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United Kingdom: Market Profile

Picture: United Kingdom factsheet
Picture: United Kingdom factsheet

1. Overview

The United Kingdom, a leading trading power and financial centre, is one of a quintet of trillion dollar economies in Western Europe. Over the past two decades, the government has greatly reduced public ownership. Long-term political, economic, and regulatory strength, coupled with relatively low rates of taxation and inflation, are key factors that have made the UK attractive to foreign investors. As a founding member of the World Bank, the United Kingdom supports multilateral efforts to promote human and economic development, reduce poverty, and boost shared prosperity around the world.

Source: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

May 2015
Conservative Party won general election by a majority for first time since 1992. Liberal Democrat coalition partners lost all but eight seats. UK Independence Party won nearly four million votes, but retained only one of two seats won at by-elections.

June 2016
A majority of voters opted to quit the European Union. David Cameron resigned, succeeded as Prime Minister by his Home Secretary, Theresa May.

June 2017
An early elections, called by Prime Minister Theresa May to strength her hand in negotiating Britain's exit from the European Union, resulted in a hung parliament and a Conservative minority government, supported by an agreement with the main pro-British party in Northern Ireland, the Democratic Unionists.

July 2018
Jeremy Hunt assumed the role of the Secretary of State for Foreign and Commonwealth Affairs. Dominic Raab replaced David Davis as Brexit Secretary.

Source: BBC Country Profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: United Kingdom real GDP and inflation
Graph: United Kingdom real GDP and inflation
Graph: United Kingdom GDP by sector (2017)
Graph: United Kingdom GDP by sector (2017)
Graph: United Kingdom unemployment rate
Graph: United Kingdom unemployment rate
Graph: United Kingdom current account balance
Graph: United Kingdom current account balance

e = estimate, f = forecast
Sources: International Monetary Fun, World Bank, Fitch Solutions
Date last reviewed: August 21, 2018

4. External Trade

4.1 Merchandise Trade

Graph: United Kingdom merchandise trade
Graph: United Kingdom merchandise trade

Source: WTO
Date last reviewed: August 21, 2018

Graph: United Kingdom major export commodities (2017)
Graph: United Kingdom major export commodities (2017)
Graph: United Kingdom major export markets (2017)
Graph: United Kingdom major export markets (2017)
Graph: United Kingdom major import commodities (2017)
Graph: United Kingdom major import commodities (2017)
Graph: United Kingdom major import markets (2017)
Graph: United Kingdom major import markets (2017)

Source: Trade Map, Fitch Solutions
Date last reviewed: August 29, 2018

4.2 Trade in Services

Graph: United Kingdom trade in services
Graph: United Kingdom trade in services

Source: WTO
Date last reviewed: August 29, 2018

5. Trade Policies

  • The UK participates in the free trade arrangements of the European Union (EU) and European Free Trade Association (EFTA), and is a member of the World Trade Organisation (WTO). The EU has a common set of tariffs and customs levied on various imports and exports. As such, the UK’s trade policy is largely identical to that of the wider regional bloc. The EU updated its trade policy (and, by extension, its import tariffs, customs, duties, and procedures) in 2017. Trade arrangements with the EU are, however, almost certain to change after Brexit.
  • The UK Government has made clear that part of its overall Brexit strategy is to build closer trade relations with non-EU countries.
  • The EU is party to some 50 FTAs and, consequently, the UK’s access to the markets of the countries concerned is currently mediated through those agreements.
  • The EU has initiated anti-dumping (AD) proceedings against certain Chinese mainland-origin products. Currently, a number of Chinese mainland-origin products are subject to the EU’s AD duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass. As at end-December 2017, the EU did not apply any AD measures on imports originating from Hong Kong.
  • To combat the spread of the Asian long-horned beetle, in July 1999 the EU introduced emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.
  • For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. The EU has also adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from January 16, 2007. In addition, the EU has adopted a Directive to prohibit the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.
  • The EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006.
  • On December 3, 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive. The recast RoHS Directive was published on July 1, 2011 and entered into force on January 2, 2013. The Directive continues to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. Nonetheless, from July 22, 2019, the new Directive will widen the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.
  • Another important law concerns the WEEE Directive. With the formal approval on June 7, 2012, the recast WEEE Directive entered into force on August 13, 2012. In brief, the WEEE Directive will see Member States subject to higher collection/recycling targets (a 45% collection rate as of 2016 and 65% as of 2019) and a wider scope of measure covering essentially all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs.

