sarbanes Oxley compliance work. He also deals with IFRS-related matters and acts as an adviser to family firms. Client sectors include property, entertainment, retail, financial industry clients, charities and the timber trade. Mark also has a continuing interest in the financial sector and carries out Financial Services authority audits. He is responsible for IT at Wilder Coe and is also the nominated money-laundering reporting officer, which has led him to act as a consultant on the Money Laundering Regulations. Mark was instrumental in gaining membership of the firm to Integra, an international association of accounting firms, and now sits on its global board. Michael Bordoley has been with Wilder Coe since 1991 and is an audit partner. In this role, he is responsible for advising clients on budgetary control and forecasts. Although working across a broad sector range, Michael specializes in SMEs, family businesses, travel agencies and insurance brokers and charities. He advises clients on all aspects of furthering a business from the day-to-day running to specialist areas and dealing with legislation. Bee Chew joined Wilder Coe in 1997 and was promoted to partner in 2005. As a member of the Institute of Chartered Accountants Entertainment and Media Industry Group, she has vast experience in the film production industry as well as property and currency exchange. Bee specializes in dealing with international business such as investment in China. He regularly attends and actively promotes networking for Women in Business events. Norman Cowan merged his Chartered Accountants practice in December 2000 with Wilder Coe and now heads the business recovery department. Norman’s experience gained in the discipline of insolvency has provided him with an analytical investigative ability and a considerable depth of knowledge in insolvency and commercial law. His expertise covers a wide range of industries and professions of differing sizes and characteristics. On a number of occasions Norman has been appointed by the Court to act as a Receiver to determine internal disputes in respect of companies and partnerships. As a member of the Expert Witness Institute, he has also received a number of instructions to act as a single and joint expert witness.

List of Contributors

xv

Alfred Levy is managing director of Wilder Coe’s sister company, Artauis Limited, while remaining a partner of the firm. Alfred boasts a wide range of expertise in new business start ups and has particular experience in inward investment from companies based overseas. Based in Stevenage, Hertfordshire, Artauis specialize in the provision of financial outsourcing solutions to a diversity of business types and sizes, from new to established companies. Ian Saunders has managed the statutory department at Wilder Coe since 1997. Additionally, he is managing director of Artauis Company Services Ltd, the specialist company formation and company secretarial arm of the Wilder Coe group. Ian specializes in company formation and the compilation and updating of statutory records on behalf of clients for the Stock Exchange or Companies House. When required by clients, he also acts as a nominated secretary and as Company Secretary for AIM listed companies. Working primarily with SMEs, he advises a number of specialized sectors, including accountancy and legal firms, on company formations and statutory consultancy.

Other Contributors Dr Nigel Almond is Senior Researcher at Jones Lang LaSalle, specializing in UK commercial real estate markets. Alan Barrell is a Founder Partner of Library House, the Cambridge research centre and networking hub. Richard Binning is an Associate at the Oxford office of FPD Savills specializing in farm sales. Lucian Cook is Director of Savills Residential Property Research Michael Charlton is Chief Executive of Think London. John Devonald is Business Development Manager at PNO Consultants Ltd. Alan Eastwood is Economic Adviser to the Chemical Industries Association. James Goodwin writes, lectures and consults on art and business. He has written for the ‘Financial Times’ and ‘The Economist’ and several rt, antique and finance journals. Neil Harvey is Manager, International Trade and Sector Groups, Chemical Industries Association. Mark Littlewood is Business Development Director of Library House, the Cambridge buy-side research house and networking hub.

xvi

List of Contributors

Mark Norcliffe consults for the UK Department of Trade and Industry on the international automotive industry. He was formerly Head of the International Department at the Society of Motor Manufacturers and Traders (SMMT). Tony Rawlinson is Managing Director of City Financial Associates Ltd. Nykki Rogers is Business Development Manager, Life Sciences, a6t East of England International. Simon Sacerdoti is Assistant Director at City Financial Associates Ltd. Nick Stephens is Manager, Trade Services, at HSBC. Charles Ward is Chief Operating Officer of Intellect UK. Robert Willsdon works for Merrill Lynch International Bank.

Regional and City Profiles

BRISTOL

A Premier UK City Region and Capital of the South West

The historic cities of Bristol and Bath have distinctive identities and, together with Weston-super-Mare and other centres, make up a city-region of just under one million inhabitants. Together they rank amongst the most attractive, successful and culturally prestigious in the UK and enjoy a rising profile within Europe, USA, China, Japan and other countries. This is due to the world-class knowledge economy emerging here based on aerospace, defence, engineering, ICT and electronics, financial services, media, creative and environmental industries, and the global reach of its four outstanding universities. The Bristol city-region has a very powerful economic pull which extends deep into the Counties of Gloucestershire, Somerset and Wiltshire and across the two road bridges linking Bristol over the River Severn to South Wales. The heart of it broadly coincides with the West of England (formerly Avon) administrative area, which comprises the four local authorities of the City of Bristol, Bath and North East Somerset, North Somerset and South Gloucestershire. Its strategic road and rail network gives it good proximity to London, Birmingham, Cardiff and Southampton (all within 2 hours) and provides the main gateway to the South West. The South West is England’s largest rural and leading touristic region endowed with a great wealth of natural and cultural attractions, including several World Heritage sites and large expanses of environmentally protected landscape and coasts. Wider national and international connectivity has significantly improved in recent years with the rapid expansion of the airport (8 miles south west of the city) and seaport (at Avonmouth and Royal Portbury on the Bristol Channel). Bristol International Airport now has scheduled services to 17 cities across UK and Ireland, and 27 cities across Europe and and USA (New York). The Bristol Port Company operates one of the UK’s most successful and fastest growing commercial ports, and has advanced plans to create a new deep water container terminal which will have capacity to service the new generation of Ultra Large Container Ships up to 14,000 TEU and 16 metres draught. Bristol is the closest port to the UK population as a whole with 45 million people living within 300 kms. A diverse and consistently buoyant economy is evidenced by the fact that it boasts the highest GVA per head of the eight ‘core’ English cities and highest growth rate since 1995 (add in figures). World class companies established here include Airbus UK, Rolls Royce, Aardman Animations, BBC, Royal Bank of Scotland, Halifax Bank of Scotland, Lloyds TSB, Bank of Ireland, Orange, Hewlett Packard, Garrad Hassan and Compact Power. The Bristol city-region has been designated as a national ‘growth point’ by the UK government, which brings with it supportive policies and resources to

enable the expansion of population, housing, employment, transportation and other infrastructures. The growth strategy proposed involves creating 100,000 new jobs and 92,500 new homes over the next 20 years with the major development concentrated in Bristol city centre, South Bristol and Weston super Mare. At the same time, there is a strong commitment across both public and private sectors to ensuring that these goals are approached in a truly sustainable manner worthy of a ‘green capital’ in Europe and without compromise to the excellent ‘West Country’ quality of life currently enjoyed. Major economic development and infrastructure projects with a total value of £3 billion are either presently under construction or in the planning pipeline across the city region up to 2012. These span across office, industrial, retail, leisure / culture, transport and education sectors and include Bristol’s new Cabot Circus retail centre, the Bristol and Bath Science Park, the South Bristol Link Road, expansion of the port, airport and public bus networks, the Bristol Arena, Museum of Bristol, Weston former Airfield and Bath Western Riverside sites, a new Skills Academy and secondary schools for Bristol. The principal commercial property development areas and sites are listed at the end of this profile.

Contact Information For readers seeking further information on packages of support available for business investment and relocation to Bristol city-region, we recommend the following contacts: Greater Bristol: Marketing, Investment and Enterprise Team, Bristol City Council Tel: +44 117 922 2928 www.bristol-city.gov.uk/business Bath, Weston super Mare and the wider city-region: Investment Team, West of England Partnership Office Tel: +44 117 903 6876 www.westofengland.org For all industrial and commercial property searches: visit the on-line register at www.investwest.org

Sector Profiles Creative Industries: Bristol and Bath combine their distinctive offers to provide one of the preeminent European centres of creative and cultural industry and talent with a growing global profile. Home to the multiple oscar-winning Aardman Animations, creators of the world famous characters Wallace and Gromit, as well as the BBC Natural History Unit, Granada Wild, Endemol West and many other independent film and production companies, Bristol enjoys close economic and cultural links to London and emerged in recent years as the UK’s second Media city - the driving force of a richly creative region with an estimated £1 billion annual media output. In 2006 the inward investment to the Bristol city-region from externally based film companies amounted to some £23 million. Bristol is the world capital of the wildlife and environmental film industry – responsible for 25% of this sector’s global output, hosting of the international ‘Wildscreen’ Film Festival annually, and employment of around 1,500 people. Another leading event is the ‘Encounters’ festival of short films held annually at the Watershed, the UK’s first and most highly regarded media centre. Popular British television drama series such as ‘Casualty’, ‘Teachers’, ‘Deal or No Deal’ and ‘Celebrity Big Brother’ are filmed or produced in the city. Apart from its film, broadcast and digital media companies, the city region is justly famous for its varied and vibrant music scene – from the Bath Philharmonia and Bristol Bach Choir to the more subterranean ‘Bristol Sound’ in the form of Portishead, Roni Size and Massive Attack, and of course the Glastonbury Festival. Bristol and Bath also boast a strength in other creative sectors unmatched by most other European regional cities – design and architecture, books and publishing, visual arts, theatre and performing arts, including a profusion of festivals and carnivals throughout the year, dance venues, comedy clubs, cabaret, street theatre and Europe’s leading circus school.

Simple Minds play Ashton Court Festival 2006

Environmental Technologies and Services Bristol is today emerging as one of the leading centres in the UK for the development of environmental technologies, including worldclass companies in renewable energy, waste management and recycling, energy control and sustainable transport, and also for environmental consultancy and specialist services of all kinds which are supporting the shift towards more sustainable modes of production, development and consumption / lifestyle. Jobs in the Bristol environmental sector have increased by some 20% over the last 10 years to around 12,400 or 2.9% of the total workforce above the regional and national average and accounting for almost one quarter of the jobs in the sector in South West England. The area sector now has an estimated 260-300 companies with significant clusters located in Avonmouth / Severnside, Bristol city centre and Clifton. The Avonmouth cluster (about 20 companies) features significant players in the renewable energy, waste management, recovery and pollution control fields, including Compact Power, a global leader in pyrolysis, gasification and oxidation technologies for conversion of domestic and commercial wastes to energy, the Bristol Port Company, which gained planning permission in 2006 for a 9 megawatt 3 turbine wind scheme to supply up to 75% of the Port’s electricity needs in conjunction with leading South West renewable energy supplier, Ecotricity, and Chemical Recoveries, a market leader in reprocessing of waste oil and solvents, and Hambrook Pallets, pallet and waste wood recyclers. In addition, Bristol City Council has its own 2 turbine wind scheme at Avonmouth with capacity to supply power to 3,000 homes or half of the city’s street lighting. The City Centre and Clifton hosts a mix of prominent national and international players in environmental services and consultancy fields, including the Soil Association, Sustrans, Centre for Sustainable Energy, Resource Futures Ltd

The RSA WEEE Man

(incorporating the former Recycling Consortium, Network Recycling and SWAP), Schumacher UK and The Green Register (sustainable construction), as well as pioneers of sustainable technologies such as Bristol Electric Railbus, Wind Prospect, Tidal Generation (tidal stream energy) and Garrad Hassan, wind turbine designers and independent wind energy consultants to governments and NGOs, and winner of the Queens Award for Export Enterprise in 2000. Other large companies are located in South Bristol – Bristol Water plc, supplier of drinking water to the city since 1846 and consistently one of the best performing in UK, and Horstmann Controls, designer and manufacturer of energy control products. Wessex Water based in Bath is recognised by Ofwat as the most efficient operator in the country and was the first UK water company to sign the 2003 UN Global Compact for sustainable development.

Financial and Business Services With 59,000 employees in the sector, Bristol is the hub of the financial and business services sector in the South West and one of the leading centres in the UK. Bristol has long specialised in banking and mortgage provision, insurance/ brokering and ethical finance. Leading companies include AXA Sun life, Lloyds TSB, Royal Bank of Scotland, HBOS, DAS Legal and Triodos Bank. Now there is also a strong presence of international legal, accountancy and consulting firms including Osborne Clark, Beachcroft, Bevan Brittan LLP and KPMG. HBOS (including Clerical Medical) is expanding its Bristol Headquarters by moving to the prestigious Canon’s Marsh site on the newly regenerated Harbourside , which it will occupy by the end of 2007 with capacity to accommodate up to 1,700 staff. This major new investment follows similar moves by Bank of Ireland (including Bristol & West), RBS and other companies occupying prime new grade A office space at Temple Quay next to Temple Meads station. Academic research and expertise are also prominent and includes Centre for Management Accounting and Research and the Centre for Fiscal Studies at the University of Bath and the XFi centre - Bristol. The city region can also boast a lower cost base and good staff retention which can be an issue in other UK centres. “Bristol has the third largest financial services sector outside London” source UKTI

Clerical Medical, Harbourside

Science and Innovation Bristol and the West of England continue the proud heritage of being at the forefront of scientific discovery and innovation. In 2005, the Chancellor of the Exchequer conferred the title of Science City on Bristol, one of only six cities in England to receive this accolade. The designation recognised two key strengths. Firstly, world-class scientific research in the university sector; and at the four Universities of Bristol, Bath, West of England and Bath Spa science and advanced engineering form a core part of the sub-region’s research and teaching offer. To illustrate: if the results of Bristol and Bath Universities’ Research Assessment Exercise (2001) are combined, they would show that the area has the fourth most powerful research environment in the UK. Academic researchers operate at the cutting edge of fundamental scientific and engineering research in single and collaboratively themed programmes, including aerospace, computing and biological systems. Secondly, a concentration of commercial innovative research and development. Major companies including Airbus, Orange, Hewlett Packard and Rolls Royce have a strategic presence in the area and, together with a significant cluster of advanced engineering companies and suppliers, make this sector one of the largest employers and contributors to the sub-region’s GVA.

Development Sites Major Strategic Sites: Aztec West Business Park, Almondsbury: Covering 68 hectares, at the junction of the M5 motorway and the A38 this business park is now home to over 120 companies including The Royal Bank of Scotland, Orange, ST Microelectronics, The Environment Agency, Cornhill Direct and G E Capital Equipment Finance. Bristol Harbourside: This 66 acre regeneration project combining apartments, shops, office and leisure facilities is one of Bristol’s showpiece development projects, with an unrivalled waterside location in the heart of the city. It incorporates the @Bristol complex at the core of this new leisure quarter and a £240 million regeneration of Canon’s Marsh due to be completed in 2010.

Temple Quarter, Bristol

East Works Site, Patchway: This 26ha site, currently occupied by older industrial buildings, will be redeveloped for a mixed range of employment uses over the next three years. Filton Northfield: Covering 74 hectares, 14 hectares is allocated for mixed employment use. A 2003 outline planning application proposes 66,000 sq. metres of mixed B1, B2 and B8 development. Hengrove Park, Bristol: 76 hectare site featuring the UK’s largest new green urban open-space development ; 40,000 sqm of B1/B8 space. It has master planning consent for mixed uses including Community Hospital and Residential units. Redcliffe, Bristol: A changing neighbourhood providing 114,500 sqm of mixed use opportunities for new buildings as well as public and green spaces. Temple Quarter, Bristol: Continuing development of the 46ha Temple Quarter adjacent to Temple Meads Station is providing a prestigious new commercial heart for Bristol. Work has begun on Temple Quay 2: a high-density mixed development and the £100 million Bristol Arena project. Weston Airfield, Weston super Mare: 170 hectares including approximately 33ha for high quality business park uses and Weston Airfield East and 26ha for B uses at Weston Airfield West. Western Riverside Bath: A 28 hectare Brownfield site to the west of Bath City Centre, adjoining the River Avon. The masterplan includes new homes, community and leisure facilities. The project has an anticipated end value of around £1bn.

Industrial & Distribution sites Avonmouth / Severnside: Proximity to the port and the motorway network and extensive development sites have attracted very considerable investment in heavy industrial, power generation and waste treatment plant, large distribution and warehousing depots and a range of other businesses. About 15ha of warehousing development have been completed at Severnside in 2005/6, with considerable opportunity available to meet demand for further industrial and related development. This includes Cabot Park (42ha), Merebank and LakeSide (32ha) and Western Approach Distribution Park (87ha).

Cabot Park, Avonmouth

Cabot Circus, Bristol

Rolls Royce

Retail & Leisure Bristol Arena, Bristol: 10,000 seat multi-purpose indoor arena at a 9 acre site. Additional mixed-use developments of residential, commercial and entertainment units (this is part of the wider Temple Quarter development). Cabot Circus, Bristol: This £500m shopping development in the heart of Bristol city is due to open in September 2008, comprises 1million sqft retail and leisure space and aims to place Bristol in the top 10 national shopping and leisure destinations. SouthGate, Bath: Close to Bath’s mainline station this £350m, 8 acre redevelopment features shops, restaurants, leisure facilities a transport hub and housing.

Science Parks & Sector Hubs Bristol and Bath Science Park (SPark), Emersons Green: The proposed 25 hectare Science Park will provide 77,000 sq metres to create a high calibre £300 million science facility. Creative Depot (former Post Office sorting office), Temple Meads, Bristol: 5 acres site providing up to 275,000 sq ft mixed-use space with a Creative Industries theme. Locking Parklands, Weston-super-Mare: Locking Parklands will transform an 82 hectare site into a new hi-tech business, residential and leisure community. It will provide 25 hectares of high quality business accommodation and up to 1,800 homes in mature landscaped parklands. Major Development Areas 1. Aztec West Business Park, Almondsbury 2. Bristol Harbourside 3. East Works Site, Patchway 4. Filton Northfield 5. Hengrove Park, South Bristol 6. Redcliffe 7. Temple Quarter 8. Weston Airfield 9. Western Riverside 10. Avonmouth/Severnside 11. Bristol Arena 12. Cabot Circus 13. South Gate 14. Bristol and Bath Science Park (SPark), Emersons Green 15. Creative Depot 16. Locking Parklands

1

10

3

14

2 6

5

9

16

8

13

City Financial Associates is a leading corporate and professional financial advisory firm in the City of London. We are focused on the provision of the highest quality financial advice to public and private corporate clients across a broad range of sectors. We minimise the risks inherent in complex transactions by tailoring each project to the needs of the client. We seek to establish long term client relationships with our clients and many of them have relied on our advice through a series of transactions. City Financial Associates Limited is an AIM Nominated Adviser, a PLUS Markets Corporate Adviser, an Official List Sponsor and a member of the London Stock Exchange. Some of the services we offer include:–

Initial Public Offerings

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We provide independent advice throughout our clients’ flotation process We work with a number of brokers best suited to meet clients’ requirements

Mergers and Acquisitions

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Takeovers – recommended and hostile MBOs, MBIs and secondary buyouts Structuring transactions Valuations Sourcing of debt and equity funding to finance transactions

Fund raising

• •

Through our sister company, Ellis Stockbrokers Limited, we are well positioned to identify various sources of funding through private clients or institutional investors We negotiate with banks and other alternative funding providers to procure optimum financing terms Contact Tony Rawlinson, Chief Executive City Financial Associates Limited 46 Worship Street, London EC2A 2EA Telephone Fax Email Website

020 7492 4777 020 7492 4774 [email protected] www.cityfin.co.uk

City Financial Associates Limited is authorised and regulated by the FSA.

Dundee - Discovering Life Sciences Dundee - ‘City of Discovery’ is one of Scotland’s

Dundee is home to one of the most exciting life

major cities with a population of over 142,000,

science clusters in the UK, with world-class companies,

and a 60 minute catchment population of 640,000.

Universities, research institutions and scientists all

Steeped in history, Dundee commands a breathtaking

within a three mile radius. The area offers a wide

position on the banks of the River Tay. The City

range of expertise from drug discovery, through

boasts excellent communication links through road,

medical devices and diagnostics to ag-biotech and

rail, air and sea, being 90 minutes drive from 90%

environmental biotechnology. Around 15% of the

of the Scottish population

life sciences companies in

including

Scotland are based in or

Edinburgh

and

Glasgow, on the main UK

around

east-coast rail line, and

the area a major player in

having a city-centre airport

the UK and European life

with daily direct London

sciences industry. With 25

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core life sciences companies

gives rise to a high quality

(and a similar number of

of living offering beautiful

support organisations) and

countryside and a wide

Dundee,

making

an internationally renowned

range of sporting and recreational activities. Dundee

academic sector, Dundee currently employs over

is a lively hub of contemporary art and culture, with

4,000 people in the sector, with the sector accounting

a vibrant music scene and is large enough to have all

for 16% of the local economy, and with a forecasted

the advantages of city life but compact enough to offer

growth of 10% per annum over the next three years.

rewards, such as short commuting times. The cost of living is low - over 19% cheaper than the rest of the UK on average, with house prices at a quarter of London and half of Edinburgh prices. According to the Lonely Planet Guide to Scotland, the people of Dundee are ‘among the friendliest, most welcoming and most entertaining people you’ll meet anywhere in the country’.

A key factor in Dundee’s rapid rise to the status of

Cellartis, a stem cell research company which has

a life sciences hub is the close relationship between

recently relocated to the city from Sweden. Dundee

academic institutions, private companies and the

Technology Park is the home of many life sciences

public sector.

Many of the city’s most successful

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biotechnology and medical device companies were

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set up to commercialise technology developed at

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institutions such as the University of Dundee. Links

Cyclacel and CXR Biosciences, as well as the Dundee

between the private and academic sectors have made

Incubator facility which offers suitable accommodation

it easier to establish projects such at the University of

for new technology companies. Business support is

Dundee’s Division of Signal Transduction Therapy,

available for companies through Dundee City Council

which involves the University

and Scottish Enterprise Tayside

working

the

who both see life sciences

world’s biggest pharmaceutical

as a priority sector for the

companies to study the way

area.

cells communicate.

with

six

of

The local networking

Another

organisation, BioDundee has

strong example of collaboration

been very successful in bringing

is the Translational Medicine

together

Research Collaboration. The

through seminars, networking

£50million

consists

and social events, as well as

of four of Scotland’s leading

building a well known brand

project

local

companies

universities working with Wyeth Pharmaceuticals,

internationally through exhibitions, newsletters and the

Scottish Enterprise and NHS trusts in the development

BioDundee International Conference. Held annually,

of personalised medicine, providing a revolutionary

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approach to developing new drugs and treatments

the USA, Australia and China.

for a range of human diseases. It is testament to the strength of the area that the main research laboratory

The growth of life science excellence in Dundee shows

for this venture is based in Dundee. The City has also

no signs of stopping. The city’s success is a magnet

been named as the lead institute for translational biology

for investment, entrepreneurial talent, ambitious

in SULSA (Scottish Universities Life Sciences Alliance),

young scientists and renowned academics. A superb

a £77million collaboration between six Scottish

location, world class academic base, and strong focus

universities which will attract the best researchers and

on networking and collaboration make Dundee a force

more investment to the area.

to be reckoned with on a global scale.

The majority of the core life science companies LQ 'XQGHH DUH DFFRPPRGDWHG LQ ÀWIRU SXUSRVH

For further information please contact us:

premises in three main locations across the city.

BioDundee,

Dundee Medipark is a new 25 acre site on the campus

3 City Square,

of Ninewells Hospital and Medical School. Two young

Dundee DD1 3BA

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Email: [email protected]

premises built at the Medipark, having outgrown their

Tel: 01382 434913

previous accommodation. This site also accommodates

Web: www.biodundee.co.uk

Highlands and Islands Enterprises

A region renowned for its outstanding natural beauty and rich cultural heritage, the Highlands and Islands is also an area with strong ambitions for the 21st century. People are drawn to this vibrant place from all over the world for a whole host of reasons, from the excellent quality of life to the diverse and resilient business sector with its well-developed skills and sustainable markets. Located at the very north western edge of Europe, the region covers half of Scotland, yet is home to just around 440,000 people – over 50 per cent aged 44 or younger – 19,000 businesses and more than 8,000 voluntary and community groups. In fact, it is the area’s northerly, sea-bound location and relatively disparate makeup that has seen it emerge as a potential powerhouse in sectors such as renewable energy, marine biotechnology, research and development, the knowledge economy, life sciences and rural healthcare. For instance, the Highlands and Islands has one of the longest coastlines in Europe, putting the region in prime geographical position to harness both marine and wind power to generate clean electricity. Currently, key sectors comprise the primary industries, construction, tourism, transport and communications. The region also has a first-class secondary school education system, providing the labour market with a highly qualified workforce and a feedstock of students for further education. Highlands and Islands Enterprise One of Scotland’s two enterprise agencies, Highlands and Islands Enterprise (HIE) works closely with Scottish Development International (SDI) to attract inward investment from around the globe Established in 1991 as a non-departmental public body, HIE plays a major role in diversifying and strengthening the area’s economy. “Our goal is to enable people living in the Highlands and Islands to fulfil their full potential on a long-term, sustainable basis,” explains HIE chair, William Roe. This goal is delivered through four key objectives: growing businesses, making global connections, developing skills and strengthening communities. “Talented people with clever ideas are the real drivers of the economy – people who live here already as well as those we want to attract to the area,” says Mr Roe. “To encourage enterprise in the Highlands and Islands we need

Highlands and Islands Enterprises

to create the optimum conditions not just for business, but for the people who do business. We have to provide the infrastructure and support to enable people and businesses to flourish.”

