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Is the UK still a premium regulatory base for multinationals?
The UK has taken a hit over the past year in a global ranking of countries charting the cost and speed for multinationals setting up entities – due to increasing competition and the rapid improvement of jurisdictions – according to Mercator® by Citco’s (Mercator) latest report in the Entity Portfolio Management (EPM) series.
The UK EPM: Special Report provides direct insight in to the cost and time it takes for multinationals to manage entities in the United Kingdom (UK). Unlike survey based reports, our EPM reports are based on real-life data drawn directly from Mercator’s proprietary technology platform – Entica™. This enables us to provide a benchmark for multinationals’ expenditure and efficiency across 170 jurisdictions, and track year-on-year global rankings, published in the annual Mercator Entity Management Report.
International competition heats up
In 2021, the UK was the 3rd most favorable location for multinationals to base entities out of 170 jurisdictions. One year on and the UK has dropped to 7th in 2022. This is due to the rapid advancements of other jurisdictions in digitalizing company law procedures and a consequence of flexible company regulations, introduced across the world in response to the disruption caused by the COVID pandemic.
In this new digital landscape, other jurisdictions across the world have managed to significantly reduce the time to complete activities. Unfortunately this leaves the UK in a worse position comparatively, falling from the 14th fastest country in 2021, to 26th in 2022.
Competitive legal sector fees keeps cost down
However, the UK remains one of the most cost-effective jurisdictions to set up entities, rising from the 19th in 2021 to 14th cheapest country in 2022. This is driven by a highly competitive legal sector, which significantly lowers the cost relative to other jurisdictions due to competitive market pricing. Indeed, legal services in the UK are well established and often externalized which also further increases demand and in turn the supply.
Conclusion
Overall, our data shows that the UK is 36% cheaper and still 40% faster than the combined average of 170 jurisdictions worldwide.
The UK’s combination of lower costs and speed of business in managing multinational entities – paired with its straightforward legal system and international standing as a global financial center – means it remains an attractive legal base for multinationals.
However as the digitalization drive continues to sweep across the globe, more and more countries bring their corporate governance processes in to the digital age, it will be interesting to see how the UK fares in the global rankings in the future.
In summary, the UK has the following advantages that reduce both the cost and time taken in entity management:
- An ideal combination of cost levels and competitive speed of business in setting-up entities;
- The availability of electronic filings for almost all corporate related actions; and relatively swift processing time by Companies House;
- Widespread adoption of flexible remote working arrangements;
- E-signatures are accepted not only for internal documentation, but also by Companies House;
- It is common practice to approve corporate decisions by written resolutions instead of holding an actual meeting; and
- Board meetings can be held via teleconference and minutes require to be signed only by one person as a chairman.
Kariem Abdellatif
Head of Mercator by Citco, Citco C&T Holdings (Luxembourg) Sàrl