    The EU’s framework Directive for setting eco-design requirements for energy-related product (ErP) is also now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.
  • REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. It requires EU manufacturers and importers of chemical substances (whether on their own, in preparation or in certain articles) to gather comprehensive information on properties of their substances that are produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.
  • Nine types of goods imported into the EU are subject to licensing. These goods are (broadly): textiles; various agricultural products; iron and steel products; ozone-depleting substances; rough diamonds; waste shipments; harvested timber; endangered species; and drug precursors. No quotas are imposed on textiles and clothing exports, as well as non-textile products exports from Hong Kong and the Chinese mainland at present.

Sources: WTO – Trade Policy Review, Global Trade Alert, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

The UK’s decision to leave the EU on June 23, 2016, followed by the commencement of the formal exit process on March 29, 2017, has led to a prolonged period of uncertainty. Following the start of the ‘agreement in principle’ on issues such as the divorce bill, EU/UK citizens’ rights and Irish border in the first phase of Brexit negotiations, the sides are negotiating the second phase of Brexit talks, focused on trade between the UK and the EU.

6.2 Multinational Trade Agreements


  1. European Economic Area-European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland): The European Economic Area (EEA) unites the EU Member States and the three EFTA states (Iceland, Liechtenstein, and Norway) into an Internal Market governed by the same basic rules. These rules aim to enable goods, services, capital, and persons to move freely about the EEA in an open and competitive environment, a concept referred to as the four freedoms.

  2. EU-Turkey Customs Union - the EU and Turkey are linked by a Customs Union agreement, which came into force on December 31, 1995. Turkey has been a candidate country to join the EU since 1999, and is a member of the Euro-Mediterranean partnership. The customs union with the EU provides tariff-free access to the European market for Turkey, benefitting both exporters and importers. Turkey is the EU's fourth-largest export market and fifth-largest provider of imports. The EU is by far Turkey's number one import and export partner. Turkey's exports to the EU are mostly machinery and transport equipment, followed by manufactured goods. At present, the Customs Union agreement covers all industrial goods, but does not address agriculture (except processed agricultural products), services or public procurement. Bilateral trade concessions apply to agricultural as well as coal and steel products. In December 2016, the European Commission proposed to modernise the Customs Union and to further extend the bilateral trade relations to areas, such as services, public procurement and sustainable development.

  3. The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada - CETA is expected to strengthen trade ties between the two regions, having come into effect in 2016. Some 98% of trade between Canada and the EU will be duty-free under CETA. The agreement is expected to boost trade between partners by more than 20%. The EU expects CETA to improve trade in goods and services between the two regions, while, at the same time, boosting FDI. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice-versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

Active, Under Re-Negotiation

  1. 1973 with Denmark and Ireland. The UK currently follows the EU's common external trade policy and measures. All EU member states adopt common external trade policy and measures. Meanwhile, 19 EU members, including Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, have adopted the euro as their legal tender.

  2. In March 29, 2017, the UK initiated the formal process of withdrawing from the EU. Under EU rules, the UK and the EU have two years to negotiate the terms of the UK’s withdrawal. The terms of the UK’s future relationship with the EU are unknown at this time. UK political leaders have said the UK intends to leave the EU Single Market and Customs Union and negotiate a comprehensive Free Trade Agreement with the EU.

Ratification Pending

  1. EU-Japan Trade Agreement - In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1 billion annually. According to the European Commission, the EU-Japan Economic Partnership Agreement (EPA) will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and is expected to come into force by the end of the current mandate of the European Commission in 2019. The total trade volume of goods and services between the EU and Japan is EUR86 billion. The key parts of the agreement will cut duties on a wide range of agricultural products and it seeks to open up services markets, in particular financial services, e-commerce, telecommunications and transport. As of August 2018, the agreement is awaiting ratification by the European Parliament and the Japanese Diet, following which it could enter into force in 2019. At the same time, negotiations with Japan continue on investment protection standards and investment protection dispute resolution. Japan is the EU’s second-biggest trading partner in Asia after China. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments, and electrical machinery. The agreement awaits ratification from all parties concerned.

  2. SADC-Economic Partnership Agreement (Botswana, Lesotho, Mozambique, Namibia, South Africa, Swaziland, Angola, Comoros, Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Seychelles, Tanzania, Zambia, and Zimbabwe): An agreement between EU and SADC delegations was reached in 2016 and is awaiting ratification, with 13 of the 35 needed states having ratified the agreement as of April 2018.