Inward investors Inward investors already thriving in the Highlands and Islands include LifeScan Scotland, a Johnson & Johnson company with its headquarters in Milpitas, California. LifeScan Scotland is the leading life sciences company in Scotland and its facility in the city of Inverness is regarded as a centre of excellence for those working in the field of diabetes. Over 1,300 people are employed there including more than 150 research and development specialists. Created in 2001 when Johnson & Johnson acquired the UK assets of Inverness Medical Limited, LifeScan Scotland has a diverse workforce made up of over 20 different nationalities, the majority from the Inverness local community. “Both HIE and SDI have been invaluable in helping us grow our business,” says Michael Crowe, managing director for LifeScan Scotland. “From their assistance in recruiting and developing talent to support for infrastructure projects such as improved air links to Inverness, the economic development agencies have been strong advocates of our business as well as partners in our growth. Not only have they been open to our ideas and needs, but they have been proactive in bringing ideas and solutions to us to help us grow.” Next year will see Lifescan relocate a number of its research and development staff to the proposed Diabetes Institute at the city’s new life sciences flagship, the Centre for Health Science. This revolutionary centre, in which HIE has invested £20m, is set to become a leader in life sciences, focusing on multi-disciplinary healthcare research and education, high-tech business incubation, and range of health services from both the public and private sectors. In the renewables field, the European Marine Energy Centre (EMEC) represents the world’s first test centre for full scale wave and tidal marine energy converters. Based in Orkney, a group of islands located at the northern tip of the mainland, EMEC is at the forefront of developing seabased renewables – technologies that generate electricity by harnessing the power of waves and tidal streams. HIE took a lead role in establishing the centre in 2004 and is continuing to support its evolution. More recently, HIE has secured eight inward investment projects; a combination of expanding businesses as well as new starts. These include the Castle Stuart development at Dalcross, which will see the construction of an international standard golf course, driving range and associated facilities; SGL Technic at Muir of Ord, where additional manufacturing capacity has been created by introducing a new production line; and Northern Irish firm Balcas at Invergordon, which is currently developing a wood chip and CHP

Highlands and Islands Enterprises

(combined heat and power) plant. Collectively, these projects have directly created 220 full-time equivalent jobs in the Highlands and Islands area. Labour market and the economy Indeed, the Highlands and Islands currently enjoys lower levels of unemployment (2.4%) than the rest of Scotland (2.8%) and the UK (2.5%), a figure that has been in steady decline and augmented by a corresponding decline in the seasonality of sectors such as tourism and the primary industries. The region also boasts higher levels of economically active people (80%) than Scotland (74%) and the UK (74%). Employment by sector: 2005

Source: Nomis (ONS)

Note: these figures exclude self-employed. Actual employment is likely to be higher, particularly in primary industries and tourism. By far the most dominant employment sector is the public administration, education and health sector, accounting for 34.4% of the total workforce. The distribution, hotels and restaurant sector is the next largest, employing 25.6%. Meanwhile, construction (6.7%), and agriculture and fishing (2.4%) provide a larger percentage of employment in the Highlands and Islands than it does in Scotland as a whole. Characteristic of the region and its enterprising communities, the rate of business starts at 4.7 per 1,000 people is higher in the Highlands and Islands than in Scotland. Self-employment is particularly high in rural areas and among island communities. The export market has also experienced growth. Between 2002 and 2005, the total export for the region rose by almost 20 per cent – from £1,175million to £1,405million. This has been driven by growth in the primary, production and construction sectors, which rose from 77% to 82% – most likely as a result of

Highlands and Islands Enterprises

growth in the manufacturing export value, especially in the food and drink sector. Marine based scientific research, technology and innovation also has a vital contribution to make to the region’s knowledge economy. HIE is working to help consolidate the growing reputation of the region as a centre of excellence in marine science. The Highlands and Islands already boast a world leader in the Scottish Association for Marine Science (SAMS) at Dunstaffnage, near Oban, the presence of which has lead to the formation of a growing marine science cluster in Argyll. HIE assisted SAMS to establish business incubator units at the European Centre for Marine Biotechnology (ECMB), which opened in April 2005. The ECMB offers international development facilities for new business tenants and wider partners. All commercial organizations utilising the ECMB benefit from operating within the hub of this rapidly growing marine focused cluster. Currently the ECMB is home to Aquapharm Biodiscovery Ltd, Culture Collection of Algae and Protozoa (CCAP), Glycomar, as well as the Scottish Association for Marine Science (SAMS) itself. A key partner in UHI Millennium Institute, which aims to establish a world-class university for the Highlands and Islands, SAMS employs over 135 scientists who are leading many national and international research programmes. Financial assistance In addition to impressive R+D credentials, the Highlands and Islands area offers a competitive cost base for investment. Attractive salaries and operating costs make it an attractive investment location for both overseas and UK companies. If, for example, a business requires finance, there is a wide range of discretionary financial assistance available to help towards project costs. Broadly speaking, there could be grant assistance towards the capital costs and creating new, higher paid jobs. The vast majority of the Highlands and Islands benefits from a comparatively high maximum level of assistance. There is also assistance towards training and research and development costs. Further assistance includes property provision, marketing and product development. In essence, HIE will work with the client to provide bespoke business solutions. Infrastructure Continuing advances in telecommunications have opened up the Highlands and Islands to the rest of the world, enabling a wealth of business activities to be carried out efficiently and effectively from the region. Advanced digital telecommunications provide a modern communication network that satisfies international businesses such as Vertex, LifeScan, the essentiagroup, O2 and Cap Gemini. This means that the area can offer any

Highlands and Islands Enterprises

organisation, whether it is operating locally in the Highlands, nationally in Scotland, or even globally, a highly effective business base. Indeed, the variety of remote working that takes place in the region provides clear evidence that telecommunications have made location irrelevant for certain functions. However, should travel be a prerequisite, the integrated Highland transport network of air, rail, road and sea travel enables easy access throughout the region and beyond to the rest of Scotland and the UK. Inverness Airport continues to enjoy impressive growth year on year. There are now six daily flights from Inverness to London and flights to Edinburgh, Manchester, Liverpool, Birmingham, Leeds-Bradford, Southampton, Bristol, the Outer Hebrides, Orkney and Shetland. There are also regular flights to Dublin, Belfast and Nottingham East Midlands. Additionally, the A9, A96 and A82 act as essential ‘arteries’, representing the main routes into the Highlands from the rest of the UK. These are complemented by a rail network which operates frequent services every day to Aberdeen, Glasgow, Edinburgh and south to London. The new joint venture company, Inverness Airport Business Park (IABP), will further complement the area’s transport infrastructure. Formed to develop prime business space with excellent road, rail and air links, IABP is a key initiative for the region and phase one will incorporate the creation of around 16,500 square metres of business accommodation, including an airport hotel, and about 260,000 square metres of business, light industrial and freight distribution. Ian Thorburn, business development manager for IABP, says: “As the area’s largest business park development, IABP is set to play a major role in attracting inward investment to the area and enabling business expansion across a range of industries.” The business park has the potential to become a hub for commercial activity with businesses benefiting from an expanding range of air and rail connections. It also has the potential to provide a significant jobs boost to the area over a sustained period, contributing greatly to the future economic expansion of the region as a whole. Over the last 30 years, HIE has undertaken programmes to provide business accommodation and now holds a stock of modern advance workshops, factories, offices and development sites for lease to expanding local or incoming firms. HIE’s current property portfolio, stretching from Shetland to Argyll and Moray to the Outer Hebrides, stands at 115,000 square metres of commercial space, incorporating almost 200 industrial units and 60 offices. HIE also holds 332 acres of serviced and unserviced land for future development in various locations.

Highlands and Islands Enterprises

Living and working in the Highlands and Islands HIE’s development of this land and future public sector premises is now robustly underpinned by sustainable construction principles. This environmentally conscious outlook is hardly suprising, since one of the Highlands and Islands’ greatest assets is undoubtedly its world-renowned natural environment. Highlighting this is the fact that out of 115 destinations throughout the world, the Scottish Highlands ranked number seven in terms of sustainable tourism and destination quality. The findings came out of an independent global survey conducted by National Geographic’s Sustainable Tourism Initiative and a graduate team from Leeds Metropolitan University, who consulted over 200 specialists in the field. The Highlands and Islands also has an exceptionally low crime rate and its vibrant cultural heritage is a major attraction – for residents, visitors and businesses. As Mr Roe puts it: “a rich arts and cultural scene not only drives the social economy through strengthened communities and an improved quality of life, but it is also a key driver of the wealth economy.” HIE is a fervent supporter of arts and culture in the round, demonstrated by the creation and ongoing support of the region’s arts agency, HI-Arts, as well as its commitment to the revival of both Gaelic language and Gaelic culture, traditional and contemporary culture and heritage throughout the Highlands and Islands. This year’s Highland 2007, a celebration of traditional and contemporary Highland culture, is a prime example of a proud region showcasing the very cream of its cultural crop. With so much going for the region, it’s not surprising that the population has risen faster in the Highlands and Islands (1.7%) than the rest of Scotland (0.6%) in recent years. It follows, then, that there has also been a substantial increase in residential property prices. Between 2002 and 2005, the median cost of a house rose almost 71% to £88,000, however in UK terms, property prices remain competitive. In terms of education, the Highlands and Islands secondary schools regularly top the country’s performance tables. Establishing university title for UHI Millennium Institute will help continue that success into the tertiary sector and continues to be a top priority for HIE. “It is really ironic that the Highlands and Islands is the only region of the UK not to have its own university, while the region has a sustained track record of educational attainment at secondary school which is consistently above the Scottish average, and at the very pinnacle of any region in the UK,” points out Mr Roe. UHI Millennium Institute comprises a distinctive network of higher education colleges and learning centres across the Highlands and Islands. Students living anywhere in the region can access a range of vocational courses, undergraduate and postgraduate degrees, either by attending one of the 13

Highlands and Islands Enterprises

academic partner colleges, and/or through the extensive use of the latest information and communications technology and video conferencing. Vision for the future So ultimately, what is the long-term vision for this ambitious region? This is perhaps best explained by HIE’s strategy, agreed with the Scottish Executive, A Smart, Successful Highlands and Islands. This sets out a vision to: • become a region of half a million residents by 2025; • create a further 20,000 full-time equivalent quality jobs over that period; • raise income levels by 10-15 per cent in real terms, and • be an international shop window for the best the region has to offer. As Mr Roe puts it: “HIE is committed to using its investment, influence, innovative partnerships and international networks to ensure that the Highlands and Islands gains a global reputation, over the next generation, as one of the most distinctive, sustainable and flourishing rural regions of Europe.” In short, the Highlands and Islands has established itself as a strong, viable business location and currently supports a wide range of enterprises serving both national and international markets. The region’s modern telecommunications network combined with an adaptable workforce means that the Highlands and Islands is shaping up to be a dynamic and attractive place in which to do business. For further information please contact: Highlands and Islands Enterprise Cowan House Inverness Retail and Business Park Inverness IV2 7GF T: +44 (0)1397 708251 F: +44 (0)1463 244241 E: [email protected] W: www.hie.co.uk

Highlands and Islands Enterprises

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International Business Wales

Wales is a separate nation within the United Kingdom. The country, with an economy of £40bn and growing, is a European state and a member of the European Union. Naturally a trading nation, with easy access to Europe and the rest of the world, Wales is home to both indigenous and inward investment companies which sell and ship goods to and from all corners of the world. Surrounded by the sea on three sides Wales may be small, with a total area of 8,005 square miles (20,732 square kms) but it is extremely well connected. You can get to London Heathrow Airport in less than two hours and links via the excellent motorway and railway networks mean that major UK centres, such as Birmingham, Liverpool and Manchester, are near neighbours. Frequent flights from Cardiff International Airport bring key locations across Europe close. Some 60 million tonnes a year, 10 to 12 per cent of the UK total, are moved through Wales’ sea ports. The six principal ones are at Holyhead, Milford Haven, Swansea, Port Talbot, Cardiff and Newport. Wales is internationally recognised for the natural beauty of its countryside from its breathtaking rivers and valleys to its stunning mountain ranges. Almost a quarter of the landmass is either designated as a National Park or as an Area of Outstanding Natural Beauty (AONB). The Wales Millennium Stadium is home to the country’s national sport, rugby and the nearby Wales Millennium Centre is a hub of Welsh cultural life. Since 1999 Wales has enjoyed devolved government through the National Assembly for Wales, based at the Senedd in Cardiff and led by a First Minister. The 60 Members of the Welsh Assembly are directly elected by the people of Wales and from these members the Welsh Assembly Government is formed. Wales, which has a population of 2.95m, is represented by four members in the European Parliament and by forty members in the UK parliament. During the past quarter of a century in excess of 1,500 companies have invested some £13bn into Wales. Over forty per cent of this was reinvested by enterprises that decided to inject additional resources into their successful Welsh-located operations. Wales is now a major base, for example, for a large number of world leading businesses including the likes of Airbus, British Airways, Ford, Bosch, Sony, Dow Corning, GE and T-Mobile. Over the next decade the Welsh Assembly Government’s Winning Wales strategic plan has identified some £15bn that will be invested to

International Business Wales

target economic development in the country. The country’s main economic development arm is International Business Wales (IBW). IBW was created by the Welsh Assembly Government to further the economic prosperity of Wales. IBW is at the vanguard of efforts to attract new investment into Wales and in assisting the continued growth of business and companies that are already here and thriving. Demographics Wales has the greatest concentration of its population in the south-east and north east of the country. The country has a workforce of 1,313,000 talented, smart, motivated and flexible people. Many of these people are graduates coming from one of the country’s highly regarded universities and colleges or from one of its 25 further education colleges. Some three in five people living in Wales are of working age. And there continues to be a high regard for traditional employment values in Wales. Welsh workers are among the most loyal there are with the country having one of the highest staff retention figures in the UK. Staff turnover is as low as just 3% in some cases with a national average of between 10% and 15%. Even in industries that are notorious for high turnover, such as contact centres, staff retention rates are impressive. High productivity levels, healthy industrial relations and a flexible can-do attitude to work help businesses to prosper and grow. There is a lot of space to spread out in the country as well. Overall the number of people per square mile in Wales is something in the region of 361 (140 per square km) which is just about half the rate of the United Kingdom as a whole. Cardiff, with a population of 305,000 and growing, is the dynamic and fast expanding capital city of Wales. The other major centres in Wales are Swansea in the south- west, Newport, in the south- east and Wrexham in the north-east. The country enjoys a very affordable cost of living with competitive house prices 25% lower than in Germany and 60% lower than London. And in Wales lower labour costs do not equate to a lower standard of living. Far from it. The quality of life in Wales is a key reason why people decide to come to Wales in the first place and after experiencing what there is on offer, decided to stay. Comparative population and land mass Area in square miles

Population

Cardiff Wales UK EU total

316,800 2,952,500 60,609,153 456,953,258

54 8,005 94,526 1,535,286

Inhabitants per square mile 5,867 369 5456,641 298

International Business Wales

Largest centres of population in Wales Cardiff Swansea Newport Wrexham

316,800 225,000 139,500 130,200

The Welsh Economy: Wales is home to some 500 overseas-owned companies which together employ in excess of 77,000 people. The largest investor country into Wales is North America which contributes some 28 % of new or safeguarded jobs. The other major player, in terms of investment, is mainland Europe at 26%. Traditionally Wales has been known as a manufacturing centre and 15% of the total workforce remains employed in these industries. Increasingly the Welsh economy is becoming more diversified. It is developing strengths in specific sectors such as aerospace, engineering, automotive components, financial services, contact centres and bio-technology. Other areas, in which Wales is increasing its share, include advanced manufacturing, business process outsourcing, Customer Relationship Management (CRM), financial and business services, food, IT, medical technologies, opto-electronics, pharmaceuticals, renewable energy, semiconductors and software and digital media. There are now in excess of 100 aerospace and related companies in Wales employing over 20,000 people. Some 30 per cent of the UK’s aircraft maintenance repair and overhaul business by value and 25 per cent by employment are located within 30 miles of Cardiff International Airport. Wales is also one of the most advanced automotive supply regions in the UK. Ford, Toyota and Bosch, are among 150 sectoral companies employing some 25,000 people and the sector is rapidly looking at alternative technologies with the recent arrival of Connaught in Wales, a green technology company developing world class, hybrid power train technology. Toyota recently announced a re-investment with the news that they will manufacture the engine for their new Auris car at its north Wales plant. Wales has a strong and expanding financial services community which directly employ some 28,000 people and has massive potential for growth. The insurance sector is particularly strong and includes global players such as Admiral Insurance, Legal and General and AA Insurance. Wales is also strong in the life sciences sector and includes operations by four of the world’s top ten medical devices companies, Johnson & Johnson, Bayer, 3M and Bristol, Myers Squibb. The computer software sector in Wales is also significant with an annual turnover in the region of £750m. Activities in this burgeoning sector include Research & Development to software design and testing.

International Business Wales

Companies operating in Wales include Mitel, BT Logica CMG, and General Dynamics. As recently as March, (2007), leading French global software development consultancy, Valtech, announced it was creating a new 170 job centre in south Wales. Opto-electronics companies employ some 3,500 people in Wales with an important cluster being created in the north of the country. Companies with operations in Wales include Alcatel and Cogent Defence Systems which is creating a new corporate headquarters and R & D facility at Celtic Springs Business Park in Newport. Global motor manufacturer, Toyota, makes and ships parts to Europe, South America and the rest of the world from its plant in north Wales while Magstim, an indigenously developed medical device manufacturer, services customers in America, Asia and Europe from its plant in south west Wales. IQE ships its semiconductor microchips from Wales to customers across the world including the US. Export levels remain high in Wales and the rest of the UK. Goods from here are exported all over the world with 60% going to fellow EU countries.

Wales employment by industry group: Industry % in Agriculture, hunting, forestry Mining and quarrying Manufacturing Electricity, gas and water supply Construction Wholesale, retail trade and repairs Hotels and restaurants Transport, storage and communications Financial intermediation Real estate, renting and business activities Public administration / defence Education Health and social work Other community and social activities

Wales 1.2 0.2 15.3 0.5 4.6 16.9 7.0 4.6 2.6 9.2 7.2 10.5 15.1 5.4

% in the UK 0.9 0.2 11.9 0.4 4.5 17.8 6.8 5.9 4.1 15.9 5.5 9.1 11.8 5.1

Wales employment in key areas Sector

Number of companies

Aerospace Automotive Bioscience Business Processes Electronics Financial services Food IT

150 250 250 160 300 1,800 525 700

Number of staff 20,000 28,000 13,000 30,000 30,000 30,000 23,000 11,000

International Business Wales

Education, research and development: The education system in Wales is widely recognised as being among the best in the UK offering quality learning at all levels through both public and private institutions. Higher education is a key priority in Wales and remains a key factor in attracting inward investors. The graduate pool is supplemented by technician training programmes organised by colleges of higher education. Many courses are tailored to meet specific industry requirements. Welsh higher education continues to forge strong links with industry and a host of networks are in place. The University of Wales is a key research and development centre. The centre is the second largest in the UK with a number of its departments recognised as excellent, not just academically but also in research and development, and collaboration with industry. There are currently a further 315 organisations across Wales offering scientific or technical services directly to industry. Innovation is held in high esteem in Wales. There is a general understanding that it offers the key to maintaining an economy with a strong competitive edge. Wales is developing a series of Technium Innovation Centres in a multi million pound project. The aim is build a network of state-of-the-art ‘incubators’ for hi tech research to bring together the very latest research technology with the brightest minds in the business. Wales was among the first of the EU regions to create a Regional Technology Plan designed to spread the benefits of the latest developments in technology throughout the economy. Its Centres of Excellence, hubs of focused academic research, are sited throughout colleges and universities. The 20 industrially-focused research groups support and enhance the delivery of technology transfer activities in support of industry. The EU-supported Wales Information Society maintains Wales’ presence at the cutting edge of developments in information technology while a telecommunications network is being developed in Wales which is among the most advanced in the world. st BT’s new IP-based 21 century network of services, including VoIP, is being rolled out in Wales ahead of the rest of the UK meaning that business in Wales will have access to the latest data and voice communications capabilities.

Wales undergraduate University students Discipline

Number of undergraduates

Agriculture, veterinary science and related subjects Architecture, building and planning Art and design Biological sciences Business administration studies

986 1,694 8,086 8,353 10,412

International Business Wales

Communication studies Education Engineering and technology Historical and philosophical subjects Languages and related subjects Law Mathematical and computer sciences Medicine and dentistry Physical sciences Social, economic and political studies Others

1,855 8, 164 6,777 6, 103 12,751 3,621 4,901 12, 312 3,405 9, 575 3,742

Total

102,746

Business environment: Many inward investors are initially attracted to Wales by its many financial incentives. Financial grants and other assistance are available to new businesses through a number of bodies including the National Assembly for Wales, International Business Wales and the European Commission. Parts of Wales benefit from Objective One status within the EU. These Tier One areas are eligible for the highest possible levels of financial assistance currently available in the EU. Social security costs, paid both by the employer and employee are among the lowest in Western Europe. And the UK’s 30% corporate tax rate makes Wales one of the most profitable places in Europe for foreign investors. Thanks to low labour costs and personal tax levels, among the lowest in Western Europe, it is less expensive both to live and to work in Wales. There is plenty of land available in Wales and at keenly competitive prices. Wales can offer an extensive range of high-quality sites and buildings at extremely agreeable rates compared with other regions in the UK and mainland Europe. From modern, prestige space and refurbished accommodation, to prime development sites, there are opportunities across a wide variety of locations suitable for all types of businesses ranging from multinational corporate bodies to small and medium sized enterprises (SMEs). And Wales is a wired nation. It leads the world in terms of its communication infrastructure. In the past 15 years some £500m has been invested to upgrade Wales’ digital network. To date 310,000 miles of fibre have installed and 98% of the population now has access to broadband services. One of BT’s Global Services premier data centres is located in Cardiff making sure that international clients have the access to a highly resilient and secure suite of fully managed and co–location services. Wales/UK average gross weekly earnings Overall Managers and senior officials

Wales (£) 588.40

UK (£) 742.20

International Business Wales

Professional occupations Associate professional/technological occupations Administrative and secretarial occupations Skilled trade occupations Personal services occupations Sales and customer service occupations Process, plant and machine operatives Elementary occupations

604.60 447.30 275.80 399.20 220.30 164.10 365.30 202.90

638.10 487.80 291.30 412.50 221.50 182.70 375.40 213.90

Overall

370.70

423.20

Wales and European Taxation: Total employee social security contribution % Security Belgium France Germany Ireland Italy Netherlands Spain Sweden UK

13.1 15 13 4 10 7.1 6.4 7 11

Contribution % 34.8 45 13 10.8 53 17.6 30.6 32.5 12.8

National Corporate Tax rates (%) Austria 25 Belgium 33.99 Denmark 28 France 33.83 Germany 38.31 Ireland 12.5 Italy 37.25 Luxembourg 30.38 Netherlands 31.5 Spain 35 Sweden 28 UK 30

International Business Wales

International Business Wales International Business Wales (IBW) is dedicated to convincing investors that Wales is the perfect place to locate, relocate or expand their business or to invest in existing enterprises. IBW helps in identifying and recruiting employees ensuring that investors accrue the most talented work force. IBW can also offer staff training support. IBW helps with matters relating to property and during the vital settling in process from helping acquire work permits, to finding the right house and school for children. And IBW plays the same personal attention to business with experts in project management enabling recent arrivals to get on their feet and quickly become part of Wales’ very welcoming business community.

For more information please contact: Carys Pugh D’Auria, International Marketing Manager, International Business Wales, T: +44 2920 828683 F: +44 2920 442696 E: [email protected] W: www.ibwales.com

International Business Wales

Invest Northern Ireland Northern Ireland the Ideal Business Location Northern Ireland is an open and flexible economy. Over 700 foreign investors and a multitude of investors from the rest of the UK have chosen to locate in the region. The country has hi-tech expertise, industrial ingenuity and a great lifestyle to offer, making it one of the most attractive inward investment locations in Europe. Young, Well Educated Population Northern Ireland has one of the youngest populations in Europe, with nearly 60 per cent of its 1.71 million residents under the age of 40. Currently the unemployment rate stands at 4.6 per cent, below the UK national average and the EU27 average. Northern Ireland has long been recognised to have one of the best education systems in Europe with pupils consistently out-performing their counterparts in Britain at GCSE and A-Levels. Two world-class universities and an extensive network of further education colleges provide excellent academic and vocational training, with over 2,000 people graduating each year with business qualifications in Northern Ireland. Established Investors Northern Ireland’s economy in recent years has been transformed into an outward looking knowledge economy. The region’s strong academic record, together with impressive intellectual property reserves have enouraged a host of internationally successful companies to invest in there. Among the sectors witnessing significant growth in recent years are financial services, software development and business services. Key investors include SAP; HCL-BPO, Polaris Software Labs; Northbrook Technology; Abbey; Seagate Technology; Liberty Mutual; Microsoft and HBOS. More traditional industries such as manufacturing continue to make a significant contribution to the Northern Ireland economy, accounting for approximately 13 per cent of employment in the region. Global organisations such as Caterpillar, DuPont, Bombardier, Emerson Electric and NACCO have all invested in Northern Ireland. Cost Competitive Location High quality, modern office space for high-tech operations is readily available throughout Northern Ireland. Facilities include the state-of-the-art Science Park in the Titanic Quarter, Belfast. According to CB Richard Ellis, global market rents are very affordable, with prime facilities starting at an average of £14/per square foot in Belfast against comparable space at £50 /sq ft in Dublin, £48 /sq ft in London.

Invest Northern Ireland

Superb Infrastructure Northern Ireland enjoys a state-of-the-art communications infrastructure. It was the first region in Europe to achieve 100 per cent broadband coverage and it will become the first region to complete BT’s 21 CN network upgrade. Telecoms costs are among the lowest in Europe and it has excellent transport infrastructure with hundred of flights daily to the UK, Europe and beyond. The region’s seaports, together with a high speed rail link to Dublin, mean that Northern Ireland is the perfect gateway to Europe. Northern Ireland is a vibrant, modern region. Considered one of the safest places to live, Northern Ireland has a rich variety of scenery, activities and a host of cultural attractions and leisure opportunities, and was recently named as one of the “must-see” travel destinations for 2007 in the Lonely Planet’s Bluelist. Today Northern Ireland is a centre of innovation and industry. This, together with its talented workforce and excellent infrastructure, makes Northern Ireland an ideal inward investment location. Invest Northern Ireland Invest Northern Ireland is the agency responsible for promoting economic development throughout the region: to grow the economy by helping new and existing businesses to compete internationally and by attracting new investment into Northern Ireland. Across its global network of offices, Invest NI delivers a tailored package of practical and financial support, enabling new investors to become operational quickly and to achieve sustained growth.

For more information please contact: International Marketing Team Invest Northern Ireland Bedford Square Bedford Street Belfast BT2 7ES T: +44 28 9023 9090 F: +44 28 9043 6536 E: [email protected] W: www.investni.com/invest

Invest Northern Ireland

property +

Locate in Kent has the expertise, contacts and local knowledge to give you a genuine advantage. Our property database gives you access to a wide range of properties from serviced offices to development sites across the county and our relocation service is comprehensive, confidential and free. Kent is perfectly located for your business with High Speed 1 rail services cutting journey times to European cities from November 2007 and to London from 2009. With property costs up to 60% less than in London the area offers companies an unrivalled business location.

Locate in Kent Perfect for Europe. Perfect for Business.

+44 (0)1732 520700

www.locateinkent.com

Locate in Kent Perfect for Europe. Perfect for Business.

location Kent and Medway is perfectly placed for business – positioned between the markets of London and Europe, the county is the closest UK location to continental Europe, offering access to over 531m consumers within a 24 hour drive.

Paris from Ebbsfleet and Ashford taking approximately two hours.

Kent already benefits from Eurostar services from Ashford International Station to Continental Europe, and the launch of a new high speed line from the new Ebbsfleet International Station in North Kent in November will build on Kent’s reputation as the gateway to Europe. Europe’s cities will be that much closer, with new trains to

New domestic services operated by South Eastern Trains from 2009 will cut a number of journey times from the county to London by up to half, further strengthening Kent’s offer to new investors. London St Pancras will only be 17 minutes from Ebbsfleet International Station and 37 minutes from Ashford International.

cost-effective research-based pharmaceutical company, has been based in Kent since the 1950s. The site in Sandwich, the company’s European R&D Headquarters, occupies 335 acres and employs around 3,500 people.

Kent offers immediate access to the leading international financial centre of London – but its property prices are up to 60% lower than in the capital, making it the location of choice for many national and international companies. Kent has a workforce of over 780,000 people, with 5,000 skilled graduates moving into industry from universities and colleges every year, but again, its salary rates and labour costs are significantly lower than London’s. The county is already home to many blue-chip companies including BAE Systems, GlaxoSmithKline, Kimberley-Clark and Royal Bank of Scotland. Pfizer, the world’s largest

+44 (0)1732 520700

Investors in Kent and Medway can also take advantage of business grants available in certain areas of the county. The Selective Finance for Investment in England (SFIE) grant scheme is delivered by SEEDA in the South East region. All grants are awarded on a discretionary basis and the level of potential assistance depends upon company size, location, eligible project expenditure, number of skilled jobs created or safeguarded and project quality. New criteria that have just been announced mean grants of up to 15% of project costs are available for small-sized companies and up to 7.5% for medium companies rising to 35% and 25% respectively in certain areas of East Kent, where large corporates are also eligible to apply for up to 15% of eligible costs.

www.locateinkent.com

Locate in Kent

Locate in Kent Perfect for Europe. Perfect for Business.

property As well as being a cost-effective location with unrivalled links to London and European markets, Kent has a wide variety of commercial property on offer. From business parks like Kings Hill in West Malling - one of the largest and most successful mixed-use developments in Europe and science parks like Kent Science Park in Sittingbourne, through to enterprise hubs, industrial units and individual offices, there is a property solution to be found in Kent for all types of business.

regeneration Developments in the county’s two governmentidentified ‘growth areas’, Ashford and Thames Gateway, are set to create further opportunities for companies looking to move into the county. Ashford is expected to have 31,000 new homes and 28,000 jobs by 2031, while North Kent is set to benefit from 50,000 new homes and 80,000 jobs within 20 years. As well as offering a new international and domestic station, Ebbsfleet Valley’s 9m sq ft of office, retail, leisure and community space is likely to create some 20,000 new jobs in the area.

Proposals for several major investment projects in East Kent have also been announced, including London Array, the world’s largest offshore wind farm, and £300m expansion plans for a new terminal, four new berths and a new marina have been unveiled by The Port of Dover.

future With its multi-million pound developments, regeneration projects and investment in infrastructure, transport and renewable energy, Kent is looking forward to a bright future - proving it really is the place in the UK to do business.

+44 (0)1732 520700

www.locateinkent.com

Locate in Kent

Locate in Kent Perfect for Europe. Perfect for Business.

Locate in Kent Locate in Kent offers a free, impartial and confidential service to companies looking to relocate to Kent or Medway. Over the last 10 years Locate in Kent has advised over 400 companies in the UK and overseas to relocate or expand in the county. Its work has led to the take-up of around 5m sq ft of commercial property space in the county and has created more than 18,000 direct jobs – of which nearly half are knowledge-based. Its services include advice and guidance on available property, access to its online commercial property database which covers the whole of Kent and Medway, ready-made business networks to tap into and an aftercare

service to assist businesses with their integration, development and growth in the county. The agency also offers companies customised research data to support a location decision including information on rent levels, demographics and salary costs. The company can also provide free grants advice and assistance through the South East Grant Advisory Service (Se-gas). For more information about Kent’s business credentials and the relocation and support services offered by Locate in Kent visit www.locateinkent.com or call 01732 520700.

locational advantages of Kent and Medway: • Although Kent is only a 60 minute drive from the capital, commercial property and labour costs are nearly 60% less.

• The area around Ebbsfleet station is being developed with offices, shops and about 9,000 new homes.

• Kent is home to many world-class companies such as Pfizer, Kimberly-Clark, BAE Systems, Delphi and Hornby, with others moving in all the time.

• Kent has more developable land than any other area in the South East of England.

• From 2009, ‘bullet trains’ will travel to a new station at Ebbsfleet in North Kent to St. Pancras in 17 minutes and ‘bullet trains’ from Ashford will reach St. Pancras in 37 minutes.

+44 (0)1732 520700

• Kent has a population of 1.6 million people, the largest of any county in the UK, and a workforce of over 780,000. • Kent has over 1000 miles2 of glorious countryside and 360 miles2 of unspoilt coastline to explore, and more historic homes and castles than any other county.

www.locateinkent.com

Locate in Kent

Northamptonshire Enterprise Limited With one of the fastest growing economies of the last decade, Northamptonshire is already established as a great place to live and for businesses to invest. High levels of employment and skills, combined with competitive costs and a highly productive labour market, have already established Northamptonshire’s position as a diverse economy and a successful location for living, working and learning. However, its economic and demographic growth levels are set for further rapid expansion. Northamptonshire is the focal point for population and jobs growth identified in the Government’s Sustainable Communities Plan – a commitment to sustain and extend the economic success of London and the South East. Over the next 25 years Northamptonshire will be home to 141,000 additional jobs and 167,000 more homes. This requires joined-up partnerships, including the development of two dedicated delivery vehicles and significant upfront funding for essential infrastructure. This is all to be invested in the county’s transport, education and community facilities, thereby creating a new era of growth opportunities for businesses, and a truly sustainable community for present and future generations. Strong commitment to sustainable development will see that Northamptonshire retains its exceptional beauty while delivering this ambitious growth. This evolution reflects Northamptonshire’s strengths as a business location, where employment and population growth rates are already more than double the national average. It is located at the heart of the Oxford to Cambridge Arc (O2C) of high-tech industry, and is less than an hour from both these cities as well as London and Birmingham. Northamptonshire has plans to attract and develop a range of new investments above the housing development. These include: • • • • • •

major retail and cultural regeneration developments in all of the county’s major towns development of 711,000 sq m of new office accommodation development of over 300 hectares of new strategic distribution facilities construction of 48 new primary schools construction of eight secondary schools development of at least one new secondary medical facility and considerable evelopment of primary facilities, including community centres and district medical centres

Northamptonshire Enterprise Limited

•

•

•

development of new regional conferencing centres and hotel facilities to cope with Northamptonshire’s growing business tourism demands the development of a Technology Realm, strategic employment sites (circa 230,000 sq m of science park-related development) and cutting-edge business support services. development of the ‘River Nene Regional Park’ – the largest sustainable tourism, environmental and leisure resources in the East Midlands.

This population growth and these development opportunities mean approximately £6bn extra per annum of spending will be generated within the Northamptonshire economy alone, excluding housing and infrastructure development costs, making it an ideal place for development and relocation. As part of efforts to deliver this growth, Northamptonshire Enterprise Limited (NE L) has been formed. NE L is the result of an innovative merger of five existing organisations to create a ‘one voice’ approach to Economic Development, Inward Investment and Tourism/Destination Management. Working with partners from the public, private and voluntary sector, NE L’s primary role is to promote, invest in, develop and grow Northamptonshire as the location of choice to live, work, learn and visit. Activity in these areas has already seen the creation of over 5,500 jobs in the past three years in the county. The enormous opportunities the growth agenda offers is not the only reason why Northamptonshire is the ideal choice for your investment. Northamptonshire is the UK’s central growth location. Fast access to the major road, rail and air networks creates a strategic gateway to the whole of the UK and beyond. The UK’s strategic road and rail lines and European transport Networks (TENS) route all directly accessible within the county, providing arguably the best North-South and East-West communication links in the UK. London is less than an hour away, so businesses needing links to the capital can operate successfully from a highly cost-competitive base. Other major cities and ports are all within easy reach, with 95% of the UK’s population located within four hours. The county offers a choice of five international airports and three major air-freight hubs within an hour – essential for companies seeking access to international markets. Northamptonshire is also located within the ‘Golden Triangle’ the most cost efficient location in the UK for access to ports and logistics, due to our location relative to the EU drive time directive, other major UK cities and access to the EU. Northamptonshire is also able to offer both fright and passenger links to the continent, with rail freight terminals at Daventry International Rail Fright Terminal and Eurohub. Northamptonshire has three rail services

Northamptonshire Enterprise Limited

running through the county. These provide access to London in under an hour Northamptonshire has a property offer to suit your business needs. Able to offer small services offices to serviced strategic sites all your business needs can be catered for. The growth of the county will see a growth in the supply of the highest quality sites and premises to st facilitate business needs for the 21 Century. This creates enormous opportunities for developers and end users alike, building on the county’s strengths as one of the fastest growing economies within the UK Key Locational Advantages • Significant catchment population of 5 million people within 1 hour drive-time, 95% of the UK’s population within a four hour drive • Northamptonshire represents a 25% lower operating cost when compared to the rest of the South East of England and is less than an hour from London. • Accelerated investment in the ICT infrastructure ensures easy access to the latest communications technology (99.9% of the county has access to Broadband). • Skilled, adaptable and a cost effective labour supply, comparative to London and the South East

For further details please contact: James Cushing Northamptonshire Enterprise Limited Enterprise House 30 Billing Road Northampton NN1 5DQ T: +44 (0) 1604 609393 W: www.letyourselfgrow.com

Northamptonshire Enterprise Limited

Investing in

North East England The latest Government statistics show 63 firms moved to the North East or re-invested in existing businesses in the region in the last financial year - five more than in 2004/05. In total, these investments will create 4,250 new jobs, safeguard a further 1,520 posts, with capital expenditure of just over £62m by the investing companies.

Simon Goon One NorthEast Head of Business Development and International Relations North East England can rightly claim to be

punching above its weight in securing valuable inward investment.

Representing a region with a population of just 2.5m and a

comparatively small GDP, One NorthEast ranked an impressive third out of the UK’s 12 regional

development agencies in inward investment

performance in the last financial year.

The prosperity that these companies, especially larger firms, bring to our region in the form of new jobs and wealth creation is a real vote of confidence in our economy, its workforce and quality business environment. The North East is home to 585 overseas companies employing over 27,000 people within a two-hour drive of Newcastle and Durham Tees Valley international airports.

In the past five years, One NorthEast has helped create 10,600 new jobs through inward investment and protected the jobs of a further 11,900 workers. As the regional development agency for North East England, we are charged with driving forward sustainable economic development.

Attracting overseas and UK firms to Northumberland, County Durham, Tyne and Wear and Tees Valley is an important part of the programme of activity we are developing to drive this growth.

One NorthEast’s investment and aftercare team has in place a carefully targeted strategy to build the portfolio of companies choosing the North East as the home for their new venture or expansion.

Its vision is to deliver investment into North East England by targeting job creation investment, working with existing companies to secure reinvestment and promoting the establishment of strategic partnerships. The region now has a far more targeted and subtle offer to attract investors than in days gone by when the lure of a vacant business park site and ready labour market was enough to secure large single investments.

Our investment and aftercare team, along with regional partners, provide a comprehensive package of support for inward investors. These partners include centres of excellence, universities, access to grant aid through One NorthEast’s business finance team, urban regeneration companies and UKTI, the Government’s inward investment arm which has access to markets outside the UK. They can be asked to intervene at any stage of a company’s strategic planning cycle to assist with the company’s long term aims and objectives. The aim is to do this by accessing all aspects of the regional network and, where and when appropriate, with One NorthEast acting as the key point of contact. In order to ensure that the North East retains the investors it has here and to promote their reinvestment in our region, One NorthEast has tackled the need for a much more coordinated, managed and informed aftercare system. An aftercare system based on project and key account management has been established. It covers the pro-active information management of regional companies and their headquarters and focuses on coordinating and managing contact with regional firms.

North East England is sharpening its focus and refining its role to win further inward investment from the crucially important US marketplace.

The aim is to give One NorthEast a far clearer picture of the economic health of our investors, their forecasts for future activity and challenges they face. One NorthEast also has a team of specialists dedicated to identifying and growing opportunities within nine specific industry sectors - all areas where the North East has existing world class strengths.

The team is committed to sourcing opportunities, improving productivity, promoting network development and innovation and skills development in the process industries, food and drink, knowledge intensive business services, marine and defence, new and renewable energy, automotive, commercial and creative, tourism hospitality and life sciences sectors.

One NorthEast’s inward investment and aftercare team has long established, dedicated teams working in the Asia Pacific, Europe, UK, North America and Far East marketplaces. The competition across the UK to attract new investment is fierce and the North East has to differentiate itself in a crowded marketplace and play to its strengths.

Having overseas offices and representatives actively working in target countries and markets, promoting our message directly to CEOs and senior Government officials is incredibly important.

The new financial year 2007/08 represents the dawn of an exciting new era for both North East and North West England and their joint US investor strategy. Both regions have reaffirmed their commitment to and funding of the North of England Inward Investment Agency (NOEIIA) office network in the States.

In China, One NorthEast, with the full backing of the regional arm of UKTI, signed an exclusive agreement with Shanghai Government officials and their counterparts in Jiangsu province, giving regional firms and universities prime access to the these lucrative marketplaces - now the economic heartbeats of the world’s third largest trading power.

world-class strength in scientific research and development and exploitation of intellectual property. One NorthEast is a leading partner in the Newcastle Science City project to establish the region as a world leading centre of scientific excellence.

At the heart of this scientific theme are three pillars of activity which we believe can generate up to £6bn of new wealth for the regional economy over the next ten years - namely process industries, new and renewables and healthcare advancements. The regional development agency is investing heavily in these fields to build on the North East’s knowledge base to help generate new jobs, businesses and investment.

Our region has an inward investment offer to rival any in the UK and we are striving to consolidate and build

upon the solid foundations we have in place.

This raises the possibility of future trade and investment opportunities for the region and of research and development link ups between North East and Chinese businesses and universities. A unique selling point for the North East and one that is already reaping rewards, is the region’s

Make contact

To discuss the service further, or to receive an initial response to an investment proposal, please make contact by phone, fax, email or via our website: T +44 (0) 191 229 6500 or +44 or (0) 191 229 6363 F +44 (0) 191 229 6243 E [email protected] W www.investnortheastengland.com

NETPark

a catalyst for regional change

NETPark, County Durham’s showcase science, technology and engineering park at Sedgefield, is at the heart of the region’s drive to develop a hightechnology, knowledgedriven economy. Developed and managed by County Durham Development Company, Durham County Council’s business development arm, NETPark provides an environment in which innovative businesses can grow and develop.

With support from the North East’s five universities and the region’s five Centres of Excellence, NETPark has begun to establish itself as a prime location for start-up scientific, technological and engineering knowledge-based businesses.

Focusing on R&D companies involved in plastic electronics, nano and micro technology, software, photonics and life sciences, the NETPark Incubator has already attracted a range of rapidly developing spin-out companies such as Durham Scientific Crystals, Farfield Photonics, NeoSensors, Analytical NanoTechnologies Ltd (ANT) and ROAR Particles.

2007 will see a substantial increase in new building developments. Incubator Phase II will provide much needed space for new start ups whilst the Business Village will create accommodation for companies post-incubation and for more mature SMEs. The construction of the Plastic Electronics Technology Centre (PETeC) will bring a development of national and international significance to NETPark. This £10m PETeC project will provide state-of-the-art facilities to support R&D in the field of plastic electronics.

Managed by Cenamps, the Centre of Excellence for emerging small-scale technologies, PETeC will be a leader in the development of novel devices with independent forecasts predicting a market worth $30bn by 2015 and $250bn by 2025.

PETeC’s benefits should spread far beyond NETPark, encouraging the development of a cluster of companies engaged in novel product development and manufacture based on flexible functional materials.

To find out more visit www.uknetpark.net

Maersk shipping giant berths in North East

One of the world’s biggest

shipping groups is relocating part of its business to the North East. The Maersk Company Limited, which currently runs its UK operations from Canary Wharf in London, is transferring its ship management division to Newcastle Quayside.

The move, which will see some 40 staff relocate to the region, has been agreed thanks to vital advice and assistance from One NorthEast and its regional partners. Sector and investment specialists from the regional development agency have worked closely with Maersk. This culminated in the awarding of £1.8m of Selective Finance for Investment (SFI) funding to finance the move, which will lead to around 100 new jobs being created over the next three years.

Alan Clarke, One NorthEast Chief Executive, said: “This deal is a major coup for North East England. The majority of Maersk’s UK operations are being relocated elsewhere in London, so for us to secure the shipping management division, bringing with it some 40 highly skilled, well paid jobs and the promise of many more to come, is fantastic news.

“We have a rich shipping heritage in the region, so it is fitting that one of the world’s biggest shipping companies has chosen to relocate part of its business here. This agency’s aim is to make the North East the location of choice for leading national and international firms, and this multi-million pound deal is yet another indicator that we are heading in the right direction to achieve this.”

The team transferring from London to Newcastle is responsible for the crewing and technical management for over 40 UK-flagged vessels operating around the world.

team elsewhere, but we were able to satisfy them that North East England has everything it needs to take the business forward.

Mark Malone, managing director of the Maersk Company’s Shipping Division, said: “Tyneside’s history has been shaped by engineering, especially marine engineering.

“It is important to recognise the continued importance of the sector to the region’s economy. We are working hard to ensure that we continue to support and develop all areas of the sector, including maximising North East England’s involvement in the major projects on the horizon.”

However, there are plans to create a design team and a technology support unit over the next couple of years, which will further increase employment.

“To date it remains a centre of excellence, with a high concentration of marine engineering resources and experienced shipping professionals. We welcome this opportunity to establish a strong maritime presence on Tyneside.”

The Maersk Company Limited is part of the A.P.Moller/Maersk organisation. The UK-based activities are expanding, creating new job opportunities for shipping professionals in the North East.

“The move has enormous potential for the region. It will bring highly skilled and well paid jobs and further strengthen our bid to be the number one business location of choice.

The Maersk Company was founded in the Danish town of Svendborg in 1904 by a father and son. It now employs over 70,000 people in 125 countries, and operates 250 vessels worldwide.

Maersk’s decision to move to the region came about following a meeting between agency representatives and managers. A cross-department team within One NorthEast was able to provide assistance with location, a £1.8m SFI grant, and sectoral knowledge to secure the project for the region. The facility, at Pandon Street in the quayside area of Newcastle, is expected to open later this year. Margaret Fay, Chairman of One NorthEast, said: “I am delighted Maersk saw the benefits of relocating its shipping management division to the region. “The company could have decided to base its expanding technical

One NorthEast Chairman Margaret Fay and Jesper Kjaedgaard of Maersk launch the Maersk Gosforth in Southampton.

MobileGov computer security

pioneers head for Newcastle

Pictured from l to r: Stephen Slater of RMT, Craig Daglish, One NorthEast, François-Pierre Le Page and Benoit Goyens, both of MobileGov and Tom Cosh of Newcastle City Council

A French firm has chosen the North East as the UK distribution base for its groundbreaking IT security solution.

MobileGov - based in Sophia Antipolis in southern France – is about to move into an incubator unit in Charlotte Square, Newcastle, after signing distribution agreements for its Mobile Device Authenticator product.

The device allows IT administrators to monitor and control all access to a company’s IT network to guard against fraud and misuse.

Up to four MobileGov staff will initially move into the Charlotte Square incubator unit owned by Newcastle City Council. The company is forecasting turn- over of £500,000 in product sales this year, rising to £7.8m in 2009.

Craig Daglish, One NorthEast Investment and Aftercare Technical Advisor, worked closely with the company to ensure it chose the North East as its first UK business location.

“When people refer to IT security it is normally associated with protecting their network through deployment of firewalls, e-mail filtering and anti-virus software.

“But the unauthorised use of portable storage devices with huge storage capacity such as iPods, smart phones and USB keys pose risks to many businesses. For example, anyone can plug one of these devices into a network and introduce viruses to the network, or more critically they provide an opportunity to anyone intending to steal sensitive and valuable data.

“However, portable storage devices undoubtedly provide good practical benefits to a company and its workforce and it is unpractical and counterproductive to ban their use outright. What is required is a more controlled approach with the deployment of suitable technology solutions.

“The Device Authenticator solution does just that, allowing IT administrators to decide which USB keys have access to the network, who has them and what they are allowed to access – allowing greater control over information flow to such removable devices.”

MobileGov has signed UK distribution agreements for its product with North East-based firms IT-PS, Onyx and RMT Accountants & Business Advisors. MobileGov’s founder and CEO François-Pierre Le Page, said: “The main reasons for choosing Newcastle are the quality of the people we met here, their kindness and their ability to motivate everyone around a new project such as MobileGov.

“In addition, we are proud to announce the signature of distribution agreements with dynamic companies such as RMT, Onyx Group and IT-PS.” Tom Cosh said:

“MobileGov is a great example of the kind of technology company we had in mind when we created Charlotte Square as a supportive environment for early stage innovative digital businesses.

“I am doubly pleased that the relationship the City foresaw when it linked to the Sophia Antipolis region of the South of France is generating a range of positive results.”

One NorthEast cemented close ties with MobileGov following its work on a European e-justice research project that looked at the issues around protection and storage of sensitive public information. The technology developed in the project was commercialised leading to the formation of MobileGov in April 2004.

GE Money

MobileGov returned to France to concentrate on building the product and commercially selling it in the French market.

They have recently signed a distribution agreement in France with AMEC-SPIE Group, a leading integrator with more than 66,000 clients. They are now interested in developing the UK market for the product.

For more information about the company please visit www.mobilegov.co.uk or www.deviceauthenticator.com or www.devicelinker.com.

to create over 400 new jobs Financial giant GE Money has unveiled a multi-million pound investment in the North East, creating over 400 new jobs in the region.

GE Money announced today that it is to expand its operations in the North East with the construction of a purpose built 100,000 square foot office facility that will accommodate up to 1000 people. The investment continues to build on the success of their current operation, which opened in 2005 and employs 450 people. The construction of the new building started in February and is due to be completed and fully operational by June 2008.

Stewart Macphail, CEO, GE Money Cards UK, commented: “This multi-million pound investment announced today represents the biggest investment in property GE Money has ever made, and reinforces our commitment to growth and job creation in the UK. The new development will create over new 400 jobs - taking our local workforce to over 800 people. This investment in the North East continues to build on our current success here, and represents a very exciting new chapter for GE Money.”

Rob Willis, HR Director, GE Money UK, said: “The new development will grow Newcastle significantly, and the creation of over 400 jobs demonstrates GE Money’s commitment to the area and our current employees. We are very lucky to have talented, enthusiastic and dedicated staff who have helped make our existing Newcastle operation such an overwhelming success.”

Alan Clarke, One North East Chief Executive, said: “ GE Money’s reinvestment in its Cobalt Park business is a huge vote of confidence in its workforce and the North East economy. And we look forward to GE Money moving into its new offices, creating 400 valuable new jobs”. One NorthEast has backed the expansion with a £1.9m SFI grant.

Recruitment for the new vacancies will begin immediately, with a highly visible and ongoing recruitment campaign in the regional press. The campaign offers variety of roles, predominately in Sales, Customer Services and Collections and will include recruiting for a number of new management roles.

Pictured l to r: Stuart MacPhail, Chief Executive of GE Money Cards, Alan Campbell Tynemouth MP, Alan Clarke, One NorthEast Chief Executive, Guy Marsden, Director of Highbridge Business Park Ltd – developers of Cobalt Park.

SeaDragon £300m oil and gas

construction project bound for Teesside Hundreds of jobs are on the way to the region after the North East was chosen as the location to undertake a massive £300m marine offshore project.

SeaDragon Offshore, a Cayman Islands company, has chosen the Tees Alliance Group to build a state-of-the-art floating drilling platform for the oil and gas sector. The company has also announced plans to build two more identical vessels with Tees Alliance Group.

It will be the biggest non-military marine fabrication project in the UK, and will bring one of the country’s largest shipyard facilities, Haverton Hill near Billingham, back into use and create up to 800 jobs.

The project has been assisted, with non-core funding, by a number of organisations, including regional development agency One NorthEast, Tees Valley Regeneration and English Partnerships.

The first rig is expected to be delivered in 2009.

Stephen Baird, Chairman of SeaDragon Offshore, said: “SeaDragon Offshore recognised that Teesside offered the skills to create a world class vessel. Our challenge was to organise and market this capability and simultaneously create sophisticated risk mitigation policies that would make the project feasible and attractive to the banks, investors and charter clients.” Other companies involved in the consortium are oil services operators the Abbott Group plc and Lloyds TSB plc.

Once complete, the vessel, which will be able to drill for oil and gas in depths of up to 10,000ft, will be used to assist deep-water reserves around the world in locations such as the Gulf, West Africa and the North Sea.

Stockton North MP Frank Cook, who has been campaigning for the regeneration of the Haverton Hill yard, said: “For over 40 years I have used every possible opportunity to tell anyone who would listen about the superb

industrial skills and facilities here on Teesside – and the opportunities available for those with the right managerial attitudes and outlooks.” The first hull has already been bought and is due to arrive in the second half of 2007. SeaDragon Offshore is now in the process of securing options on two further Russian hulls and has agreed on fit-out times for the two additional vessels from the Tees Alliance Group.

Ray Thompson, sector projects manager at One NorthEast, said: “If we can bring some of the facilities we have in the North East back into use, and get workers back into traditional engineering jobs, we’ll put the region in a strong position to maximise opportunities in the future.”

David Eason, CEO of Tees Alliance Group, said: “It will secure major employment for locally skilled people in a field of work that has been in recession in this area during the last eight years. There will be a significant number of new jobs from both a direct and indirect perspective for the area which must be good news for everybody in Teesside.”

Pictured from l to r: Frank Cook, Stockton North MP, David Eason, CEO of Tees Alliance Group and Stephen Baird, Chairman of SeaDragon Offshore

Pictured from left to right: Clare McDermott, One NorthEast Europe Senior Advisor, Chris Levett, Seadrill Engineering Managing Director and Richard Marr, NaREC Finance Director.

Seadrill taps into rich seam of North East talent

A world-leading oil and gas drilling contractor is creating 60 new jobs in Northumberland as it looks to the North East to help it capitalise on an unprecedented boom in the industry.

Chris Levett, Seadrill Engineering Managing Director, said: Norwegian owned Seadrill Engineering has just opened a satellite office in Eddie Ferguson House, Blyth, home of the New and Renewable Energy Centre (NaREC). Sixteen employees will initially support the company’s activities in its Aberdeen, Bergen and Stavanger offices, with job numbers forecast to rise to 60 within three years as the company looks to recruit specialist engineers from the North East labour market. Seadrill Engineering has extensive contracts with major global companies such as Shell, Statoil and BP, to upgrade oil rig drilling technology, allowing the companies to tap into harder to reach pockets of oil and gas in the North Sea.

“It was a choice between Blyth and other international locations but we decided on Blyth because of its location, accessibility, the quality of these facilities at Eddie Ferguson House and the pool of resources in the North East related to our industry.”

Seadrill Engineering is beginning a recruitment process to fill future positions with graduates and North East workers with oil and gas sector experience, some of which may be working overseas. The Blyth office will work to help Seadrill Engineering customers update ageing technology on oil rigs with new state-of-the-art automation, allowing access to lucrative oil and gas reserves previously out of reach. Seadrill Engineering is the engineering arm of offshore services firm Seadrill – based in Stavanger with an annual turnover of £500m and 4,400 staff worldwide. “The oil and gas industry is in the midst of an unprecedented boom at the moment, the oil companies just can’t get it out of the ground quick enough,” said Mr Levett.

One NorthEast has backed the project with a £200,000 Selective Finance for Investment Grant. The regional development agency’s inward investment and aftercare team worked with Seadrill and NaREC to identify suitable space in NaREC’s facilities as the ideal location to establish its first presence in England.

Richard Marr, Finance Director at NaREC, said:

“With a skilled workforce and a wealth of resources already in the region, it makes sense for oil and gas companies to look at the North East as a key part of the future for new and emerging energy technologies.”

South East England Development Agency THE BEST ENVIRONMENT TO GROW YOUR BUSINESS The South East of England is the powerhouse of the UK economy, contributing more in net tax to the Exchequer than any other UK region, including London. It is a prosperous, dynamic and innovative region with a highly skilled workforce and the largest population of any region in the UK, approximately eight million. South East England encompasses Hampshire, Isle of Wight, East and West Sussex and Milton Keynes as well as counties which border London - Buckinghamshire, Oxfordshire, Berkshire, Surrey and Kent. The region has a £166 billion (GVA) economy and has grown at an average annual growth rate of 3.66 per cent during 1996-2006 (Source: Experian Business Strategies). Across the region there are 682,380 enterprises, 16% of the UK total. Businesses – both local and internationally owned - regard the South East as an attractive and dynamic location to operate. It is an ideal springboard for global growth. So what are the advantages of locating in the region? South East England is the preferred choice of location for over 6,500 overseas investors and these companies benefit from: • An international transportation hub with excellent links to European and global marketplaces, which includes London Heathrow and Gatwick Airports and the Channel Tunnel rail link to Europe. • The highest rate for exporting in the UK, £28 billion per year. • Easy access to London, Europe’s financial capital. • The largest population of any UK region. • A highly-skilled and flexible workforce, with 74,000 new graduates per year. • Home to 25 universities and higher education institutes, including the University of Oxford • Significant clusters of businesses in all high technology industries. • A high technology, research intensive economy. Transport and Communications The South East boasts three international airports - London Heathrow, Gatwick and Southampton; 11 ports including Dover, Southampton and Portsmouth; and the Channel Tunnel.

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Research & Development (R&D) Annual R&D expenditure in the region, at £4.66 billion, is almost one quarter of the UK total. This is due in part to the hundreds of commercial R&D operations which locate in the South East to access the talented R&D workforce and benefit from the close proximity to world class research departments within the regions’ universities. Almost 25 per cent (45,800 people) of the UK’s R&D workforce is employed in the region. Among the region’s world class universities, Oxford is the most renowned and its science park is host to firms specialising in computer hardware and software and bioscience. Sharp Laboratories of Europe set up its research centre for consumer electronics in the Park in 1992. Oxford University and Southampton University are two of the influential Russell Group of research focused establishments. Along with other academic institutions in the region, these two generate consistently strong results in science research and produce 74,000 graduates per year. With 25 universities and higher education institutes in the South East, each with strengths in specific areas, there is significant potential to help businesses become more competitive and productive. The Research Excellence Directory - www.researchexcellence.org - has been developed to assist individuals and business to explore data on applied research and put direct users in touch with dedicated people working at the leading edge of research and discovery in their fields. Many universities and scientific institutes in the South East undertake collaborative research projects with world-renowned businesses such as Nokia, QinetiQ and Microsoft. The University of Oxford’s global reputation ensures that there is a cluster of R&D activity nearby. In early 2007, the £500 million Diamond Light Source Synchrotron began operations. Located at Harwell, Oxfordshire, the Diamond Synchrotron produces infra-red, ultra-violet and X-ray beams which enable scientists and engineers to delve deep into the basic structure of matter and materials, leading to scientific breakthroughs in the fields of biotechnology, medicine, environmental and materials science. The Rutherford Appleton Laboratory (RAL), based in Oxfordshire employs 1200 staff and provides world-leading research and technology development, space test facilities, instrument and mission design, and studies of science. Much of the laboratory’s work is in collaboration with research groups from the UK and overseas. As an example, collaborations have been set up to support the European Space Agency and NASA.

SEEDA

Science and business parks Science parks provide an environment where large and international businesses can develop relationships with some of the region’s world class centres of knowledge, such as universities, higher education institutes and research organisations. There are eight science parks based in the region, including two with wet laboratories at Sittingbourne Research Centre in Kent and the Begbroke Science Park, part of the University of Oxford. All science parks offer flexible services to both established and start up companies. For more information on their services contact UKSPA, the United Kingdom Science Park Association at http://www.ukspa.org.uk/ Smaller high technology companies in the region are assisted by the Enterprise Hub Network. The Network focuses on entrepreneurial individuals and companies, helping them to bring ideas to market quickly and profitably. The Network is built around a team of commercial experts who can draw on a wide range of specialists to help entrepreneurs and businesses realise their potential. www.enterprisehubnetwork.co.uk Industry sectors Although financial and service sector industries dominate the economy of the region, there is a strong and diverse manufacturing base – in GVA terms, manufacturing in the South East is the highest in the country. Electronics From research to manufacturing, the largest electronic sector in the UK is located in the South East. There are over 2,000 electronics companies employing over 44,000 people, many in scientific and engineering positions. Eight out of the top 10 global electronics companies have operations in the South East and the region has developed particular strengths in electronics systems research, design and marketing covering a wide range of applications from consumer goods to avionics. Electronics companies in the region include LG Electronics, Siemens and Samsung. The University of Southampton has a world class reputation in the field of optoelectronics and the University of Surrey has collaborated with a number of major companies such as Nokia, Ericsson and Sun Microsystems. Other electronics companies in the region include Philips Semiconductors has major design and manufacturing operations and Honeywell UK is headquartered in the Thames Valley. High-Tech Engineering There are over 500 automotive companies operating in the region, with specialisms in motorsport, manufacturing and research and

SEEDA

development. The South East is home to some of the most successful and innovative aerospace and defence companies in the world, and between them they employ over 93,000 people in the sector. Boeing, Thales, BMW and Ford all have operations in the South East. Five formula one teams are based in the region – Williams, Mclaren, Renault, Red Bull and Super Aguri. The Information and Communication Technology (ICT) sector is a success story for the South East with one of the highest concentrations of companies in Europe clustered around the Thames Valley, to the West of London. The region is home to many of the world’s most successful and influential companies and provides an important base for their UK, European or Global client-focused operations. There are 30,000 ICT companies in the region employing around 185,000 people. The South East is the centre of the UK Telecoms industry and home to many of the worlds most successful and influential Telecoms companies. In total there are around 2,160 companies operating in the sector employing approximately 53,000 people. Vodafone, Nokia Microsoft and IBM are located in or near the Thames Valley. Life Sciences South East England is home to the highest concentration of healthcare companies in the UK with over 6,900 companies employing 240,000. Companies include GE Medical Systems and GlaxoSmithKline. Twenty percent of the UK’s medical devices companies are based here and the success of these companies is enhanced by the region’s strong electronics, engineering software and biotechnology sectors. Investment and research in this area is supported by organisations such as Oxford Bioscience. Many leading biotechnology companies have operations in the South East including Takeda, Murex Biotech, and Astellas. Renowned for its expertise and expenditure in research and development, the South East has welcomed the key research and production facilities of global healthcare organisations, including Pfizer, the UK’s largest pharmaceutical company; Genzyme, one of the world’s leading biotechnology companies and Allergan which houses its European R&D and UK sales functions in the region. Aerospace & Defence The UK’s aerospace and defence industry is the largest in Europe with more than 20% market share. It was worth over £27 billion in 2004 and is forecast to grow to over £32 billion by 2009. The South East employs 93,000 workers in the industry and a large proportion of these jobs are involved with research & development. Twenty five per cent of aerospace and defence companies based in the region carry out R&D. Seven of the top ten US aerospace and defence prime companies are located in the region. UK or European HQs based here include Boeing, GKN, Thales, Virgin Atlantic and BAE systems. The region is also

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home to QinetiQ, Europe's largest science and technology solutions company. Financial & Professional Services Many international and UK finance and professional services companies are based in the region, benefiting from a close proximity to London, while avoiding the overheads of an office in the capital. The region’s workforce is made up of highly educated professionals offering essential skills in IT, accountancy, economics, finance and business studies. American Express, HSBC, Lloyds TSB, and Merril Lynch are just some of the key players that can be found in the South East. These companies offer a vast range of financial services, including consultancy, pensions and investments, shares and brokerage, insurance and assurance. Investment capital The availability of investment capital is recognised as a key requirement for growing companies, wherever their location. With its strong regional economy, South East England has a healthy investment environment. Many companies find funding from banks and venture capitalists. The region also has well developed Business Angel networks, for example the Solent Investment Opportunity Network (SION), offering access to a rich source of selected investment opportunities in early stage ventures. The network is primarily for Private Investors or "Business Angels" who can bring experience and contacts as well as capital. Quality of Life In addition to the hard business facts which make the South East a natural choice for inward investment, the region boasts a rich cultural heritage and is steeped in history. Annual outdoor events such as Royal Ascot, Glyndebourne Festival of Opera and the world famous sailing regatta, Cowes Week, combined with scores of museums and theatres; the leisure opportunities afforded by the region are numerous. One third of the region is designated Areas of Outstanding Natural Beauty status or equivalent. Quality of life can be a competitive advantage, as employees of all businesses to enjoy living here. 2012 and beyond The next few years will be particularly exciting in the South East. It will be involved closely with the development of the London 2012 Olympics and will host some events as well as many international visitors. Our development plans for the region will see new and vibrant communities spring up in the Thames Gateway, Milton Keynes and Ashford as part of the Government’s Sustainable Communities Plan which will result in around half a million new homes by 2020. There will be increased transport and travel opportunities opened up by the expansion of Heathrow, the development of Crossrail and new, fast services on the

SEEDA

Channel Tunnel Rail Link. This will all enhance the region’s place as a key global location for business and investors. Business support The South East England Development Agency (SEEDA) was established in 1999 to generate sustainable economic development throughout the South East of England. It is a business-driven organisation that offers professional, impartial, confidential and free advice to companies located or seeking to locate in South East England. Six regional Sector Consortia are open to foreign owned companies. The Consortia are for companies who operate in the same field and are keen to share best practice – and to act in concert to win new markets or compete on a collaborative basis for contacts. These sector groups are the Farnborough Aerospace Consortia (FAC) which works with aerospace and defence companies; Envirobusiness, environmental technologies and services; the South East Media Network (SEMN), for digital and creative companies; Marine South East, South East Centre for the Built Environment and South East Health Technologies Alliance. Much of this support is funded by SEEDA. Since SEEDA began, its International Business activity has attracted or retained 295 companies and created or safeguarded 15,442 jobs. Through Finance South East, created in 2002, companies in the region have been helped to raise over £30 million, and over 4,000 companies have benefited from SEEDA’s Sector Consortia. SEEDA’s International business team The South East is an attractive location for foreign investment and SEEDA provides a free, professional inward investment service to overseas companies. Its international function has teamed up with UK Trade and Industry (UKTI) South East to help the region’s businesses to grow into the global marketplace. UKTI offers solid practical assistance to firms based in the region who are looking to sell their products and services abroad. UK subsidiaries of overseas owned companies can benefit from assistance from programmes like the Overseas Market Introduction Service (OMIS). This Service includes research and analysis of potential new markets for you to trade with. The International Business Team has a strong track record in helping foreign-owned companies establish profitable businesses in South East England to access the European market. The team can save your company valuable management time and money by offering a fully comprehensive inward investment service. SEEDA and business support partners, such as the sector consortia and UKTI, offer an established infrastructure to help businesses achieve

SEEDA

their potential. The region supports substantial business clusters, often led with passion and new ways of thinking by industry leaders and organisations which provide vision and networking for their sectors. SEEDA’s focus on global competitiveness and sustainability aims to propel the South East to its highest level of achievement yet. These are excellent times to locate in the region – why not contact SEEDA and see what can be achieved?” SEEDA’s free services for businesses wishing to locate in the South East include: Working with businesses to define critical location needs Finding real estate or business facilities to match current and future requirements Planning and managing location and expansion projects Introductions to professional service providers including architects, construction contractors, tax advisers, planners, solicitors, bankers and human resources specialists Organising visits to explore opportunities in the region Introductions to component suppliers and sub-contractors Providing support to key team members with immigration, housing, education and relocation issues Assisting with project implementation, delivery and future support

For further information, please contact: Lewis J Scott, Director Trade & Investment, SEEDA & UKTI South East John Rutherford OBE, Inward Investment Director SEEDA Cross Lanes Guildford Surrey GU1 1YA T: 01483 484200 W: www.investsoutheastengland.co.uk

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region proved inspirational from “theThestart, there’s a real passion here

“

for ideas and free thinking. DALE VINCE, FOUNDER, ECOTRICITY, STROUD

SOUTH WEST ENGLAND IS HIGHLY ENTREPRENEURIAL AND ENJOYS THE COUNTRY’S HIGHEST LEVELS OF SELF-EMPLOYMENT OUTSIDE LONDON. SOURCE: ANNUAL POPULATION SURVEY – ONS

southwestengland.co.uk BUSINESS. LIFE. INSPIRATION.

Everything about the quality of life “here is inspirational. It’s definitely

“

helped motivate us to become Britain’s leading organic brand. GRAHAM KEATING, COMMUNICATIONS MANAGER, YEO VALLEY, SOMERSET

WORKERS IN THE SOUTH WEST ENJOY THE UK’S HIGHEST LEVELS OF HAPPINESS, MOTIVATION, ENTHUSIASM AND PLEASURE IN THEIR SURROUNDINGS. SOURCE: 2005 WELLBEING@WORK SURVEY

southwestengland.co.uk BUSINESS. LIFE. INSPIRATION.

South West of England RDA The Right Climate for Business For potential investors, the business case for the South West of England is compelling. Not only does the region tick all of the usual boxes – strong economy, skilled workforce, good transport links, and so on – but it has one crucial advantage over other parts of the UK (and many parts of Europe too) and that is quality of life. The region’s seven counties are consistently ranked among the best places to live in the UK and quality of life in the South West is quite simply outstanding. Happy to be Here For businesses, the benefits of being based in a place where people want to live and work can be measured in terms of easier recruitment, improved retention and greater productivity, amongst other factors. The statistics certainly bear this out. The South West has one of the most productive workforces in the UK. Advanced engineers, for example, are a massive 31% more productive than their counterparts in the rest of the UK. And the combination of world class universities whose graduates who tend to prefer to remain in the South West, plus a constant influx of highly skilled workers from all over the country has given the region one of the most highly qualified workforces in Britain. Thirty seven percent of the region’s employees work in higher level occupations, the greatest of any in the UK. “Surveys consistently show that workers in the South West are, for the most part, happier, more motivated and enthusiastic than employees in the rest of the UK,” says James Harris, Head of Skills at the South West of England Regional Development Agency. “The 2005 Wellbeing@Work survey, for example, revealed that workers here enjoy the highest levels of wellbeing in the country. It doesn’t take a genius to work out the correlation between high job satisfaction and high productivity, which is also a characteristic of this region” Growing Faster It is easy to see, therefore, why the South West has one of the UK’s fastest growing economies, worth around £80 billion. The region generates 9% of the total output of England and its GDP growth outstrips the national average. Exports grew by 34% between 2001 and 2006, above the national rate of 28%. Between 1981 and 2001, the South West’s population grew by 12.5%, faster than anywhere else in the UK. This increase was fuelled almost entirely by inward migration. Already, more than 1500 major international investors have recognised the considerable competitive advantages of basing themselves in the

South West of England RDA

South West and this number is increasing all the time. Paul Ellis, CEO Sifam Fibre Optics sums up the feelings of many: “We get real business benefits from operating our business in the South West… from attracting excellent employees to exporting effectively due to excellent transport links… It’s all here in this beautiful area.” Highly Qualified Stretching from Gloucestershire to Cornwall, the South West is the largest region in the UK with a population of around 5 million. Life expectancy here is the highest for women and joint highest for men in the UK. Healthcare and education are excellent. Sixty two percent of the adult population is currently in employment, providing a total workforce of some 2,205,000. These are some of the most highly qualified workers in the UK. Twenty eight percent of them are educated to degree standard or above and 24% report being in job-related training, higher than just about anywhere else in the country. Spirit of Enterprise “South West England has an independent spirit and fire in the belly. Quite frankly, if I was investing anywhere in the world today, it would be here.” - Tim Smit, Eden Project There is an energy and enthusiasm about the South West that is almost palpable. The spirit of innovation and adventure that began 5000 years ago with the building of Stonehenge is still very much alive today, as evidenced by the incredible transformation of a former china clay pit near the town of St Austell into the Eden Project – a visionary recreation of the climates associated with rainforests, deserts and the Mediterranean, housed inside huge futuristic geodesic domes. The Eden Project is now a major tourist attraction and was recently dubbed the eighth wonder of the world. This same energy helps to ensure that more small businesses succeed here than anywhere else in the UK and the region also enjoys the highest proportion of self-employment in the country. Some of the world’s leading high technology companies – Hewlett Packard, Lucent Technologies, Motorola, Toshiba – have tapped into the South West spirit of enterprise and innovation, basing some of their most important global research and development facilities here. Global Impact Across the region, ground-breaking R&D work is taking place. As well as internationally significant research institutions in the fields of nuclear power, biotechnology, aeronautics, food and drink, water technology and mining, many private companies are developing new technologies that will help to shape all of our lives. OC Robotics, for example, is the world’s leading manufacturer of snake arm robots, at the heart of the South West’s emerging robotics cluster. Managing Director, Rob Buckingham, explains:

South West of England RDA

“Early adopters of snake arm robot technology include the nuclear, aerospace and security industries, but it has considerable potential elsewhere - in the workplace, in the home, in the environment and even inside our bodies.” Brilliant Minds It is the strong links between the region’s universities and leading edge companies that drives the dynamic R&D sector. The University of Bath, for example, has 550 academics and a research budget in excess of £22million. The university supports companies in the research of new products and processes, as well as testing and evaluation. Just a few miles away, the University of Bristol is renowned as one of the UK’s top research universities, with world-class facilities and knowledge. Toshiba’s European research centre is based here, driven by one of the most famous names in world ICT research, Professor Joe McGeehan. Support for Business The South West Regional Development Agency, which is responsible for providing high quality support to businesses and inward investors, has made a commitment to support the development of world-class R&D facilities in the region. Amongst its many investment projects, SWRDA is collaborating in the £300 million SPark Science Park for Bristol and Bath. The science park will occupy 40 hectares and employ over 6000 people. One of its first developments will be the innovation centre, uniting the world class universities of Bristol, Bath and the West of England. The Regional Development Agency is also helping to fund the work of the Peninsula Medical School in the areas of Neuroscience and Clinical Trials. In total the South West is spending around 10% more on R&D than the current UK national average. Core Clusters A key part of the Agency’s remit is to increase the region’s competitiveness by focusing on business sectors with the greatest development potential. In the South West, there are seven core clusters - aerospace, creative industries, food and drink, biomedical technologies, ICT, marine and tourism – along with significant numbers of financial services, real estate and business services organisations. The Agency advises on a range of funding for investors in these and other sectors, including capital grants, the SW Venture Fund and the South West Angels and Investors Network. Aerospace More than 700 companies in the South West of England are directly engaged in the design or manufacture of parts and systems for the aerospace industry, making it Europe’s largest concentration of aerospace-related companies. The industry employs 43,000 people and has an annual turnover of £4 billion. Bristol has been home to many aero engine breakthroughs, including the Olympus 593 for Concorde and the Pegasus engine for the Harrier jump jet. Today the region is

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actively involved in building components for the new Airbus A380. The new Composite Structures Development Centre, based at Airbus, is expected to attract more than £100 million worth of R&D projects in the next five years alone. Creative Industries Wallace and Grommit are unlikely ambassadors for the region but their plasticine faces have helped to focus the eyes of the world on Bristol – officially the UK’s most affluent city after London. Their creators, Aardman Animations – winners of 3 Oscars - are based at the heart of a dynamic Creative Industries cluster which has grown exponentially in the last decade. Scores of independent film production businesses are now located here, alongside the world-renowned BBC Natural History Unit. Creative Industries employ around 144,000 people in the South West and the sector is expanding faster than anywhere else in Britain. Food and Drink The South West’s mild climate and its traditional farming roots make it one of the strongest food and drink producing regions in the UK. A quarter of the country’s entire organic food is produced here and the region has given the world many famous delicacies, including the original and much copied Cheddar Cheese. Today, the region is home to more than 3000 food and drink companies, from international brands to niche producers. The leading research organisations, Campden and Chorleywood Food Research Association are also based here. Biomedical Technologies Biomedical Technologies are one of the region’s emerging success stories. It is difficult to keep pace with the rapid growth of this fast moving sector and the figure of 500 companies employing 15,000 people is increasing all the time. The South West is quickly becoming known as a major centre of biomedical research and new opportunities are emerging all the time for partnering and licensing agreements. St Louis-based Tripos Inc was quick to recognise the benefits of being based in this region and has recently committed a further $22.5 million to a major expansion programme, backed by Regional Selective Assistance and a grant from the DTI. Managing Director of Tripos Discovery Research, Dr Mark Allen comments: “The considerable growth in our business allowed Tripos to consider many locations for this expansion. Our search criteria included both a highly skilled workforce and a locality that would support our expansion requirements. We have been delighted with the high-calibre of scientific personnel that this area can attract, and the great community support that Bude and the South West region have demonstrated.” ICT The exciting discoveries being made in Information and Communications Technology have made this region one of the most

South West of England RDA

important in Europe for the ICT sector. Large multinationals like HP Labs, Orange and Message Labs rub shoulders with specialist players like Clearspeed and Apertio. The South West has its own version of Silicon Valley, in the form of the M4 corridor. This fertile network of forward-thinking companies is driving some of the most important developments in the world today. ST Microelectronics, which is the world’s leading producer of processors and operating systems for settop boxes, recently invested £1.7m in its Bristol site. Phil Morris, Managing Director of ST UK Research and Development, says: “Being part of a cluster of high technology companies means that there is a concentration of talented engineers nearby. Not only can we offer them an opportunity to work on some of the most interesting and ground-breaking projects in our industry, but they can also see that, when they are ready for their next career move, there are plenty of opportunities locally without having to uproot themselves and their family. There is a real sense of community amongst high tech companies in this region and our staff benefit from being part of this, as well as the obvious lifestyle advantages of this part of the UK.” Marine With its 700 miles of coastline and strong naval traditions, the Marine sector is a natural winner for the South West of England. Boat-building and repair services generate a turnover of £1.3 billion and there are some 2700 companies employing more than 32,000 people. Many centres for marine-related research operate within the region. The Met Office, the world’s leading organisation in weather prediction and global climate change which recently relocated here from Bracknell, is conducting research into oceanography and atmospheric science. Nearby, in Plymouth, the Plymouth Marine Laboratory is one of the world’s first truly multidisciplinary marine research centres, contributing to the issues of climate change, marine pollution and sustainability. Tourism and Leisure In a region that has the longest coastline of any in the UK and a fifth of which is designated as an Area of Outstanding Natural Beauty, tourism and leisure are, not surprisingly, a key industry sectors. Twenty three million visitors each year stay in the South West, including more foreign visitors than anywhere outside London. The region’s credentials as a world class tourist destination are beyond question. It has some of the country’s most spectacular tourist destinations, including the Eden Project, Bath, Stonehenge and the Jurassic Coast. Two National Parks, Dartmoor and Exmoor, account for 8.3% of the total land area and nowhere is more than 50 miles from the sea. The region is also considered to have some of the UK’s finest surfing conditions and plays host to national and international surfing championships.

South West of England RDA

Strong and Safe Transport Networks The demands of business and tourism means the South West needs to have a strong transport network. The region is home to two of the UK’s most rapidly expanding airports – Bournemouth, which grew by 46% in 2002 alone, and Bristol, which currently has services to 330 destinations worldwide. Exeter Airport, too, is set to double in capacity by 2008. The South West is served by two motorways, the M4 and M5, and is crossed by a network of some of the safest roads in Europe. Eighty five percent of the UK is within four hour’s drive and the region has fast, direct rail links to London, as well as the rest of the UK and Europe. £951m is earmarked for transport projects to further improve travel times. Well-Connected The South West also benefits from a high speed network of ICT communications, with 100% connectivity. Because the peninsula is the landfall destination for North American traffic to and from Europe, there is already an advanced fibre optic network in place, with more miles of cable than anywhere else in the UK. This has opened the door to more flexible patterns of working, making even some of the remotest parts of the region a viable business proposition. A Magnet for Investors For many inward investors, London is held up as the example against which other regions are judged and, in this respect, the South West has huge competitive advantages. High quality business premises are available at significantly lower rents than the capital and property prices, too, are significantly cheaper than in London and the South East. Labour costs are around 5% lower than the UK average, In the South West, the average commuting time is 22 minutes compared with an average of 55 minutes for central London. And, while employees here are generally more productive, remuneration packages are below the national average. It is easy to see why the South West is such a magnet for businesses from all over the world. All of the usual benefits of the UK – low interest rates, a low rate of inflation and one of the lowest main corporation tax rates in the European Union – combine with the unique lifestyle benefits that only this region can provide. It is a potent mix and one that is helping the South West to emerge as one of the most favourable business locations in the whole of the UK. For more information please contact: Matt Smith, Inward Investment Manager South West of England Regional Development Agency Sterling House, Dix's Field Exeter, Devon EX1 1QA T: 01179 330 262 E: [email protected] W: www.southwestrda.org.uk

South West of England RDA

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Part 1 Economic Overview

1.1 The UK Economy and Investment Environment Jonathan Reuvid and UK Trade & Investment

With its population of over 60 million, the United Kingdom is part of the world’s largest trading entity, the European Union (EU), whose population was enlarged to 456 million from 1 May 2004 following the accession of 10 new members to the previous Western European grouping of 15 states. Two new states, Bulgaria and Romania, were admitted from 1 January 2007, bringing the membership up to 27 and the EU population to 486 million. However, the United Kingdom is also a major market and economy in itself and has the lowest barriers to inward foreign investment in the industrialized world, according to a June 2003 report of the Organization for Economic Cooperation and Development (OECD).

The UK economy in brief The vital statistics of the UK economy are recorded in Table 1.1.1 and illustrate its favourable current performance in comparison with the other US $3 trillion economies of Western Europe and many other EU members.

Growth Gross domestic product (GDP) growth in the United Kingdom in 2006 was 2.6 per cent, another year of positive performance, and is forecast to remain

4

Economic Overview

Table 1.1.1

UK major macroeconomic indicators (per cent)

Economic Growth Consumer Spending (% Change) Investment (% Change) Inflation (CPI) Unemployment Rate Short-term Interest Rate Public Sector Balance/GDP Public Sector Debt/GDP Export (% Change) Imports (% Change) Current Account Balance (as per cent of GDP)

2002

2003

2004

2005

2006a

2007b

2.0 3.4

2.5 2.6

3.2 3.6

1.9 1.3

2.6 2.3

2.3 2.2

0.3

(2.2)

3.3

3.0

5.0

3.0

1.3 5.2 4.0

1.4 5.0 3.7

1.3 4.7 4.6

2.1 4.8 4.7

2.3 5.5 5.1

2.1 5.8 5.5

(1.5)

(3.3)

(3.3)

(3.3)

(3.2)

(3.0)

41.5

42.0

44.0

47.0

50.0

53.0

0.1 4.5 (1.8)

1.2 1.8 (1.5)

3.9 5.9 (2.2)

6.5 5.9 (2.2)

12.0 11.0 (2.5)

5.0 6.0 (2.5)

Source: Coface www.trading-safely.com 9 July 2007. a Estimate. b Forecast.

at the recent trend level of 2.3 per cent for 2007. The UK economy is now in its 11th year of uninterrupted growth and has outpaced those of the Euro area.

Interest rates The Bank of England’s Monetary Policy Committee has raised the interest base rate incrementally to 5.75 per cent from 3.5 per cent in July 2003 when long-term interest rates were at their lowest since the 1960s. Under the present government, the Bank of England has independence to set interest rates to meet the government’s maximum inflation target of 2.5 per cent. Since autumn 2006, the Bank Committee has raised the base rate progressively in a seried of 25 basis point increases as a measure to dampen increasing consumer debt and inflationary pressures, and a further increase to 6.00 per cent is considered likely by 2007 year-end.

Inflation UK inflation remains broady in line with EU averages and the OECD. The longest period of sustained, low inflation since the 1960s is forecast to

The UK Economy and Investment Environment

5

continue. The UK average consumer price index (CPI) rate was 2.5 per cent year over year in May 2007 and is expected to ease to perhaps 2.1 per cent by the end of 2007, marginally below current year interest rates in the United States.

Unemployment Since 1997 the United Kingdom’s long-term unemployment rate has fallen by 75 per cent, with youth unemployment at only 20 per cent of its pre1997 level. The present unemployment rate of 5.5 per cent (May 2007) is significantly lower than the current rates of Britain’s major EU partners, France, Germany, Italy and Spain. Among fully industrialized economies, UK unemployment is bettered only by the United States, Japan, Austria, Netherlands, the three Nordic countries and Switzerland.

Foreign trade The United Kingdom runs a deficit on current account, which is forecast to remain at the 2.5 per cent level through 2007. Both export and import growth strengthened in 2006 to double digits but are forecast to return to 2005 levels in 2007.

Public finances The government’s accelerated programmes to speed up improvements in education, transport and health services have impacted current public expenditure and generated a budget deficit since 2001, which reached 3.3 per cent of GDP in 2003 but eased to 3.2 per cent in 2006 and is expected to decline further in 2007. The deficit is therefore marginally above the Maastricht Treaty criterion level for euro entry.

The inward investment environment The underlying strength of the UK economy is an important factor in its popularity as an investment location. Although services, particularly banking, insurance and increasingly IT, Internet and e-commerce, computer software and shared service operations, account for the largest proportion of GDP, the manufacturing industry remains healthy. In particular, higher value-added sectors like chemicals, pharmaceuticals, aviation, automobile engines and electronics have developed rapidly. Agriculture is highly mechanized, intensive and efficient by European standards, producing about 60 per cent of the nation’s food requirements by employing only 1 per cent of

6

Economic Overview

the labour force. The United Kingdom retains large reserves of coal, natural gas and oil. With its diverse economy, the United Kingdom remains the fifth largest trading nation, accounting for 4.7 per cent of world trade in goods and services combined (World Trade Organization, 2006). Overall, the United Kingdom’s key strengths as an investment location continue to be the City of London with its status as the financial capital of the world; the dominance of English as the language of science, business and the Internet; and the United Kingdom’s research and science base, which makes it the strongest R&D base globally after the United States, although China now ranks second in terms of total R&D expenditure.

Inward investment data For the year 2006/07 a total of 1,431 successful inward investment projects generating 36,526 new jobs were recorded by UK Trade & Investment, an increase of 17 per cent over 2005/06 in the number of projects. The investments also safeguarded a further 41,000 jobs. The projects are analysed by investing country in Table 1.1.2. There are now 49,446 corporate inward investors in the United Kingdom of which 44 per cent are from Europe and 30 per cent are US companies. The United Kingdom remains the first destination in Europe for inward investment and globally second only to the United States. The United States continues to be the source of the largest number of inward investment projects to the United Kingdom while France is the largest source of projects

Table 1.1.2 UK inward investment projects by investing country (2006/07) Projects USA France Canada Japan Germany Australia India China Ireland Netherlands Sweden Rest of EU Rest of the World Total

540 95 82 80 75 74 69 52 43 34 30 103 128 1, 431

Source: UK Trade & Investment Annual Report 2007.

New Jobs 13, 326 3, 025 1, 687 2, 786 2, 694 947 5, 130 869 1, 377 842 606 1, 808 1, 172 36, 526

The UK Economy and Investment Environment

7

from the EU. The number of investments from China has almost doubled. The United Kingdom is increasingly seen as the preferred springboard to the EU. The number of foreign companies choosing to invest in the United Kingdom was a record for the third year running since 2004/05. Overall, 42 per cent of the projects were new investments, 23 per cent were expansions of earlier investments and the remaining 35 per cent were mergers and acquisitions (including joint ventures). In terms of operation type, services activity accounted for about 41 per cent and manufacturing sector projects rose five per cent overall. About two-thirds of all inward investors were companies engaged intensively in innovation or R&D. A record of more than 200 companies established headquarter operations in the United Kingdom in the past year. Among the specific business and industry sectors, the largest number of projects (19 per cent) were in software, significantly up on 2005/06, followed by business services (11 per cent) and information and communications technology (ICT) (10 per cent). Other significant sectors in the 2006/07 count were life sciences, financial services, advanced engineering, environmental technology and the creative and media industries.

Benefits of the United Kingdom for inward investors In 2004 KPMG analysed cost advantages/disadvantages of 11 countries relative to the United States in a 10-month research programme that measured the combined impact of 27 significant cost components in 98 cities. The basis for comparison was the after-tax cost of start-up and operation for 17 specific businesses over a 10-year time horizon and the findings were published in its Competitive Alternatives Report. The United Kingdom was judged to be the most competitive in Europe, in terms of both business costs advantage (2.4 per cent) and manufacturing costs (2.5 per cent). Italy was the second most competitive country on business costs and Luxembourg on manufacturing costs. The Netherlands and Germany were found to suffer considerable cost disadvantages against the United States. There are five main reasons why the United Kingdom is the most favoured inward investment location in Europe and attracts around 40 per cent of Japanese, US and Asian investment into the EU: • The United Kingdom’s openness and flexibility to job-creating new investment. The United Kingdom’s open-borders approach attracts quality investment – in offshoring and in many other sectors. With its leadership in deregulating markets and opening them to international competition (eg in financial services), the United Kingdom encourages and fosters technological and commercial innovation. • The United Kingdom has a skilled, well-motivated and adaptable workforce of 28 million and high standards of education with a strong

8

Economic Overview

emphasis on vocational education and training. Labour market regulations in the United Kingdom, including working hours, are the most flexible in Europe, and staffing costs remain highly competitive. In the past two decades the government has addressed the structural imbalances of the economy by greatly reducing public ownership and, until recently, containing the growth of the social welfare programmes. The United Kingdom maintains a reputation as one of the world’s best locations for international students. • The United Kingdom has a strong science and technology base with worldclass design, research and development disciplines. Many UK universities and scientific institutes take part in collaborative research projects with businesses. The United Kingdom is committed to simplifying science funding in order to maximize its impact. • The business environment is focused on providing the right conditions for companies of all sizes to grow in the United Kingdom and innovate and compete in global markets. Financial incentives are available for companies setting up in certain areas of the United Kingdom and finance is provided for early-stage companies with real growth potential. More generally, the United Kingdom now has a competitive main corporation tax rate among major industrialized countries (lower than for Germany, Italy, France, Spain and Belgium), and there are no additional local taxes on profits. (Pending changes in the tax treatment, dividends repatriated from overseas subsidiaries will provide an additional incentive to inward investors.) In terms of infrastructure, the United Kingdom has a telecommunications industry that is among the world’s most advanced. The United Kingdom’s integrated transport network provides fast, lowcost delivery throughout Europe. Every location in the United Kingdom is within 100 miles of a container port. The Channel Tunnel links the United Kingdom by road and rail to the rest of Europe, bringing both Paris and Brussels only three hours from London by rail. •

In European Cities Monitor 2006, the survey conducted by Cushman & Wakefield, Healey & Baker, London is ranked first among European cities as the best business centre and has held that ranking for the past 14 years.

Further reading UK Inward Investment 2006–2007, an annual report by UK Trade & Investment, available at www.uktradeinvest.gov.uk.

1.2 The United Kingdom and the European Union Jonathan Reuvid

The European Union (EU) is now the most important market for UK exporters, accounting for around two-thirds of the United Kingdom’s foreign trade. The ratio represents a dramatic change in the United Kingdom’s economy from 1972, the date of its passing of the European Communities Act, when most of its markets were beyond Europe, mainly the Commonwealth countries of Australia, New Zealand, Canada, West and East Africa and the Caribbean. This transformation in the orientation of the UK economy is the direct result of EU membership and the resultant changes to the way in which the United Kingdom does business have been far-reaching.

EU law In terms of trade, commercial regulations and most areas of the law, in particular competition law, the United Kingdom is bound by EU law, which prevails over UK law and takes the following four forms: • Treaties that are binding on member states and EU institutions. • Regulations also binding on all member states that do not require any implementation or adoption by national parliaments. • Directives that are binding but leave a member state to choose how the required result will be achieved. In the United Kingdom, the alternative methods are an act of parliament or delegated legislation.

10

Economic Overview

• Decisions of the European Court of Justice of the Communities, which are binding on the highest courts of member states (the House of Lords in the case of the United Kingdom) in their entirety. Areas of regulation in which the United Kingdom does not conform to EU law or practice are taxation and labour law where the government negotiated exclusions in the Maastricht Treaty.

EU grants, incentives and business support UK investment incentives and regional support programmes are tailored within EU parameters and the programmes administered from Brussels by the European Commission. The range of various schemes available to inward UK investors and programme rules are complex. Chapter 2.2 provides an outline description and some insight into the complexities.

The Eurozone The United Kingdom has not joined the European Monetary Union (EMU), which came into being with effect from 1 January 1999. The forebodings for the impact on sterling and the UK economy expressed at the time have not been realized. UK importers and exporters have learnt to trade in the euro as a matter of routine, and the City of London retains its domination of financial markets despite fears that the centre of gravity would move to Frankfurt. Only Denmark, Sweden and the United Kingdom of the then EU15 have held back from the Eurozone. Both Denmark and Sweden have rejected the euro through national referenda. The prime minister, in his former role as UK Chancellor of the Exchequer, has established criteria for judging whether the UK economy is sufficiently aligned to the Eurozone but there is no shortterm prospect of the United Kingdom holding a national referendum on this issue or joining. In fact, even before the present political uncertainties arose, the relatively good performance of the UK economy had complicated the case for joining the Eurozone. Public opinion polls continue to show a majority of Britons opposed to participation.

The EU constitution Of more concern is the divisions that opened up among members of the EU following clear rejections of the draft European Constitution by the citizens of France and the Netherlands in national referenda held at the end of May 2005. Although the draft had previously been signed by all state governments at the Council of Ministers at the endof 2004, rejections had been forecast in both polls. Previously, the constitution had been approved by

The United Kingdom and the European Union

11

Spain in a national referendum and ratified by the German Parliament, so that the differences of opinion lie at the core of EU membership. As a result other countries, including the United Kingdom, have made it clear that they will indefinitely defer planned referenda or parliamentary ratifications. As a result, debate on the European Constitution in its original form was halted but the topic was returned to the EU Council of Ministers agenda during the German Presidency of the United Kingdom in the first half of 2007. One option to a formal European Constitution, currently under discussion, is a treaty incorporating some key elements of the orginal draft, which could be approved by member state parliaments without recourse to referenda. At the core of a longer-term debate are the contrasting visions for the future of the EU as a more integrated political entity based on the original social model of its founders, or as primarily an outward-looking economic and trading entity as advocated by the United Kingdom.

1.3 Trade Information for Investment Decisions Roy Chegwin, Editor of Export Focus Magazine

Sound investment decisions are usually a mixture of in-depth research and evaluation of what has gone before as a base for predicting what will happen in the future. For any organization looking to invest in the United Kingdom, the trade statistics from the website of the UK government department HM Revenue & Customs are an invaluable source of background information. Holding statistics on both imports and exports for a period of five years, the website can help paint a picture of any sector, highlight trading and investment opportunities. The primary use of the data available on the HM Revenue & Customs website, www.uktradeinfo.com, is to provide market intelligence that can help identify trade opportunities both into the United Kingdom and from the United Kingdom. The trade data can provide market share information, highlight growth areas, help forecast trends and analyse patterns. Because the information is sourced from the official documentation submitted with every import and export consignment, it is robust and reliable and also the most up-to-date data available anywhere. The website features a very efficient search facility enabling users to drill down to the very key information they need to investigate a market. So, for instance, a company in the air-conditioning business can research imports and exports right down to specific product sectors. Table 1.3.1 shows imports and exports of air-conditioning machines between the major regional markets during 2004, measured in sterling. These data can also be analysed by quantity, can be tracked over any period up to five years, can be downloaded to Excel and converted to chart form. Further interrogation of the database could result in detailed information on the import and export of specific types of air-conditioning units to individual countries.

Trade Information for Investment Decisions

13

Table 1.3.1 Foreign trade in air-conditioning machines between major markets – 2004 [Under ‘Total’ covering first 2 columns add ‘air-conditioning machines’. Ignore all data to right of first four columns] Pounds Sterling

Pounds Sterling

Year to date

Year to date

Total Imports

Total Exports

Total Imports

Total Exports

8,225 4,500 136,071

47,786

10,031

2,808

CANADA GREENLAND MEXICO ST PIERRE-MIQUE PUERTO RICO USA

Table 1.3.1 shows general information on one product (air-conditioning machines) and a subsector of that product group. More detailed information by country is also available. The website is a very sophisticated tool that can satisfy the requirements of everyone from entrepreneurs to statisticians. As well as being available free of charge, the website is extremely user-friendly, right from the Home Page where you are invited to click on a number of options including Latest News and the intriguing ‘Stat Facts’, a scrolling list of topical information. Figure 1.3.1 represents the data shown earlier converted to a graphic format. This exercise has illustrated a very simple example, but the key is that as users become more familiar with the data available on www.uktradeinfo.com, they can select and manipulate the information to suit their requirements in terms of product and period. Consequently, they can analyse import and export levels of any product to monitor and see trends over any period in the last five years. Users can construct their own data sets

Canada Greenland Mexico

150000

15000

100000

10000

50000

5000

0

0

St Pierre-mique Puerto rico USA

Figure 1.3.1

Foreign trade in air-conditioning machines (2004)

14

Economic Overview

and compile charts that help them to visualize the situation. Clearly, these charts can be also be used in presentation material. The website provides other benefits to users. The e-mail alert facility allows users to opt-in to receiving regular information from a range of sources on selected subjects of interest. The website can also be used to access a regularly updated database of 130,000 UK importers – a very useful marketing tool for anyone looking at the United Kingdom as a potential market. For many organizations, the statistics available from www.uktradeinfo. com can become an essential part of their investment planning. Statistics are vital to any investor. They are the confirmation of fact that takes commercial decisions beyond opinion. Very often statistics do that basic and valuable job – they confirm what is commonly believed – but it is still essential to have that information. However, sometimes statistics throw up surprises and challenge popular conceptions, and when this happens opportunities can arise. Whether the website is used to evaluate market share, to prospect for investment opportunities or simply to be better informed about global markets, users will not be disappointed with the ease of access and the breadth of information. It is a source of valuable information and interesting information too, such as the fact that of all the 4,894 tonnes of Brazil nuts the United Kingdom imported in 2003 only 0.6 per cent came from Brazil.

Part 2 Investment and Start-up Considerations

2.1 Overview for Inward Investors Jonathan Martin and Anna Halliday, Watson, Farley & Williams LLP

Introduction The United Kingdom is Europe’s most favoured jurisdiction for inward investment – that is, the investment of money from an external source into a region – attracting about a quarter of all direct investment in the European Union (EU).1 Once established in the United Kingdom, foreign-owned companies are treated no differently from UK firms. The attractiveness of the United Kingdom as a place to invest continues to grow – between 1998 and 2002, the amount of inward investment into the United Kingdom grew by approximately 48 per cent, reaching US $170 billion in 2006,2 the highest figure of any European country and second only to the United States.3 In London alone, inward investment accounts for 27 per cent of the economy and 13 per cent of all jobs are held in foreign-owned firms, according to a report published by Think London in 2007. There are many reasons for investors and businesses to choose to invest or establish a presence in the United Kingdom, which include the following: • sophisticated infrastructure and telecommunications; • position as the world’s leading financial centre; 1 Doing Business in the United Kingdom: A Country Commercial Guide for US Companies – 2006 US Commercial Service, Chapter 6. 2 United Conference on Trade and Development. 3 Organization of Economic Cooperation and Development statistic.

18

Investment and Start-up Considerations

• recognized and respected legal system; • financial incentives and tax environment; • stable political environment; and • skilled workforce. What are the main points to consider when deciding whether to establish a business presence in the United Kingdom? Once a business has chosen to establish a presence in the United Kingdom, there are a number of issues, in addition to other broader commercial issues, that need to be considered by an inward investor, including the following: 1. What type of entity should I choose? 2. What will the tax treatment be on my investment? 3.

How do I go about employing people in the United Kingdom?

4.

Is the United Kingdom a good place to raise finance?

5. Which type of premises do I need for my investment? 6. What if my business becomes involved in a dispute?

Factors to consider when establishing a presence in the United Kingdom Type of entity to be chosen There are a number of entities or arrangements that may be chosen when establishing a business presence in the United Kingdom, including trading partnerships, limited liability partnerships, agency arrangements and European Economic Interest Groupings. However, the most common arrangements chosen for those investing or establishing a presence in the United Kingdom are as follows: • a UK company (which may be a subsidiary of the overseas presence); • a branch; and • a place of business. UK companies, branches and places of business are all regulated by the Companies Act 1985 (as amended by the Companies Act 1989). Companies House, operated by the Registrar of Companies, is the key government organization that coordinates the registration and administration of businesses in the United Kingdom.

Overview for Inward Investors

19

Whenever a business establishes a presence in the United Kingdom through a company, a branch or a place of business, a number of consequences will flow, which will to some extent vary with the form or presence chosen, but will include obligations to file certain documents at Companies House and to submit tax returns to HM Revenue & Customs. The Companies Act 2006, which received Royal Assent on 8 November 2006, will alter the regime that is described in this chapter. However, the new act is not due to be fully implemented until 1 October 2008 and accordingly the information below reflects legislation in the United Kingdom as at the date of publication. (a)

Establishing a UK company

The most common method for establishing a business presence in the United Kingdom is through the incorporation of a UK company. The company may be incorporated as a wholly owned subsidiary of the non-UK parent entity or by one or more individuals. The company will have its own legal personality as an entity separate from its parent undertaking or individual shareholders, and will therefore be able to enter into contracts and otherwise to operate in its own name. It will be a limited liability entity, with the liability of its shareholders being limited to the amount of its issued share capital. In certain cases, the best way to develop a presence in the United Kingdom may be to partner with experienced and established local representatives or undertakings through cooperation or joint venture arrangements, which will often be through a UK company as the joint venture vehicle. For further discussion on joint ventures, reference should be made to Chapter 3.3. In order to establish a UK company, certain documents must be filed with Companies House, including the company’s constitutional documents: the ‘Memorandum and Articles of Association’. Depending on the nature of the company’s business going forward, standard documents may be adopted or these can be tailored to specific requirements (for which a solicitor’s advice should be sought). Once the constitutional documents have been finalized, these and other incorporation documents are filed at Companies House and a certificate of incorporation and an incorporation number are issued. It can take as little as a day to register a company at Companies House. (b)

Establishing a branch or a place of business and the differences

As an alternative to incorporating a UK company, a non-UK business may instead simply establish a branch or place of business in the United Kingdom. An overseas company is required to register at the Companies Registry in Great Britain if the company’s presence has some permanence, whether through the establishment of a branch or a place of business. As mentioned above, the Companies Act 2006 (due to be fully implemented by 1 October 2008) will alter the regime described in this section. At the

20

Investment and Start-up Considerations

time of publication, the Department for Business, Enterprise and Regulatory Reform (DBERR) had not yet announced the date on which the sections relating to branch offices of overseas companies would be implemented.

Establishing a place of business Whether the presence of a non-UK business amounts to a branch or merely a place of business will depend on the nature and extent of that presence. A presence will not amount to a branch and may instead be a place of business, if the only business carried on at that place is ancillary or incidental to the company’s business as a whole. Such incidental operations include the following: • warehouse facilities or administrative offices for the company; • internal data processing facilities; and • performing local representative functions for the overseas company. However, the presence of administrative offices is likely to constitute a business’s UK presence as a branch particularly if there is a management presence and the office is equipped to negotiate business with third parties so that such third parties do not have to deal directly with the overseas company but may transact business at the local office. This is important for both company law and taxation purposes since both the UK registration requirements and the UK taxation implications will depend on whether or not the UK presence constitutes a branch or a place of business/representative office. It will therefore be necessary to consider very carefully whether or not the UK presence is, in fact, likely to constitute a branch rather than a place of business/representative office.

Establishing a branch A non-UK business may need to establish a UK presence through a branch. A branch may be the preferred entity where the investor does not wish to form a separate legal entity in the United Kingdom, but wishes to carry on operating in the United Kingdom, which will take the presence beyond a mere place of business. The essential features of a ‘branch’ that distinguish it from a ‘place of business’ and give rise to an obligation to register as a branch are as follows: • the appearance of permanency; • the presence of managers at the branch premises; and • the ostensible capacity of the branch personnel to conduct business with third parties on behalf of the company.

Overview for Inward Investors

21

A UK branch will usually conduct some or all of the trading activities of the non-resident company in the United Kingdom. For commercial reasons, limits may be placed on the extent of those activities, to ensure that the branch is permitted to conduct only some of the non-resident company’s trading activities or so that it performs a local service function and is not allowed to enter into binding obligations in the name of the company. When deciding which type of entity would best suit an investment in the United Kingdom, the ability to mitigate tax is usually an important consideration. The different tax treatments of companies, places of business and branches are discussed in the following section.

The tax treatment on investment The format chosen for establishing a business presence in the United Kingdom will vary according to the taxation implications as well as the commercial considerations and objectives of the principals involved. The basic principles of UK corporation tax and the taxation consequences of each format are briefly set out below. A comparative summary is also made of the relative advantages and disadvantages of a UK subsidiary and a UK branch, since they are the two formats most often chosen. When deciding which entity would be most suitable for an inward investor, it should be noted that the tax implications of establishing a company, branch or a place of business/representative office in the United Kingdom may vary significantly. (a)

Subsidiary

A company incorporated in the United Kingdom will generally be regarded as resident in the United Kingdom for tax purposes, and will consequently be liable to pay UK corporation tax on its profits, unless it is treated as being resident outside the United Kingdom under the provisions of any applicable double tax treaty (eg as a result of the ‘effective management’ of the company being located in a treaty jurisdiction). In the United Kingdom, local and foreign-owned UK resident companies are taxed alike. Inward investors may have access to certain regional grants and incentives that are designed to attract industry to particular areas of the United Kingdom, but no tax concessions are granted. The principal corporation tax rate is currently 30 per cent, with small companies being taxed at a rate of 19 per cent. It was announced in the 2007 budget that the principal corporation tax rate is set to decrease to 28 per cent from tax year 2008/09 and the small companies’ corporation tax rate is set to increase to 20 per cent in tax year 2007/08, to 21 per cent in 2008/09 and to 22 per cent in 2009/10. Capital allowances may be claimed by companies within the charge to UK tax on capital expenditure incurred on certain types of assets (eg machinery and plant) used for a qualifying purpose (eg a trade). Once claimed, capital

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allowances can be set against taxable income when calculating the company’s liability to UK tax. The United Kingdom has a simple system of personal income tax, with one of the lowest top marginal rates of any EU country: 40 per cent (the higher rate). The other income marginal tax rates in the United Kingdom are 10 per cent (the starting rate) and 22 per cent (the basic rate). It was further announced in the 2007 budget that the starting rate of income tax is to be removed for earned income and pensions from 2008/09 but will remain for savings income and capital gains. The basic rate of income tax is to be reduced to 20 per cent, from tax year 2008/09. There is also a National Insurance System into which taxpayers make mandatory payments. This funds social security and retirement benefits. (b)

Branch

The profits attributable to the UK activities of a UK branch of an overseas company (a permanent establishment) will be liable to UK corporation tax, subject to the terms of any relevant taxation treaty. (c)

Place of business/representative office

Provided that the activities of a UK representative office are sufficiently limited so as to not constitute a permanent establishment, an overseas company should not suffer UK tax on profits as a result of the involvement of a UK representative office. Whether an office constitutes a permanent establishment is a question of fact. In order for a representative office to avoid a UK tax charge on the profits generated from sales where the UK representative is involved in procuring those sales, the overseas company must ensure that its UK representative does not have, for example, the power to enter into substantive negotiations with potential customers or to conclude sales/services contracts on its behalf. If it does have such power or in fact does undertake such activities, the representative office could be treated as a permanent establishment of the overseas company and be subject to UK taxation on any profits attributable to the UK activities of the representative office. Since the taxation implications are complex it is advisable to seek more detailed tax advice from a solicitor specializing in UK tax on the particular requirements for establishing a UK presence.

Employing people in the United Kingdom Businesses wishing to establish a presence in the United Kingdom have various options in relation to their staff. These, along with connected immigration issues and requirements, are discussed in more detail in Chapters 4.3 and 4.7. The purpose of this section is to introduce the reader to the nature of the UK workforce.

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The relatively strong performance of the UK economy is reflected in its employment data. As of December 2006, the number of people in work in the United Kingdom had reached a record 31.58 million, and the unemployment rate was 5.5 per cent.4 The UK workforce continues to increase due to an influx of workers from the new EU member states in Eastern Europe. Much of the employment legislation currently affecting the United Kingdom workforce market originates from the European Commission in Brussels. EU regulations affect working patterns, wage structures and employee protection rights. For example, the European Working Time Directive creates an entitlement to minimum daily and weekly rest periods, an average workweek limit of 48 hours and restrictions on night work. It also entitles workers who meet the qualifying criteria, including part-time and seasonal workers, to a minimum of four weeks annual paid holiday, including eight national bank holidays. As it has implemented EU directives, the UK government has been proactive in trying to maintain its flexibility and competitiveness. For example, it has negotiated a special provision under the Working Time Directive that allows employees to opt out of the workweek limitations and has favoured changes to the rules on temporary workers. The UK government has adopted the EU regulations governing the admission of non-EU business visitors and economic migrants to the United Kingdom, which limit the ability of some foreign nationals to reside in the United Kingdom. The categories of persons adversely affected, to a lesser or greater extent, by the new immigration rules are selfemployed persons, retired persons of independent means, business investors and short-term business visitors. Entry may be denied to those who intend to perform productive services unless a work permit has been issued in advance to their employer. The determination of who may be admitted as a consultant is decided on a case-by-case basis at ports of entry.

Raising finance The City of London is widely regarded as the leading financial centre in the world. London offers a huge variety of financial services, including commercial banking, investment banking, insurance, venture capital, stock and currency brokering, fund management, commodity dealing, accounting and legal services, electronic clearing and settlement systems and bank payments systems. London is attractive to inward investors because of its solid regulatory, legal and tax environment, a supportive market infrastructure and a dynamic and highly skilled workforce. 4

National Statistics: Labour Market Statistics First Release – April 2007.

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UK government policies are intended to facilitate the free flow of capital and to support the flow of resources in the product and services markets. Inward investors are able to obtain credit in the local market on normal market terms, and a wide range of credit instruments is available. The principles involved in legal, regulatory and accounting systems are transparent, and they are consistent with international standards. In all cases, regulations have been published and are applied on a non-discriminatory basis by a single regulatory body, the Financial Services Authority. The London Stock Exchange (the Stock Exchange) is one of the most active equity markets in the world, combining its robust and liquid nature with a high degree of integrity. An increasingly popular forum for inward investment into the United Kingdom, particularly for smaller companies, is the Stock Exchange’s Alternative Investment Market (AIM), which is examined in Chapter 3.1.

Real estate The United Kingdom has one of the most dynamic and transparent property markets in the world, with a wide range of property options and flexible short-lease arrangements. For inward investors in the United Kingdom, one of the first decisions to make regarding real estate is whether to rent premises or to buy premises. There are no restrictions on overseas companies either buying or renting property in the United Kingdom. (a)

Renting or leasing

Companies can either rent premises that are already available or enter into what is known as a ‘pre-let’. This is an agreement with a developer to lease premises before construction is completed, enabling prospective tenants to specify the design, layout and fittings of the building. Commercial leases in the United Kingdom typically run for 15 years with reviews every 5 years, although shorter terms are becoming more common. It may be possible to negotiate ‘break clauses’ at set times throughout the lease (enabling the occupier to serve notice to vacate the premises). The majority of leases on commercial premises in the United Kingdom are let on ‘full repairing and insuring terms’, which places the responsibility and costs for all upkeep, decoration and repairs onto the tenant. In addition, most leases over three years in length will have a provision to increase the rent in line with the market conditions at predetermined points throughout the lease. The standard clause allows for ‘upwards-only’ rent reviews at fiveyearly intervals (this means that should the market rent rise, so does the rent payable but the rent payable does not come down should the market fall). Businesses selecting the leasehold property option must also pay ‘stamp duty land tax’, which is calculated using the ‘net present value’ of all rental payments due over the term of the lease.

Overview for Inward Investors

(b)

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Buying

Buying property in the United Kingdom is a straightforward process and, importantly, there are no restrictions on overseas companies buying real estate. In addition to the price of the property, purchasers must also pay stamp duty land tax based on the size of the transaction and the location of the property and Land Registry fees will also be payable on a purchase, and in some circumstances on a letting. Companies purchasing or leasing property should appoint an agent to represent them and expect to pay legal fees – which incorporate conveyancing fees, costs for local authority searches and bank transfer fees. An experienced property solicitor is typically necessary to assist in the preparation of all required legal documentation. (c)

Location

London may be the obvious choice for most investors establishing their business in the United Kingdom. London has been voted Europe’s most internationally accessible city, with its proximity to the EU and excellent communications. However, running an office in London can be expensive and some businesses may prefer to locate elsewhere in the United Kingdom. As the legal and tax regulations do not tend to vary between locations in the United Kingdom, the considerations when choosing a location are primarily practical: physical geography, communications and labour and transport to name but a few.

Dispute resolution Disputes in the United Kingdom are generally resolved through litigation in the UK courts or by arbitration or mediation. As a strong centre for legal services, up to 5,000 international disputes a year are determined in London.5 The United Kingdom is a member of the International Centre for Settlement of Investment Disputes and, as such, accepts binding international arbitration between foreign investors and the state. Bilateral investment treaties (BITs) have been used as a means of protecting international investment and ensuring a more predictable and fair treatment of investors. The United Kingdom is party to 94 BITs that are currently in force.6 A key feature of most of these BITs is investor – state dispute settlement providing rights to those investing in the United Kingdom 5 A Country Commercial Guide for US Companies: 2006 – US & Foreign Commercial Service and US Department of State. 6 DTI article: http://www.dti.gov.uk/europeandtrade/key-trade-issues/investment/page22718.html.

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to seek redress for damages arising out of alleged breaches of investmentrelated obligations by the UK government. Key elements include provisions for equal and non-discriminatory treatment of investors and their investments, compensation for expropriation, transfer of capital and returns and access to independent settlement of disputes. Investors should be aware that litigation in any jurisdiction can be an expensive and lengthy process, but the maturity of the UK legal system, along with its inbuilt investor protection, goes some way in alleviating these drawbacks.

Conclusion For the wide variety of reasons discussed throughout this chapter, the United Kingdom continues to be attractive to overseas businesses and inward investors. The United Kingdom has a legal system recognized worldwide, which, along with its talented and varied workforce, makes the United Kingdom a sensible choice as an investment location.

2.2 Grants and Incentives within the United Kingdom John Devonald, PNO Consultants Ltd

Introduction Thousands of different grant schemes, worth well in excess of £5 billion each year, are dangled in front of companies in the United Kingdom in an attempt to encourage, amongst others, innovation and economic development. Any enterprise looking to invest in the United Kingdom has the potential to access these financial incentives, which can be quite considerable and are certainly worth exploring further before deciding where to locate an investment. Although the United Kingdom has to compete with other locations in the world, especially Eastern Europe, the United Kingdom also has a lot to offer companies that are willing to invest. When obtaining grants, emphasis is placed on high value-added businesses and novel industries or manufacturing sites that will offer a nationwide service, regardless of where the head office is based. Different types of grants and incentives are there to persuade companies to favour an investment in the United Kingdom.

Available grants and incentives Besides grants, subsidies are also available in the form of tax relief and soft loan facilities. To find out what support is available in specific regions, companies can contact the United Kingdom’s extensive network of Regional Development Agencies (see www.dti.gov.uk). Although on average there are

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over 1,500 funding programmes available in the United Kingdom, the most interesting ones for companies can be categorized into the following four different themes: • capital investments in specific regions that create or safeguard jobs; • innovation; • energy/environment; and • training.

Capital investments While government funding schemes are often purpose and sector specific, depending on the areas that the government is particularly interested in supporting, location is the most important factor for companies looking to invest into the United Kingdom, as locating in certain areas will make them potentially eligible for the most lucrative and the greatest number of grants. In addition to the European Union (EU)’s designated ‘Objective’ areas referred to below, the UK government provides support through the discretionary Selective Finance for Investment (SFI) in England and Regional Selective Assistance (RSA) to the Assisted Areas of Scotland and Wales. Companies locating in Northern Ireland are eligible to apply for grants and incentives that are not available to companies in other parts of the United Kingdom. These areas, defined in the Assisted Areas Map on the Regional Investment website (http://www.dti.gov.uk/files/file38642.png), are designed for companies in the industries that supply national and international markets rather than a local area, and manufacturing sectors that are planning expansions, modernizations or rationalizations, or investing in the United Kingdom for the first time. For overseas companies investing in the United Kingdom where they qualify for SFI or RSA, the amount of funding that they can receive ranges from tens of thousands to millions of pounds. These schemes cover the cost of new buildings, plant or machinery. This scheme is delivered by the Regional Development Agencies, although in cases where the total requested grant exceeds £2 million, the grant is administered by the Department of Trade and Industry (DTI). The scheme is designed for projects that provide employment opportunities and increase regional competitiveness and prosperity, with the amount offered depending on the needs of the project, the number of jobs safeguarded or created and the impact the project will have on the economy. The amount provided and the terms of this assistance are generally negotiated as the minimum amount that would ensure that the project can go ahead. The United Kingdom’s ‘Objective’ areas were considerably reassessed with new area boundaries laid out for the start of 2007, and these will remain in place until 2013. Therefore, potential investors should check carefully for up-to-date information on supported locations.

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Certain local authorities in England, Scotland and Wales also offer financial assistance through grants or special loans and even venture capital, and all local authorities can be important sources of general support, for example, location searches. The EU also provides assistance in the form of low-interest-rate loans from the European Investment Bank (EIB) that can cover up to 50 per cent of the cost of eligible projects.

Innovation Many schemes within the United Kingdom focus on innovation, from ‘blue sky’ research to novel development on a product level. The key eligibility criterion for all schemes is that each innovation has to be new to the industry. Although a lot of companies have made use of the R&D tax credit scheme since its launch in 2000 for small and medium-sized enterprises (SMEs) and in 2002 for larger companies, a significant percentage is underspent and companies can improve their tax benefit by adopting a structural approach when making use of this scheme. The relatively new DTI scheme for Collaborative Research has been very successful. It is envisaged that each year there will be two calls (with multi-million-pound budgets) for proposals. Each new call will focus on different themes. Grants for Collaborative Research projects could be up to 75 per cent and could be worth up to £3 million. Another source of funding for SMEs is the Grant for R&D scheme, which provides funds of up to £200, 000 (£500, 000 for exceptional projects) for new products and process development projects, as well as interest-free loans for environmental initiatives and projects that help reduce operating costs.

Energy/environment Sustainable development is another key target area of the UK government, in which first movers and innovators are incentivized. Both research into new technologies and investment in state-of-the-art technology could be eligible for different types of grants and incentives. There are also EU-funded projects that can provide support towards the initial European demonstration of a novel technology that has significant environmental advantages to society. The total grant awarded is between 30 and 50 per cent of project costs.

Training Training or retraining of employees is of eminent importance to keep the workforce up to speed in rapidly changing environments. In some areas within the United Kingdom, these types of training courses may be eligible for public funding. Focus is on training for personnel below NVQ level 2 or minority groups such as asylum seekers.

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The application process Thorough preparation is the key to success in applying for grants. Conducting research and networking with specialists and/or grantor bodies before an application is submitted is a very important part of the application process. Application processing times differ significantly from scheme to scheme, with timescales anywhere from three weeks to up to two years. For investment grants, it is more likely to be in the region of three to four months, so enterprises need to account for this in planning and provide for possible contingencies. One golden rule that is easily overlooked is that application for funding needs to be made in advance of making an investment, as applicants need to demonstrate that the project will not go ahead without this financial assistance. The amount of assistance rarely equates to more than 50 per cent (although 10 to 20 per cent is more common for investment projects) of the eligible project costs, and will be determined largely by negotiation, during which all companies are treated equally, irrespective of their home nation base. There is no guarantee that an application will succeed, regardless of its merits, as UK grants are discretionary, meaning that they are awarded on a case-by-case basis and, more commonly, on a competitive basis. It is therefore of vital importance to ensure that the application is of the highest quality so that it stands out against the competition. It is also prudent to maximize the chances of success by developing a total grants strategy, rather than pinning everything on just one application. Sectors that currently attract the most funding include agriculture, food services, manufacturing, chemicals, waste management, bioscience, aerospace and ICT, while pet projects the government bodies are currently seeking to encourage are those involving energy, transport, the environment, education, research and development activities and training.

Assistance with applications Very few companies possess the specialist knowledge or experience required to handle complicated grant applications successfully. The wiser operations choose to maximize the opportunities while minimizing the hassle, especially in applying for the larger schemes, by calling on external expertise. Support advice and providers can be found through the UK Government Business Link network. There is also a sprinkling of grant consultants, mainly oneor two-man bands, but their reputation has been tarnished in the past by the actions of a handful of cowboys who have charged large upfront fees and ended up delivering little, if anything, in return. In continental Europe, where grants appear to be taken far more seriously than in the United Kingdom, many larger organizations, including Akzo Nobel, InBev, Hewlett-Packard, Nestlé and Nike, look to Europe’s leading grants firm, PNO Consultants, to maximize the available grant opportunities. These clients are serviced by over 200 PNO staff in 15 offices across Europe, including offices recently opened in Eastern Europe. As significant sums of European money are now

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being directed towards Eastern Europe and PNO Consultants have been able to assist some of the major players in the market, manufacturing sites in countries such as Poland and the Czech Republic are being realized. These high-level services are also available in the United Kingdom from PNO (www.pnoconsultants.com), which has already assisted several companies with their external funding strategies, including Procter & Gamble, Heinz and INEOS Chlor, with a success rate of over 80 per cent. PNO Consultants adopt an end-to-end approach to funding, with a range of services that can be broken down into three main areas: • identify (the identification and building of fundable projects); • apply (proposal writing and submission); • comply (support in financial project management). Once an application has been approved, many companies find they are unable to claim the full amount approved, due to errors in the administration of the project, which is where PNO’s 20 years of experience comes into play – maximizing the available grant funding.

Availability of funds from the EU Structural Funds are one of the EU’s key instruments for reducing disparities between regions, by supporting social and economic development and restructuring in regions that are lagging behind or in decline. Any type of organization can apply for funding, depending on the priority being addressed. Applications can be made by eligible bodies such as local authorities, business support agencies, universities, colleges of further education, voluntary sector bodies, non-profit-making organizations and others. The private sector can gain access to a range of support through grants made under the programme to intermediaries in the area. The type of projects funded varies from region to region. Projects supported are required to deliver a direct, measurable and positive impact on the economy of the region to which the application is being made. EU funding is also available to companies investing in an area that benefits from ‘Community Initiatives’, including certain designated rural areas, urban areas, border regions and projects involving transnational cooperation, which are designed to promote equal opportunities in the labour market.

Conclusion Grants can assist enterprises to achieve their aims, and although they can potentially involve a lot of work, with the correct approach and some thorough planning, companies can minimize the inconvenience and maximize the possible returns. There are some very lucrative schemes around, but

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they generally require more complex applications, which is where many companies decide to employ the services of grant consultants. With the launch of the new UK and EU seven-year plan in 2007 it has never been more important to review all forms of funding available, but at the heart of the matter must be a great company and project, coupled with independent and professional external advice and support to deliver the opportunities.

2.3 UK Competition Law and Policy Andrew Bailey, Watson, Farley, & Williams LLP

Introduction As in many countries throughout the world, over the last two decades the United Kingdom has shifted from state ownership and a managed economy towards free markets. In response, in competition policy has grown in importance. Under the new systems companies doing business in the United Kingdom are allowed to act, more or less, in whatever way they deem commercially advantageous. This is subject, however, to the strict qualification that they do not artificially interfere with free and fair competition in the market. Competition law is the rules and regulations that set the parameters regarding how companies (undertakings) interact with one another and with the market, aiming to ensure that companies do not restrict free and fair competition. Nowadays it is essential for all companies operating in the United Kingdom, or any part of the United Kingdom, to comply within competition law. This includes inward investors with headquarters located elsewhere. In the United Kingdom, the competition law sets out two basic prohibitions: arrangements between companies that are anti-competitive (the Chapter I prohibition) and abuse by a company in a dominant market position (the Chapter II prohibition). This chapter discusses both prohibitions in detail, outlining the structure and powers of the regulators in administering the competition rules (including market investigations) and the penalties associated with contravention. Before proceeding, it should be noted that competition law in the United Kingdom is interpreted in a manner entirely consistent with European Community (EC) law. Any decision by a UK regulator or court concerning the

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Investment and Start-up Considerations

implementation of UK competition law must not contradict established EC competition law principles.

Chapter I prohibition Competition rules aim to prevent and penalize agreements or understandings between two or more businesses that seek to regulate the market, but do not necessarily give the best deal to the customer. Prohibited agreements or understandings most often exist between competitors in a market specifically in relation to the following (this list is non-exhaustive): • prices, discounts or other trading conditions; • profits, profit margins or costs; • market shares, markets or sales territories; • distribution practices; • bids or intentions to bid; • supply capacity; • entering or leaving any product or geographical markets; or • selection, classification, supply to or termination of customers or classes of customers. Restrictive vertical agreements (ie agreements between two or more parties operating at different levels of the production and distribution chain containing conditions that relate to the purchase or sale of goods or services) are also prohibited, but only where a 30 per cent market share threshold is exceeded or the agreement contains hardcore restrictions (such as restricting a buyer’s ability to determine its resale price or restricting the territory into which, or the customers to whom, the buyer may sell).

Exemptions from the Chapter I prohibition Despite the seriousness of contravening the Chapter I prohibition, some potentially anti-competitive activity may be deemed exempt. The Office of Fair Trading (OFT) has the power to adopt Block Exemptions and agreements falling within a Block Exemption will not be subject to the Chapter I prohibition. It should be noted that to date only one Block Exemption has been adopted in the United Kingdom, addressing a relatively narrow area of commercial activity (public transport ticketing schemes). However, any Block Exemption adopted by the European Commission is automatically

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adopted by the United Kingdom (a parallel exemption). A number of parallel exemptions currently exist covering specific types of agreements such as agreements in the motor vehicle sector, technology transfer agreements, vertical agreements and research and development agreements. The OFT may also consider some potentially anti-competitive agreements to be so insignificant to the market that they have no appreciable effect on competition (de minimis). These agreements are also exempt from prohibition. The test to assess appreciability is whether the parties’ combined share of the relevant market falls below certain thresholds. The relevant market share thresholds are as follows: • an aggregate market share of the parties to the agreement of 10 per cent of any of the relevant markets affected by the agreement where the agreement is made between competitors in a market; or • an aggregate market share of the parties to the agreement of 15 per cent of any of the relevant markets affected by the agreement where the agreement is made between non-competitors. This de minimis exemption will not apply to agreements between competitors that fix prices, limit output or sales, or allocate markets or customers. In the case of non-competitors, a potentially exempt agreement will not be considered de minimis if it restricts the following: • the buyer’s ability to determine its resale price; • the territory into which, or the customers to whom, the buyer may sell; • active or passive selling by authorized distributors to end-users or other authorized distributors in a selective distribution network; or by agreement between a supplier of components and a buyer who incorporates those components in its products, the supplier’s ability to sell the components as spare parts to end-users or independent repairers not entrusted by the buyer with the repair or servicing of its products.

Excluded sectors A number of areas or categories of agreements are specifically excluded from the application of the Chapter I prohibition. In particular, agreements that are already subject to a separate regulatory regime, such as the Financial Services and Markets Act 2000, the Broadcasting Act 1990 and the Communications Act 2003, are excluded from the scope of the prohibition. Mergers are also subject to separate competition scrutiny (as discussed in Chapter 3.3). Agreements relating to interests in land may also benefit from an exclusion from the application of the Chapter I prohibition. The inclusion of restrictive covenants in land agreements, for example, is generally acceptable.

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Chapter II prohibition Competition rules also seek to prevent and penalize actions by an individual business that dominates its market sector and takes advantage of that dominance to impose unfair trading conditions on its customers or competitors. Such unfair trading conditions can usually be split into two separate categories of conduct: that which is exclusionary and that which is exploitative. Inward investors need only be concerned by the Chapter II prohibition to the extent that their investment creates or strengthens a company with a position of dominance in a particular UK market sector. Even then, being dominant is not an offence in itself. Rather, it is the abuse of that dominant position that will lead to contravention of the competition rules. Abuse can take many forms; the following is a list of exploitative and exclusionary conduct that would be viewed as abusing a company’s position of dominance in a market: • Pricing products or services excessively high in relation to the costs of producing the products or providing those services. • Pricing products or services excessively low in relation to the costs of producing the products or providing those services. • Imposing exclusivity obligations on customers without strong commercial justification. • Engaging in behaviour deliberately intended to have the effect of preventing a potential competitor from entering the market, or eliminating a current competitor from the market. • Applying different conditions to equivalent transactions with similar trading partners. • Offering rebates to customers that do not generate real efficiencies or are aimed solely at securing customer loyalty. • Refusing to supply products or services to new or existing customers without objective commercial justification. • Making the concluding of contracts dependent on customers agreeing arrangements for the provision of unconnected goods or services. Whether a company is in a position of dominance will depend on a number of factors. The European Court of Justice has defined dominance as a position of economic strength that enables a firm to hinder effective competition on a market by allowing it to behave to an appreciable extent independently of its competitors and customers, and, ultimately, of consumers.

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Excluded sectors Specific types of arrangements or conduct are excluded from the Chapter II prohibition. These include mergers and circumstances where other competition regimes for considering the relevant matters are already in place (eg for utilities).

OFT powers of investigation and penalties When it comes to investigating and enforcing competition law, the OFT has particularly broad powers and may conduct an investigation if there is a reasonable suspicion that either of the prohibitions discussed above is being infringed. The OFT may require any person to produce a specified document that relates to any matter relevant to an investigation. The OFT may also authorize, without a warrant, the entry into any premises connected with an investigation. To illustrate the extent of the OFT’s powers of investigation, an investigating officer entering a premises may take equipment, require the production of relevant documents and take copies and extracts of documents. In some circumstances a judge may even issue a warrant for the use of force in entering the premises. The OFT also has additional powers of surveillance when investigating the cartel offence (see below) so that it can police the offence more effectively.

Penalties – civil Along with ordering remedies to combat anti-competitive behaviour, the OFT has the power to impose a fine of up to 10 per cent of worldwide turnover on any undertaking that contravenes the Chapter I and/or Chapter II prohibition. The fines imposed by the OFT since the current legislation became operative in 2001 include the following: • approximately £15 million for parties, including Umbro, JJB Sports, etc, involved in price fixing in the replica football shirts market; • approximately £20 million for Littlewoods, Hasbro and Argos for price fixing in the board game market; and • approximately £1.4 million for various companies involved in a nationwide bid-rigging cartel in the flat roof construction market. The OFT has developed a leniency programme whereby members of cartels may have their financial penalty reduced substantially or avoid a penalty altogether if they come forward with information. For the purposes of the leniency programme, the term ‘cartel’ or ‘cartel activities’ applies to agreements between undertakings, decisions by associations of undertakings or

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concerted practices that infringe the competition rules and involve price fixing, bid rigging, setting of output restrictions or quotas and/or market sharing or dividing.

Penalties – criminal In order to provide an additional deterrent to engaging in cartel activity, since July 2004 it has been a criminal offence for an individual to engage dishonestly in cartel-like behaviour. An individual is liable to criminal prosecution for the cartel offence if she or he dishonestly agrees with one or more other persons that competing undertakings will engage in one or more of the prohibited cartel activities. These are as follows: • price fixing; • limitation of supply or production; • market sharing; and • bid rigging. Importantly, dishonesty is required. However, the offence is committed irrespective of whether an agreement is actually implemented by the undertakings and irrespective of whether the individuals have the authority to act on behalf of the undertaking at the time of the agreement. Individuals that are prosecuted and found guilty of the offence are liable to a maximum of five years’ imprisonment and/or an unlimited fine. Failure to comply with requests for information, documents, etc, may also constitute a criminal offence in certain circumstances. No one has yet been successfully prosecuted. The OFT has the power to issue written notices and no-action letters confirming that a particular individual will not be prosecuted for the offence if certain conditions are met. Much like the civil leniency program, these conditions include giving details of the cartel activity to the OFT and cooperating throughout the investigation.

Other penalty provisions The OFT is empowered to seek a court order to disqualify company directors, for a maximum of 15 years, where serious breaches of competition law have been found. The OFT has extended its leniency policy so as to not disqualify those directors who have come forward to assist the OFT in detecting seriously damaging anti-competitive activity and who benefit from a no-action letter. Further, third parties that have suffered loss or damage as a result of certain types of competition law infringement may bring claims for damages directly before the Competition Appeal Tribunal (CAT) where a competent

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regulator has already established a breach of competition law. This is in addition to the existing right to bring damages claims in the courts.

Market investigations and appeals The UK Competition Commission (CC) will conduct investigations into markets where it appears that the structure of the market or the conduct of suppliers or customers is harming competitors. Some recent investigations by the CC include inquiries into the UK supermarket sector, airports and the market for classified directory advertising services. Markets under investigation are referred to the CC by the OFT. The OFT may refer a market to the CC where it has reasonable grounds to suspect that one or more features of a market prevents, restricts or distorts competition in relation to the supply or acquisition of goods or services in the United Kingdom (or part of the United Kingdom). Alternatively, the OFT may accept undertakings to remedy any adverse effects on competition (or harmful effects on customers that result) that would otherwise form the subject of a reference. Once a reference has been made, the CC carries out a detailed investigation to determine whether any feature of the market prevents, restricts or distorts competition in relation to the supply of goods or services in the United Kingdom (or part of the United Kingdom). If it identifies an adverse effect on competition, it will then attempt to remedy the adverse effect, usually by making an order or seeking undertakings from market participants. Persons affected by a decision made as a result of a market investigation may apply to the CAT for a review of the decision.

Merger control In certain circumstances the OFT will review concentrations of undertakings (mergers, acquisitions, joint ventures) to consider whether the concentration may be expected to result in a ‘substantial lessening of competition’ in the relevant market. The United Kingdom’s merger control regime is discussed in detail in Chapter 3.3.

Institutional arrangements Inward investors needing to know more about the United Kingdom’s competition law regime can always contact the regulatory bodies themselves. The following section describes the various regulatory bodies that oversee and enforce competition rules in the United Kingdom. The Secretary of State for Business, Enterprise + Regulatory Reform represents the ‘political pillar’ of UK competition policy and has overall

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Investment and Start-up Considerations

responsibility for the enforcement of the Chapter I and II prohibitions. He or she signs any secondary legislation and has various powers of appointment. Successive reforms, however, have reduced the role considerably. Direct intervention in operational issues by the Secretary of State is now restricted to so-called public interest issues only (discussed above). The OFT exists on a statutory basis as a corporate body and is the principal enforcement and policy body in relation to competition law in the United Kingdom. The general functions of the OFT include the following: • Obtaining, compiling and reviewing information about matters relating to the carrying on of its functions (eg market investigations, merger references and investigations under the competition legislation). • Making the public aware of the ways in which competition may benefit consumers and the economy and giving information or advice in respect of its functions in this regard. This includes publishing educational materials and carrying out educational activities. • Providing information and advice to ministers on matters relating to any of its functions. Sector regulators (concurrently with the OFT) enforce competition legislation applying to regulated utilities. These regulators include the following: • OFWAT (water); • OFCOM (communications); • OFGEM (gas and electricity); • OFREG NI (gas and electricity in Northern Ireland); • ORR (railways); and • CAA (air transport). The CC is an independent public body established under legislation. It replaced the former Monopolies and Mergers Commission. The CC conducts in-depth inquiries into mergers, markets and the regulation of the major regulated industries. Every inquiry is undertaken in response to a reference made to it by another authority, usually by the OFT but in certain circumstances the Secretary of State, or by the regulators under sector-specific legislative provisions relating to regulated industries. The CC has no power to conduct inquiries on its own initiative. The CAT has the power, amongst other things, to confirm, set aside or vary a decision of the Secretary of State, the OFT, the CC or regulators in specific sectors, or remit matters to the relevant authority. Specifically, its functions include the following: • hearing claims for damages where an infringement of competition law has been established;

UK Competition Law and Policy

41

• hearing representative claims for damages, brought by specified bodies on behalf of groups of named individual consumers, in respect of established breaches of those competition laws; and • reviewing decisions on mergers or market investigation references taken by the OFT, the CC or sector regulators. Additional information relating to UK competition law and policy is available from the following websites: • http://www.oft.gov.uk • http://www.competition-commission.org.uk • http://www.catribunal.org.uk/default.asp

2.4 Company Formation – Methods and Legal Implications Ian Saunders, Artaius Company Services Limited

Registration There is no formal requirement in the United Kingdom to register with a local commercial registry or the tax authorities before commencing business. A person wishing to start a business in the United Kingdom has a choice between the registration of an incorporated vehicle (a company) or an unincorporated vehicle (a sole trader or partnership).

Unincorporated vehicles Sole trader A person who carries on business as a sole trader is personally liable for all the debts and obligations incurred by the business; accordingly all of the business and personal assets can be called upon to meet payment of any liabilities incurred by the business. Partnership A partnership is usually governed by a written agreement, which binds the partners and is subject to the provisions of the Partnership Act 1890. With some exceptions, partnerships are limited to 20 partners. The partnership has no separate legal entity and a trader who carries on business through this vehicle is jointly and severally liable with the other

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partners for all debts and obligations incurred by the partnership while he or she is a partner. Furthermore, he or she is jointly and severally liable with the other partners for loss or damage to third parties by the wrongful acts or omissions of any partner in the ordinary course of the partnership business. Limited partnerships These are governed by the Limited Partnerships Act 1907. As long as there is one or more partner liable for all the debts and obligations of the partnership, the act allows a partner to limit his or her liability to the amount contributed by him or her by way of property or capital on joining the partnership. Such a partner is not entitled to take part in the management of the partnership.

Incorporated vehicles Corporations have a distinct legal personality separate from that of their members. The private company limited by shares (limited company) and public company limited by shares (public limited company, PLC) are the most important and common business corporations in the United Kingdom. There is no statutory minimum capital requirement for a limited company but the minimum capital requirement for a PLC is £50,000. If contributed in cash, only one quarter of the value of each issued share is required to be paid up in the PLC (effectively £12,500) for it to obtain a certificate to commence trading. A private company is prohibited by law from offering any of its shares to members of the public; so no offer of shares of any kind can be made. It is the vehicle used mostly for owner/managed companies and new business start-ups. A PLC can, under strict procedures, issue a prospectus and offer its shares to members of the public. There are other types of corporation that may be incorporated in accordance with the Companies Act 1985, which are as follows: Private company limited by guarantee and not having a share capital This vehicle is used chiefly by trade associations, clubs, charitable companies and management companies for apartment blocks. There is no share capital. Instead, each member ‘guarantees’ that in the event of the company being wound up they will pay a specified sum towards the funds. The articles of association govern the terms of membership of the companies. Unlimited companies, with or without a share capital The members’ liability is unlimited with this type of company. The chief advantage of this organization is that its accounts are not required to be submitted to Companies House and are thus not available for public inspection.

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Investment and Start-up Considerations

Limited liability partnership (LLP) Introduced on 6 April 2001, a LLP comprises a corporate entity distinct from companies incorporated under the Companies Act, but sharing many characteristics. An LLP is a legal person quite separate from its members, with the capacity to contract in its own name. Members of an LLP enjoy limited liability; they do not have to be employees of the LLP. LLP incorporation A minimum of two people is required when the LLP is incorporated; they subscribe their names to an incorporation document. The LLP must carry on a lawful business with a view to profit. An LLP must prepare and publish accounts similar to those regarding a company and file an annual return accordingly. An LLP may change its name and registered office. Members may change. Unless members agree otherwise, they share profits and losses equally and may all participate in managing the LLP. Members may enter into an agreement that, among other things, deals with profit shares, involvement in management and remuneration. As with incorporating a company and settling its memorandum and articles of association, those intending to incorporate an LLP and drafting a Members Agreement should seek expert advice at an early stage. Members of an LLP are taxed as if the business was carried on by a partnership, rather than by a company. Community interest company (CIC) CICs are limited companies, with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage. This is achieved by a ‘community interest test’ and ‘asset lock’, which ensure that the CIC is established for community purposes and the assets and profits are dedicated to these purposes. Registration of a company as a CIC has to be approved by the regulator who also has a continuing monitoring and enforcement role.

The process of forming a company Private company limited by shares The great majority of companies formed in the United Kingdom are private companies limited by shares and the process of the formation of these companies will be examined first. 1.

Company name The proposed company name should be checked to ensure that it is not identical to an existing registered name or does not contain a word restricted or prohibited. The UK authority dealing with the registration

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of companies (Companies House) maintains a list of already registered names and restricted words. This is available at their website www.companieshouse.gov.uk/info Care should also be taken to avoid clashes with companies of similar names. Although this will not prevent the registration of the name, a new incorporator may find a subsequent objection to the new name has been made and in such cases Companies House has the power to direct a new company to change its name. New companies should also be advised to ensure their proposed name does not conflict with any registered trade or service marks. Further information can be obtained from the UK patent office at www.patent.gov.uk/tm. The company name chosen must end with the word ‘Limited’ or ‘Ltd’ and these words must not appear anywhere other than as the last word in the name. 2.

Shareholders A private company limited by shares can have one or more shareholders. The first shareholder(s) of the new company will be those persons who subscribe for shares in the memorandum of association of the company, which is a document required to be submitted for the incorporation and which is detailed below. Subsequent to the incorporation the directors of the company may allot further shares that are available in the ‘authorized capital’ of the company as stated in the memorandum of association. The liability of any shareholder is limited to any amounts unpaid on the shares agreed to be taken.

3.

Directors The directors of a company will be those persons who consent to act as such on Form 10 submitted with the incorporation papers. The directors are required to provide their full name and residential address, date of birth, nationality, business occupation and to list any other directorships held in the United Kingdom. There is no restriction on non-UK residents acting as directors, but there may be restrictions on what work some nationals who are not based in the European Economic Area can do in the United Kingdom. For further information please see the UK Home Office website at www.ind.homeoffice.gov.uk. A private limited company requires a minimum of one director. A UK or foreign registered corporation may be a director, but the Companies Act 2006 requires that at least one director must be an actual person. This section of the new act is likely to be implemented with effect from 1 October 2008. The directors will be responsible for managing the business and affairs of the company. As such, they are required to act at all times in the best interests of the company and are regarded as the equivalent of trustees of the company’s monies.

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4.

Secretary Currently, the company must have a secretary, who will be responsible with the directors for ensuring that the company meets its obligations with filing accounts and returns, etc, in good time. If there is only one director, this person may not also be the secretary. If there are two or more directors, one of these persons can also act as secretary. The new companies act removes the compulsion for a private company to have a secretary and this part of the act is likely to be implemented with effect from 6 April 2008.

5.

Registered office A company incorporated in England and Wales must have a registered office in either England or Wales and a company incorporated in Scotland must have a registered office in Scotland. A company is required by UK law to keep at its registered office registers of directors, shareholders, legal charges, debentures and minutes of directors’ and shareholders’ meetings. Certain of the registers must be made available for inspection by any member of the public presenting himself or herself to the registered office. The registered office should therefore be a place where such inspection can take place and where any legal notice can be served on the company.

Documents required by Companies House to form the company 1.

Memorandum of association This sets out the name of the company, whether the registered office is to be situated in England, Wales or Scotland, and its business activities (its Objects). The Objects of the company may be stated as ‘to carry on business as a general commercial company’, in which case the company may undertake any activity allowed under UK law. The memorandum also states that the liability of the members is limited – the authorized share capital of the company – and contains a page for the subscribers (or first shareholder or holders) to sign. The Companies Act 2006 removes the Objects requirements from the memorandum and makes this a very simple statement. This change is scheduled for implementation on 1 October 2008.

2. Articles of association These set out the rules for the running of the company’s internal affairs, ie the rules for meetings of directors and shareholders and the relationship between the owners (shareholders) and managers (directors), transferring of shares, etc. There is a default set of articles, which will be implied if no articles are submitted, but these are not always appropriate for a newly formed small company. It is therefore recommended that articles be submitted.

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Company registration agents will be prepared to supply both the memorandum and articles of association for a proposed company for a small fee. 3.

Form 10 This sets out the details of the directors and secretary of the company and its registered office address. It must be signed by these officers and by the subscribers to the memorandum and articles of association or an agent for the subscriber.

4.

Statutory declaration (Form 12) This must be signed by a director or the secretary in the presence of a commissioner for oaths, notary public or solicitor having the powers of a commissioner for oaths and is a statement that all the requirements of the Companies Act 1985 have been met.

5.

Cheque for Companies House fees Companies House require a cheque in the sum of £20 to complete the incorporation. If the documents submitted are in order, Companies House usually issues a Certificate of Incorporation within four to five working days.

UK company registration agents can assist with the whole process of forming a company and can arrange for the relevant declaration to be carried out very simply. In addition, it is possible for agents with the necessary software to file private limited company incorporations electronically at Companies House. This speeds up the process still further and companies can now be formed usually within 24 hours. An electronic formation will not require a statutory declaration on form 12 to be made and Companies House fee is reduced to £15.

Public company limited by shares The process for forming a public company is very similar to that of forming a private company; the differences are as follows: 1. Company name The name must end with the words ‘public limited company’ or ‘PLC’ 2. Shareholders A PLC must have a minimum of two shareholders and must have an issued capital of £50,000 minimum. 3. Directors There must be a minimum of two directors.

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4.

Secretary Must be qualified, ie a barrister, solicitor or advocate admitted in the United Kingdom, or be a qualified chartered accountant, certified accountant, certified management accountant or chartered secretary.

The documents required to be submitted to Companies House for the formation of the company are the same as for a private company, but the memorandum and articles of association must be suitable for the management of a public company. In addition, following incorporation, a public company must undertake a further declaration that it has met the minimum capital requirements and that it has paid up its capital as necessary (one quarter of the nominal value of each share). It will then be issued with a further certificate, allowing it to borrow money and trade.

Statutory requirements 1. Accounts Companies are required to submit accounts prepared in accordance with the Companies Act 1985. Companies House and the UK tax authorities must receive these not later than 10 months following the company’s year-end date (seven months for PLCs). The new companies act will reduce the time allowed for filing to nine months and six months, respectively. A company’s year-end will be set automatically by Companies House as the anniversary of the end of the month of incorporation, ie a company incorporated at any time during, for example, July 2007 will have a year-end of 31 July 2008. A company’s year-end can be changed by the submission of a form to Companies House and can be extended to a period of up to 18 months. However, directors of new companies should note that if this extension is made, the first set of accounts will still be due 22 months from the original incorporation date (19 months for PLCs), ie 10 months from the original year-end date (7 months for PLCs). 2. Annual return Companies are required to submit an annual return to Companies House within 28 days of the anniversary of the date of incorporation. This return sets out the current business activities, details of directors and secretary and shareholders of the company. A fee of £30 is payable to Companies House for this return. The fee can be reduced to £15 if the annual return is submitted electronically via Companies House Web-filing service or via an agent with the necessary software.

Company Formation – Methods and Legal Implications

3.

49

Other documents The Companies Act 1985 specifies that returns shall be made to Companies House in the event that the company undertakes certain actions. For example, the increase of capital, the issuing of shares, changes being made to the memorandum or articles of association, the granting of a charge over the company’s assets, changes to the details of any director or secretary or the resignation or new appointment of these officers. There are various time limits imposed for the submission of these returns and the officers of a company are advised to familiarize themselves with these requirements.

The management of a company’s statutory affairs (such as the submission of annual returns and changes to shareholders and directors) is often carried out by specialist company formation agents, company secretarial service providers, solicitors or accountants.

New companies act The Companies Act 2006 received Royal Assent on 8 November 2006 with the aim of cutting costs and red tape for businesses and in particular smaller companies. The act is being brought into effect in stages so as to avoid overwhelming Companies House systems and confusing companies and their agents. Removing the requirement for companies to keep registers of their directors’ interests in shares has already been implemented. Further sections of the act that allow private companies to be exempted from the requirement to have a company secretary and to hold annual general meetings will be implemented later. The act also includes for the first time a statutory statement of directors’ general duties. The idea is to make the law in this area more accessible and to allow easier changes to it where it no longer corresponds to modern business.

2.5 Commercial Banking Services Nick Stephens, HSBC

The information provided in this chapter and in Chapter 4.7 is drawn from the published material of HSBC but the services described are available from the other major banks offering commercial banking services in the United Kingdom. The commercial banking services available to international companies and UK banking practices are among the most reliable and sophisticated in the world.

Introduction In common with most businesses, a company setting up in the United Kingdom for the first time wants to make payments to suppliers and receive payments from customers and perhaps the parent company quickly and efficiently in sterling. It may also require a method of making and receiving routine planned payments in a cost-effective manner acknowledging that they can often be ‘bulked’ and arranged in advance. To stay in control of cashflow, the business needs to keep track of payments made, to have rapid advice on receipts and to have transaction data available in an easily accessible form in the United Kingdom, the parent headquarters and often at the offices of a third party that is undertaking back office, accounting and similar functions on its behalf. UK banks offer accounts in a wide range of currencies. However, the services described below may not be available in currencies other than sterling. The starting point of the banking relationship for the customer is the opening of a business current account and the issue of a cheque book. Cheques remain the simplest form of payment for low-volume transactions. However, cheque volumes peaked in 1990 and usage has fallen since then due to the wide range of alternative payment methods from card payments and direct debits to telephone and electronic banking services described in this chapter.

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Many suppliers in the United Kingdom such as landlords and utility companies will demand a direct debit in their favour and view this as part of their credit assessment of a new (to UK) business with no (UK) credit history. A direct debit is an instruction from a customer to their bank authorizing an organization to collect varying amounts from their account. The customer must give the bank advanced notice of the collection. Direct debits save time, reduce costs and put cleared funds directly into the account of the collecting organization. A business current account may be interest bearing but the interest rate will be low and for this reason it can be linked with a business savings account, enabling surplus funds to earn a better rate. Larger sums can also be placed in the money market at current rates and varying notice periods or fixed terms.

Internet banking Internet banking allows 24-hour access to bank accounts and offers the following benefits: • real-time balances on business accounts; • transaction details on individual accounts; • immediate transfers between customers’ own accounts; • payments of up to £100,000 per day using Bill Payments or BACS; • payments by priority payment; • forward date payments up to 45 days in advance; • viewing and cancellation of standing orders or direct debits; • delegated access to the service to other company users; • access to the accounts of your other businesses from a single logon, if required; • download of transaction details to Quicken© , Microsoft Money© or spreadsheet packages; and • security routines including unique ‘one-time’ passwords, automatic logoff after periods of inactivity and protected communication across the Internet using data encryption and digital certification. Most full-service banks offer a priority payment facility providing a simple, cost-effective way of making payments from a PC. These enable customers to initiate same-day sterling and euro payments in the United Kingdom and urgent payments to beneficiaries outside the United Kingdom. Templates with details of regular beneficiaries may be held and payments submitted for transmission around the world at any time of the day or night.

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Investment and Start-up Considerations

Making payments For companies wishing to make payments, the services that will be the most appropriate will vary depending on whether payments are made in the United Kingdom or overseas and upon the volumes and speed of payments required.

Making payments in the United Kingdom Services for customers in this category include cheques, various forms of debit or credit card and, increasingly, electronic payments through online or telephone banking. For a large number of payments each month with various payment times, the Automated Clearing House (ACH) (known in the United Kingdom as BACS) direct debits and credits are the norm. Software in the form of either easy-to-use dedicated Windows-based software packages that allow customers to make or collect payments direct from PCs within their organizations, or an option in PC and Internet banking packages are provided by banks. The software has inbuilt security, allowing full control of the payment process through creation/generation, authorization and transmission. Each action can be allocated to a specific ‘user’ with relevant authority. This solution caters for fully euro-denominated credit payments within the United Kingdom and payments in a wide range of currencies to a growing number of countries through reciprocal banking arrangements. With the onset of ever-increasingly sophistcated Internet and PC banking services, most banks have now withdrawn fax payment services for bulk payments. Payroll services usually provided by third-party bureaus that interface with the company’s bank provide a full calculation facility, the printing of pay slips, management reports and payments direct into employees’ accounts by wire transfer/BACS.

Card payments The differing key features of three types of card, available for both UK and overseas purchases as offered by HSBC, may be summarized as follows: • Business Card – a credit card for everyday business expenses and purchases • Up to 56 days’ interest-free credit • Accepted worldwide wherever the Visa symbol is displayed • Separation of business from personal expenses with itemized monthly statements • Individual credit limits (minimum £500)

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•

Personal identification numbers (PINs) can be given to cardholders enabling them to withdraw up to £300 per day from over 500,000 cash machines around the world (for a small charge) • Allows telephone and Internet purchases • No transaction fees on purchases • Corporate Card – a credit card for companies with a large travel & entertainment (T & E) budget • • • • •

Up to 56 days’ interest-free credit Can be used worldwide wherever the Visa symbol is displayed Company chooses number of cards and maximum spending limit on each card Itemized monthly statement for each card with a choice of statement date extensive management information available

• Debit Card – available to sole traders, partnerships and limited companies with sole signatures in place • • • • •

Chip and PIN-enabled card combines new technology in a chip card with the security of a four-digit PIN Saves the time and bother of writing out cheques Use the card to purchase goods and services wherever the Maestro symbol is displayed Enables cash withdrawal, balance enquiries and interaccount transfers through a network of self-service machines Card linked to an HSBC Business Current Account

Making payments overseas Companies making payments overseas and needing same-day or next-day payment are recommended to use their bank’s priority payments facility, which provides a fast and secure method of payment that can be sent to most countries in any tradeable currency. Payments to Eurozone countries will be received within one day. Payments outside the Eurozone will normally be received within four working days. This service can be accessed by the Internet or PC banking or by physically giving instructions to a branch either in person or exceptionally by fax where prior arrangements exist. Most banks require these instructions to be provided on a pre-printed and security-marked bank form. Some banks including HSBC now accept payment instructions by telephone if prior arrangements are made. Payments to all European Union (EU) and European Economic Area (EEA) countries will require Bank Identifier Code (BIC) and International Bank Account Number (IBAN) numbers for the beneficiary. Elsewhere SWIFT and branch and account number will be required.

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Investment and Start-up Considerations

Payment instructions include: •

by credit to a specified bank account;

•

by payment to the beneficiary at a stated address; or

•

collected by the beneficiary upon production of appropriate identification.

If payment times of between three and six days are acceptable, HSBC offers to its customers its ‘Worldpay’ solution for the cost-effective transmission of low-value payments abroad from the customer’s local HSBC bank branch. Worldpay involves one simple document only and instructions received before 2.30 pm will be acted upon the same day. There is a fixed fee with no deduction of fees by the payee’s bank. The system is available for payments of £2,000 or less and may, for example, be used to pay salaries, fees and expenses to employees abroad and pay subscriptions to trade organizations and publications. The countries to which payments by this means may be made are Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Hong Kong SAR, Ireland, Italy (2,500 euros maximum), the Netherlands, New Zealand, Portugal, South Africa, Spain„ Switzerland and the United States. Other high street banks offer a similar service through their local branches. For non-urgent payments overseas or non-urgent payments in euros within the United Kingdom, international drafts are an appropriate alternative, offering the customer the following advantages: •

low cost;

•

ability to attach relevant documentation and correspondence;

•

no time limit within which a draft supplied by the bank has to be sent; and

•

drafts available in sterling and most currencies.

Cards provide an alternative payment method

Receiving payments within the United Kingdom In addition to payment by cheque, direct debit or cash, companies wishing to receive payment from the United Kingdom may consider two further alternatives: 1.

Banker’s draft – This provides a near certainty of payment upon presentation and is therefore attractive for the receipt of large sums, particularly where immediate delivery of goods or the transfer of title to property is concurrent.

2.

Electronic card processing – An efficient and swift system for dealing with sales transactions, which accepts all major credit cards via terminals provided by the bank and software providing monthly statements

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showing the previous month’s card transactions. Companies preferring to outsource their invoice payments and collections may consider using their bank’s credit management service.

Receiving payments from abroad Inward payment Companies that request a wire transfer from the sender against full banking details may take advantage of their bank’s inward payment service. Banks in all EU and EEA countries will require BIC and IBAN numbers for the beneficiary. Elsewhere SWIFT and sorting code and account number will be required. The bank applies the appropriate exchange rate in force at the time of the transaction on receipt of a payment in currency that is to be credited to the customer’s sterling account and effects the credit. An advice with all details of the receipt, including exchange rate and commission, is mailed to the customer on the next working day. Cheque negotiations Most banks offer a cheque negotiation scheme to clear cheques received that are payable outside the United Kingdom, foreign currency cheques payable in the United Kingdom or sterling cheques drawn abroad. The proceeds of cheques credited to a customer’s sterling account are immediately made available subject to recourse, while costs are much lower than those incurred with cheque collection. A forward value date is applied when crediting a foreign currency account with funds of the same currency. The cheque negotiation scheme is also the only way in which the proceeds of travellers’ cheques payable outside the United Kingdom can be paid. Cheque collections Businesses receiving cheques payable outside the United Kingdom, foreign currency cheques payable in the United Kingdom or sterling cheques drawn abroad and wishing to be sure that the cheque is paid when funds are received, can take advantage of their bank’s cheque collection scheme. Proceeds of cheque collections are made available to the customer only when the funds have been received by the bank, unlike a cheque negotiation where the proceeds are made available before the cheque has been cleared. As a part of the service: • The bank will provide the exact date on which proceeds or advice of nonpayment will be received for certain cheques. • The collection process can be accelerated by requesting the bank to send cheques to the drawee bank by courier for an extra fee.

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• The bank’s international cheque-processing department monitors progress of each transaction and will chase for the proceeds or an advice of non-payment. • Since receipt of proceeds usually means that a cheque has been paid, customers can use the cheque collections mechanism to withhold the release of goods or the provision of services where advance payment is an agreed term of business. Foreign cheques can be paid in at any UK branch of most commercial banks. US dollar and European lockboxes If a company’s goods or services are bought by customers in the United States, prompt and efficient processing of cheques receivable is paramount. For example,HSBC provides a US Dollar Lockbox service whereby funds are credited up to 10 days faster to customers’ accounts by processing all cheques through the US clearing system rather than with traditional cheque negotiations. There is no need to open accounts with different banks in the United Kingdom and the United States, charges are fixed, paperwork is kept to a minimum and the documentation sent by the US customers is returned to the company. There is an equivalent Euro Lockbox system to process all cheques from customers based in continental Europe through the relevant European clearing system. Use of this system will result in the earliest possible crediting of cheques to their accounts, up to five days earlier than with traditional cheque negotiations. The transaction information provided can be linked to new or existing electronic balance reporting and payments services.

Cash management Physical cash management Standard physical cash management services include the time-saving facility of placing payments in self-sealing packets that can be handed over at branch counters and secure enquiry positions or deposited in automated payingin machines to be verified later, and a range of solutions available to bank customers receiving over £10,000 in cash every week. These include cash collection services by secure carrier from the customer’s own premises with delivery to the bank and cash in transit services where the collections are delivered to one of the bank’s network of cash centres across the United Kingdom. At many banks there is a parallel bulk cheque service for organizations receiving more than 100 cheques per week whereby cheques are collected by an authorized carrier from the customer’s outlets/premises and delivered to a cheque-processing centre within the UK network, which processes all branch and commercial cheque items.

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Outsourcing payment collection Finally, for companies preferring to outsource payment collection there is the option of using their bank’s credit management service. Credit management is one of the three service elements of invoice finance (see Chapter 4.7) linked to credit protection and sales-linked finance services. For companies selling on credit terms to other businesses in the United Kingdom or overseas, full-service banks offer a credit management service providing consistent, professional credit control and efficient collection, which strikes a balance between the customer’s need to be paid and the maintenance of good public relations.

Opening a UK bank account Account opening formalities will vary in detail from bank to bank. However, in general the requirements for both UK registered and overseas registered companies will be: 1. Business Customer Application Form • Giving details of the business requiring an account, its activities and ownership and details of the services required as well as instructions as to mailing addresses and other contact details. 2. Mandate • Incorporates the resolution to open an account and gives signature instructions. 3. Registration of UK company • A search is usually undertaken to confirm registration of the company, and sight of the Certificate of Incorporation or other proof of registration is usually required. 4. Bank statements • If the company already has a bank account it is usual for a bank to review recent bank statements. For new businesses, bank statements of the parent company or directors/beneficial owners may be requested. 5. Audited accounts • If the company is subject to audit, the latest audited accounts for all businesses established for 18 months or longer are required. If the company is not subject to audit requirements, unaudited accounts will be accepted.

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Identification of key officials It is usual to require verification of the identity and personal residential address for at least two signatories on the account, one of whom must be a director. UK banks are also required to identify the beneficial owner(s)1 and/or principal controller(s)1 [if any] of the company if they are individuals and not one of the directors. If beneficial owners are corporate entities, a structure chart is required and there may be a need to identify key officials and beneficial owners of those entities in due course. Each signatory and/or beneficial owner and/or principal controller to be identified must provide original copies of a passport or National Identity Card and a separate proof of address such as a recent credit card statement or utility bill (not mobile phone). If any officers of the company are not resident in the United Kingdom, banks may also need a reference from their own bank. Certification of documents In all cases it is usual to require presentation of original documents/ID. However, arrangements can usually be made for these to be presented to and certified by bank branch offices or other officials such as a British Embassy, Consulate or High Commission, or a notary, lawyer, attorney or accountant. Practices vary from bank to bank and potential account holders should take time to ensure that they will be able to meet their chosen bank’s requirements.

Case study A privately owned Melbourne-based software company specializing in systems for financial services organizations and with a growing portfolio of clients in the United Kingdom decided to create a UK subsidiary to handle further UK and European sales and to provide technical support close to its clients and in the same time zone. Additional support and in particular accounting was to remain in Australia. The company’s bank in Melbourne did not offer a full service in the United Kingdom and the decision was made to open an account with a UK bank. Of primary importance was the ability to view and operate the account from Melbourne and there was a clear understanding that most transactions both in and out would be electronic. After consulting the UK bank a ‘pack’ was created including the following documents: • Business current account application form • Business Internet banking application form 1 Individuals, shareholders with 25 per cent or more shareholding, a public quoted company or an individual providing significant financial support, influence or control.

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• Business telephone banking application form • Mandate authorizing any one of two Melbourne-based owner/directors (of the UK company), a UK-recruited director and the Melbourne-based finacial controller to sign cheques and authorize other transactions up to and including £2,000 and any two of those designated to sign cheques and authorize transactions above £2,000 • Latest accounts of the parent company (unaudited as no Australian requirement for audit) • Certified copies of • UK company Certificate of Incorporation • Bank statements of three months from the parent company • Passports of two founders of the parent company each with a 40 per cent interest in the parent and thus the wholly owned UK subsidiary • Driver’s licence of one founder and recent credit card statement of the other As the founders are also directors of the UK company and signatures on the account, no further identification or address verification was required. The ‘pack’ was couriered to the UK bank and after making its own credit checks the account was opened four days after receipt of the documents. Since opening the account, business cards have been issued to the UK director and three sales staff. The company has also leased cars for the UK-based sales staff from the bank, arranged insurance for employers’ liability, buildings contents and equipment and a ‘Key Man’ policy for the UK director (an appointment considered pivotal in pushing the company forward in Europe). The company is currently discussing a stakeholder pension scheme with its pensions advisers and the bank. With more and more European business in prospect, a Euro account will be opened and the bank is demonstrating a multi-currency upgrade to its business Internet Banking Service.

2.6 Finance for Companies Nick Stephens, HSBC

Fund-raising requirements Most businesses will need to raise finance at some stage in their development either to fund growth or to enhance short-term cashflow. Raising finance wisely and taxing efficiently can make a major contribution to a company’s profitability, whereas badly planned inappropriate finance may be burdensome. The first step in identifying appropriate financing solutions is to clarify the purpose for which a company needs to raise funds. Broadly, there are four main reasons for a company to seek external funding.

To assist cashflow In practice companies investing abroad for the first time rarely seek this type of working capital finance in the early stages of a project, preferring to fund from the head office. However, after a certain period that differs from company to company, the decision is invariably made that the new business should now be self-sufficient. Prudently, this decision will coincide with the point at which the parent considers the subsidiary to have developed a strong enough balance sheet to enable it to approach bankers in reasonable expectation of a positive response. The need for external support may be driven by the fact that your order book is increasing in volume and/or value, you need to take on more staff/buy more stock, your customers are demanding credit terms, your suppliers can offer you good early payment discounts or you may want to diversify in response to customer demand. Easily accessible solutions range from invoice financing services to an extended overdraft or the use of a bank business card or loan.

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To finance international trade International trade can put a strain on a company’s cashflow and expose the business to a variety of risks. A number of specific solutions are available, depending on whether a company is engaged in import or export trade or both.

To acquire fixed assets The acquisition of new premises and the expansion or improvement of existing buildings may all require funding of a longer-term nature for which there are several solutions. Equally, a number of funding options are available for company acquisitions of equipment and business vehicles.

To fund business growth Companies needing a cash injection to facilitate growth should be sure to choose an option that supports their expansion plans constructively. The needs of a business planning to expand by organic growth may be very different from those of an enterprise expanding through franchising or a company growing through acquisition. Alternative solutions for all these funding scenarios are discussed in the sections that follow. As Chapter 2.5, the range of solutions is drawn from published HSBC material but all full-service UK banks offer a similar range.

Assisting cashflow Companies trading within the United Kingdom have access to a variety of financing services through the commercial banks.

Overdraft Often the most convenient way for a company to pre-arrange the working capital it needs to ride out the troughs in its business cycle is to arrange an overdraft facility with its bank. An overdraft is flexible in as much as you decide how much you use and interest is only paid on what you use and not what is available. It is usually available from 1 to 12 months and subject to regular review. Overdrafts are repayable on demand. The company will need to satisfy the bank as to why the money is needed, how much is required and for how long. Subject to a favourable credit assessment and agreement on the overdraft limit, the bank will confirm arrangements by a facility letter including details of arrangement or renewal fees. The bank

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may require tangible security, or the support of the parent company by way of guarantee or bank guarantee or standby documentary credit. Interest is charged at a pre-agreed rate and debited monthly or quarterly to suit the customer.

Business card The business card facility identified in Chapter 2.5 as a payment method can be used as a means of easing cashflow by taking advantage of an interest-free credit in paying for everyday expenses.

Invoice finance (factoring) Comprising three service elements – sales-linked finance, credit management and credit protection – invoice finance offers greater working capital flexibility, relief from the time and resource burden of chasing customers for payment and safeguard against bad debt to businesses selling in the United Kingdom or overseas on credit terms. Typically, up to 85 per cent of an invoice’s value can be advanced the next working day. Using this facility it may be possible to obtain more favourable terms from suppliers by paying earlier. Invoice finance is suitable for most businesses that sell business to business on credit terms with a sales turnover of £100,000 or more and is available as a stand-alone service for larger, longer-established companies. Invoice finance grows with your business and there is no need to keep increasing your borrowing facilities. This enables businesses to react quickly to market opportunities while keeping debtors under control. Other non-bank invoice finance houses offer services usually up to lower limits.

Invoice discounting Invoice discounting differs from invoice factoring only in as much as you manage debt collection and credit control. Credit protection remains an option. Businesses seeking this type of finance must have an annual turnover exceeding £1,000,000 and a proven track record and must be able to evidence profitability.

Financing international trade Loans and overdrafts Loans and overdrafts are the first source of finance for international trade, as in the normal course of domestic UK business. For longer-term needs,

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fixed or variable rate loans in sterling or foreign currency are available from full-service banks with the repayment terms structured to suit a company’s business cashflow. Foreign currency loans on fixed terms are an attractive option for companies involved in international business. By taking out a loan in any major currency, a company can reduce its exposure to fluctuating exchange rates and is enabled to make and receive payments in the overseas currency without the cost and effort of conversion back into sterling. It opens an appropriate foreign currency account in the United Kingdom, which is simpler and may be more cost-effective than opening an account abroad. Foreign currency loans can be medium or short term and the borrower can have the option to repay in single or multi-currencies to suit its requirements. Where these facilities are not suitable and either the lender or the borrower requires more structure, the following services are available from those banks that specialize in the finance of international trade.

Discounting/negotiation of Export Documentary Credits Also known as letters of credit, Export Documentary Credits are a popular method of reducing the risks in overseas trade and are in global usage. They provide a measure of security for both the buyer and the seller. Having given credit to an overseas customer using an Export Documentary Credit, an exporter may find that the cashflow becomes tight during the credit period. If compliant documents have been presented to the bank, in most cases the bank will be able to give the exporter immediate value for the documents under the Documentary Credit, less a discount/negotiation fee.

Import Usance Documentary Credit By asking their bank to issue Documentary Credits on their behalf to buy goods, an importer reduces the risk of non-payment for the exporter and may enable itself to negotiate a period of credit, such as 30, 60 or 90 days, from the supplier, thereby giving itself the opportunity to sell on the goods before having to pay for them.

Import loans for traders There are two basic types of import loans. The first addresses the situation where a company has imported goods under an Import Documentary Credit, but has not received sufficient supplier credit to allow collection of any proceeds from selling on the goods. In this instance, an import loan can be used to pay the Documentary Credit on the due date. The loan is repaid when the proceeds are received from selling on the goods.

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In the second instance, import loans are taken out to cover situations where a company wishes to import goods without using trade finance instruments, but still needs structured borrowing. The bank will require some assurance that the proceeds from selling on the goods will be used specifically to repay any debt associated with the original purchase of the goods. Therefore, the bank will probably provide an import loan for each transaction, with a repayment date set to match the expected date for receipt of proceeds from any onward sale of the goods.

Export loans for manufacture If a company is the named beneficiary under an Export Documentary Credit advised to it by its bank but needs working capital to manufacture the goods to be sold, an export loan may be appropriate. The Export Documentary Credit and the export loan will be repaid once compliant documentation has been presented to the bank, with any surplus being credited to the exporter.

Financing export sales International commercial banks provide a range of services that allow companies to offer attractive open account terms to overseas customers, while protecting their business from the associated risks of severely delayed payment or non-payment. Export factoring is the finance (factoring) of export invoices and the terms are described in the paragraph on Invoice Finance (above). Additional advantages of this service include the ability to offer open account terms to overseas customers helping them compete with local suppliers. You can choose to invoice in one currency and be paid in another. The bank will use UK-based linguists, its own network and correspondent invoice factoring providers abroad to collect your payments. Such services iron out the risks of currency fluctuation, give professional assistance in assessing creditworthiness of potential customers and allow exporters to focus on negotiating the most appropriate terms.

Advances against export collection Documentary Collections are an alternative to the relative complexity and cost of Documentary Credits and provide a cost-effective, more secure alternative to trade on open account. Basically, the method relies on using the overseas customer’s bank as an intermediary. The exporting company sends the shipping documents to its own bank, which forwards them to the customer’s bank, with instructions to only release them in return for payment or a promise to pay at a later specified date. The exporter’s bank can advance funds against the subsequent collection of payment.

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Acquiring fixed assets Property purchases The commercial mortgage is the most commonly used financial package to purchase existing or new business premises or to extend premises acquired previously. Mortgage finance is available from a number of financial institutions including life assurance companies and pension funds. Mortgages are also available from commercial banks, typically up to 80 per cent of the purchase price for new or existing buildings or the professional valuation – whichever is the lower. There are no set maximum amounts but typically there is a minimum amount for the sum borrowed. Loans from HSBC are for a minimum period of 2 years and a maximum period of 30 years. For loans up to £100,000 rates are charged at a margin over the bank’s base rate and for those of greater value variable rates linked to the London Inter-bank Borrowing Rate (LIBOR) are also available. Fixed interest loans are available for periods of 1 to 10 years. Interest is applied monthly with an optional moratorium on capital repayment of up to two years from drawdown.

Property-associated purchases The small business loan A quick and easy way to fund the refitting of premises or the purchase of new business equipment such as PCs, which will minimize the effect on cashflow, is through a small business loan. Small business loans available may typically be for any amount from £1,000 to £25,000. To assist budgeting, the interest rate is fixed from the start and loan repayments therefore remain the same even if bank base rates should rise. Repayment schedules can match the expected lifespan of the items purchased and may be spread over 12 months to 10 years with interest charged either monthly or quarterly. Banks usually offer an optional business loan protection plan under which the borrower’s payments are covered for one year against sickness and disability and repayment in full is provided in the event of death. The cover can be extended to up to four people and the insurance premium can be added to the loan as principal. The flexible business loan A similar type of facility is the flexible business loan, which HSBC offers to limited companies at variable rates for amounts over £10,000 and to all businesses at fixed or variable rates for amounts over £25,001 as a costeffective way for a company to finance fixed investment in the business or,

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indeed, business expansion. There is no maximum to the amount for which a loan application can be made. There is an option to pay interest either monthly or quarterly. Security may be required, which may in turn incur security fees and an arrangement fee will apply. Repayments may be spread over up to 15 years (10 years for fixed rates), although, in the case of equipment, the length of the loan is expected to match the useful life of the asset. For loans over £25, 001 a capital repayment holiday of up to two years may be taken. On certain types of loan, an option is granted to defer up to two monthly payments a year.

Vehicle acquisitions A range of alternative financing arrangements is available for the acquisition of vehicles and equipment, which are inappropriate for other fixed asset purchases. Contract hire Contract hire gives a business the use of a new car or light commercial vehicles for a pre-determined period of between two and four years based on an agreed mileage, at a fixed cost. The finance company will purchase the new vehicle at the beginning of the agreement and take on the risks associated with reselling it at the end, and for budgeting purposes a fixed cost maintenance package may be added to the agreement. The finance company will pass on the benefits of its buying power as both vehicles and maintenance are sourced and purchased at our preferential rates. Replacement vehicles are usually available in the event of an accident or breakdown, and tailored to suit your company’s needs and reduce ‘down time’ for your drivers a comprehensive Accident Management service is usually offered, covering the sourcing and processing of fast, high-quality accident repairs, with the minimum of involvement from your company or your drivers. This service offers balance sheet efficiency as you do not own the vehicle during the contract, which improves the balance sheet ratios, and the value added tax (VAT) recovered on purchase by the finance company is reflected in lower rental costs. Even if you have no tax shelter of your own, you will still benefit from the finance company’s ability to claim Writing Down Allowance, passed on through lower rentals. Contract hire is tax efficient in that it is usually allowable as a trading expense. Treatment of VAT varies according to whether the vehicle is also used for private purposes. The lender can give advice. Sale and leaseback Sale and leaseback is an agreement under which a fleet of vehicles is sold to a finance company which then leases them back on a tailored, fixed-term basis

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using contract hire, allowing the immediate advantage of the savings and the security of contract hire. Each individual vehicle in a fleet is valued at a fair market rate. The finance company pays you this value and the vehicles are transferred onto a contract hire agreement. This agreement can be tailored to meet your individual business requirements. A fixed monthly payment covers the costs of regular servicing and maintenance and eliminates all residual value risk. Valuable capital can be released for more profitable use elsewhere in the business and the risks associated with selling and maintaining vehicles can be transferred to the finance company.

Equipment finance Finance packages are available from the equipment finance subsidiaries of commercial banks for the purchase or lease of equipment. Hire purchase enables a company to select its own supplier and negotiate its own deal, acquiring ownership at the end of the agreement. An asset loan for two to seven years can be used to finance equipment that has already been paid for in full by a business. Once a purchase is made, the loan is advanced and the bank or finance company takes a chattels mortgage over the asset as security. An Asset loan allows you to fund the asset without the long-term outlay, and make repayments over a period that suits your cash flow. Alternatively, a finance lease enables a business to have the use of an asset over a predetermined period without leading to ownership. At the end of the contract the rental can be extended or the lessee can sell the asset and retain a part of the proceeds. The principal difference between finance leasing and other forms of medium-term finance is that the bank retains legal ownership of the asset and claims the capital allowances against tax, which are reflected in reduced rentals. This form of finance can be particularly beneficial for businesses that are unable to benefit from the tax allowances themselves. As previously noted, a small business loan or a flexible business loan can also fund the purchase of equipment.

Funding business growth The most suitable finance product to help fund a company’s growth is based on its expansion plan. For example, a company planning to expand through franchising may need a bank Franchise Support service. Companies operating in the field of new technology will have special needs, while professionals wishing to buy into a partnership may require a Partnership Capital Loan. In each of these scenarios bank customers will require the attention and advice of a specialist service that leading banks are organized to provide. At a later stage, well-managed companies with ambitious long-term plans may require to raise equity capital to support their organic business expansion, to fund management buyouts or to provide the cash consideration for acquisitions.

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Structured finance Major commercial banks provide a range of complementary financial products giving structured solutions for complex financial needs. Funds are generally available from £1 million to £100 million to established companies with a proven record of cash generation. The structured finance may serve a variety of purposes from management buyout to acquisition of a business or company or for a specific working capital requirement. The three main types of finance product available are term loan facilities, revolving credit facilities and overdraft facilities. Term loan and revolving credit facilities both provide funding for a specific purpose, which is then repaid from the future cash flow of the corporate borrower. In previous sections of this chapter, overdraft facilities and a range of commonly used asset-based solutions have already been described.

Venture capital and equity funding The anatomy of venture capital and private equity finance in relation to specific niche market opportunities is discussed at length in Part 3. For established companies with an eye on stock market flotation and both institutional and private funds, the route to a stock exchange main market listing is explained in Chapter 3.1 while a more detailed account of the requirements for listing on the stock exchange’s Alternative Investment Market (AIM), which offers a cost-effective alternative for smaller companies with proven management to raise capital, is given in Chapter 3.1.

Interest rate risk management Interest rate volatility can affect your bottom line profit if you borrow on a variable rate and interest rates rise increasing your cost of funds. If on the other hand you hold cash investments and interest rates fall, your return on these funds will be reduced. There is a range of approaches to interest rate management, which could include fixing your rate with a fixed rate loan as described in this chapter or using interest rate swap. More flexible approaches can protect you against adverse movements in rates but allow you to benefit when rates move favourably. If your borrowings (including borrowings with other financial organizations) are in excess of £100,000 HSBC could protect you against increased interest costs if UK interest rates rise. By understanding your risks and the options available to you most major banks will assist you to developing and implement an interest rate strategy.

2.7 Financial Reporting and Accounting – An Overview Michael Bordoley with Jitendra Pattani and Bee Lean Chew, Wilder Coe

This chapter provides an overview of the financial reporting and accounting requirements of the majority of entities carrying out trading or investment activities within the United Kingdom.1 A detailed description of the various vehicles through which business activities can be carried out is contained in Chapter 2.4.

Introduction All entities carrying out business activities within the United Kingdom have an obligation to produce accounts summarizing the entity’s financial activities and results generally at least once a year. The accounts prepared normally cover a period of 12 months, though this can be varied (as described in Chapter 2.4). The period-end date to which these accounts are prepared is known as the accounting reference date (ARD). This chapter summarizes the various financial reporting requirements and practical accounting issues faced by any entity looking to carry out its business activities in the United Kingdom. 1 This overview does not, however, cover specially regulated entities such as charities and registered social landlords, which have specialized requirements.

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Format of accounts Unincorporated entities: sole trader/partnership There is no formal requirement for sole traders or partnerships to prepare annual accounts in accordance with any predetermined format. However, in submitting the annual tax return to HM Revenue and Customs (HMRC), it is expected that the entity is to provide backing accounts supporting the figures included in the tax return, and these accounts should be prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP).2 As a bare minimum, the sole trader or partnership will be expected to submit a statement of income and expenditure for the year with their tax return, prepared in accordance with UK GAAP.

Incorporated entities: companies limited by shares or by guarantee The most common types of entity are companies limited by shares incorporated under the Companies Act 1985. In terms of corporate financial reporting, the United Kingdom is currently undergoing a transitional phase in terms of its financial reporting requirements to the extent that it is aiming to achieve convergence with international reporting standards. On 1 January 2005, it became compulsory for all UK publicly listed companies preparing consolidated accounts to prepare them in accordance with International Financial Reporting Standards (IFRSs). This requirement is not mandatory for non-public companies, though these may opt for early adoption, and therefore there is currently a divergence in accounting treatment across companies in the United Kingdom. As with unincorporated entities, incorporated entities submit backing accounts with their annual tax returns. Again, there is no formal standard to which these accounts are prepared, and a detailed statement of income and expenditure will suffice.

Incorporated entities: limited liability partnerships Accounting rules as applied to companies apply in the same manner to limited liability partnerships (LLPs), where the format and regulations are as 2 As for most countries, entities engaging in business activities in the United Kingdom are required by national law or regulation to prepare financial statements that conform to a required set of generally accepted accounting principles. In the United Kingdom, the preparation of financial statements is governed by a combination of statute and standard practice, the whole of which comprises UK Generally Accepted Accounting Practice (UK GAAP). The latter is codified by the Consultative Committee of Accountancy Bodies (CCAB) in the form of Financial Reporting Standards (FRSs). Note that, prior to 1990, accounting standards were issued in the form of Statements of Standard Accounting Practice (SSAPs) – in so far as these have not been superseded by FRSs, the guidelines provided by SSAPs are still relevant in the preparation of financial statements.

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set out in the Companies Act 1985, as amended by the Limited Liability Partnerships Act 2000. In respect of taxation requirements, provided the LLP carries on a trade or profession and is not purely an investment vehicle, it is considered to be tax-transparent, ie the LLP itself is not taxed on its income or capital gains. Instead, the members are taxed on their shares of the LLP’s profits and gains, in accordance with normal partnership rules.

Audit requirements Of the different vehicles through which a business can be carried out in the United Kingdom, only limited companies and LLPs are required to have their financial statements audited.

Definition of an audit An audit includes an examination of the financial statements by a registered auditor3 who, on completing the audit, makes a written report to the shareholders. It also includes an assessment of significant estimates and judgements? utilized by the directors in their preparation of the accounts, as well as the accounting policies adopted. The examination is performed on a test basis using evidence relevant to the amounts and disclosures shown in the financial statements. 3

For contact details of firms registered in the United Kingdom to carry out statutory audits: The Institute of Chartered Accountants in England and Wales Gloucester House 399 Silbury Boulevard Central Milton Keynes MK9 2HL www.icaew.co.uk The Institute of Chartered Accountants of Scotland CA House 21 Haymarket Yards Edinburgh EH12 5BH www.icas.org.uk The Institute of Chartered Accountants in Ireland CA House 83 Pembroke Road Dublin 4 www.icai.ie Association of Chartered Certified Accountants ACCA Connect 64 Finnieston Square Glasgow United Kingdom G3 8DT http://uk.accaglobal.com/

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On completion of the audit, the auditor will provide an opinion as to whether the financial statements provide a ‘true and fair’ view of: 1.

the state of the company’s affairs at the balance sheet date; and

2.

the profit or loss for the period under review.

In giving an opinion, the auditors state that they would have performed the audit with a view to obtaining reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud, other irregularities or errors. The opinion expressed within the audit report may be qualified should the audit uncover any areas of uncertainty or disagree with the directors’ treatment of items within the financial statements, or encounter any deficiency in evidence required to support amounts and disclosures in the financial statements. The extent of disclosure included within the audit report would depend on the degree to which the shortcoming would affect the reader of the financial statements.

‘True and fair’ concept This concept is a statutory requirement and central to the whole process of financial reporting in the United Kingdom. While there is no definitive guidance on what constitutes a ‘true and fair’ view, ‘[i]t is inherent in the nature of the concept that financial statements will not give a true and fair view without containing sufficient quantity and quality of information to satisfy the reasonable expectations of the readers to whom they are addressed.’4 The ‘true and fair’ concept is essentially dynamic in nature, and constantly evolves in response to changes in accounting and business practice. These changes are constantly monitored, and codifications of such changes are contained within the Financial Reporting Standards (FRSs), Statements of Standard Accounting Practice (SSAPs) and, most recently, IFRSs. For specialized activities such as charities and financial services, further guidance in the form of Statements of Recommended Practice (SORPs) is issued. While not statutory, the guidance provided in FRSs, SSAPs, IFRSs and SORPs is generally taken to be authoritative in the United Kingdom. Any departure from these principles would have to be clearly explained and justified in the financial statements. Finally, to emphasize the fundamental nature of this concept to UK financial reporting, it is important for anyone involved in the preparation of financial statements to note that the ‘true and fair’ concept can override the application of all FRSs, SSAPs and IFRSs, and the reasons for the override need to be disclosed in the financial statements. 4

Accounting Standards Board: Statement of Principles for Financial Reporting.

Financial Reporting and Accounting – An Overview

Table 2.7.1

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Thresholds for audit exemption Single Company/LLP

Turnover