  3. Central America-EEU Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize, and Dominican Republic): An agreement between the parties was reached in 2012 and is awaiting ratification (29 of the 34 parties have ratified the agreement as of April 2018).

Sources: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: United Kingdom FDI stock
Graph: United Kingdom FDI stock
Graph: United Kingdom FDI flow
Graph: United Kingdom FDI flow

Source: UNCTAD
Date last reviewed: August 21, 2018

7.2 Foreign Direct Investment Policy

  1. The UK actively encourages FDI. The UK imposes few impediments to foreign ownership and, throughout the past decade, has been Europe’s top recipient of FDI. The UK government is a strong defender of the rights of any British-registered company, irrespective of its nationality of ownership.

  2. The UK is well supported by sophisticated financial and professional services industries and has a transparent tax system in which local and foreign-owned companies are taxed alike. The British pound is a free-floating currency with no restrictions on its transfer or conversion. Exchange controls restricting the transfer of funds associated with an investment into or out of the UK do not exist.

  3. As in all other European Union member countries, foreign equity ownership in the air transportation sector is limited to 49% for investors from outside of the EEA. Foreign ownership is limited in only a few strategically privatised companies, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defence). No individual foreign shareholder may own more than 15% of these companies. Theoretically, the government can block the acquisition of manufacturing assets from abroad by invoking the Industry Act 1975, but it has never done so. Investments in energy and power generation require environmental approvals. Certain service activities (like radio and land-based television broadcasting) are subject to licensing.

  4. The UK requires that at least one director of any company registered in the UK must be ordinarily resident in the UK. The UK, as a member of the Organisation for Economic Cooperation and Development (OECD), subscribes to the OECD Codes of Liberalisation, committed to minimal limits on foreign investment.

  5. While the UK does not have a formalised investment review body to assess the suitability of foreign investments in national security sensitive areas, an ad hoc investment review process does exist and is led by the relevant government ministry with regulatory responsibility for the sector in question (eg, the Department for Business, Energy, and Industrial Strategy who would have responsibility for review of investments in the energy sector).

  6. The UK government seeks to facilitate investment by offering overseas companies access to widely integrated markets. Proactive policies encourage international investment through administrative efficiency. The online business registration process is clearly defined, though some types of companies cannot register as an overseas firm in the UK, including partnerships and unincorporated bodies. Registration as an overseas company is only required when it has some degree of physical presence in the UK. After registering a business with the UK government, overseas firms must register for the corporation tax within three months.

  7. Furthermore, the Industry Act (1975) enables the UK government to prohibit transfer to foreign owners of 30% or more of important UK manufacturing businesses, if such a transfer would be contrary to the interests of the country.

  8. The UK has concluded 110 bilateral investment treaties, which are known in the UK as Investment Promotion and Protection Agreements (IPPAs) with many states in Asia, Europe, Latin America and Africa.

  9. In the UK, expropriation of corporate assets or the nationalisation of industry requires a special act of Parliament. A number of key UK banks became subject to full or part-nationalisation from early 2008 as a response to the financial crisis and banking collapse. In the event of nationalisation, the British government follows customary international law by providing prompt, adequate, and effective compensation.

  10. The UK does not impose forced data localisation rules and does not require foreign IT firms to turn over source code. The Investigatory Powers Act became law in November 2016 addressing encryption and government surveillance. It permitted the broadening of capabilities for data retention and the investigatory powers of the state related to data. As of May 2018, companies operating in the UK need to comply with the EU General Data Protection Regulation. The GDPR will have a significant impact on the business practices of companies operating in the UK. The extent to which the UK will maintain the requirements of the GDPR after the UK withdraws from the EU is unknown at this time.

Sources: WTO - Trade Policy Review, The International Trade Administration (ITA), US Department of Commerce

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
The cargo ports and freight transportation ports at Liverpool, Prestwick, Sheerness, Southampton, and Tilbury used for cargo storage and consolidation are designated as Free Trade Zones. No activities that add value to commodities are permitted within the Free Trade Zones, which are reserved for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.Free Ports are within a country's geographic boundary, but are considered to be outside of it for the purposes of customs duties. It means goods and parts can be imported, manufactured or re-exported from the zone without incurring the usual domestic import procedures or tariffs. Customs duties are payable on finished goods only when they have reached the host economy for sale, and then often at reduced rates. Products can also be made and processed in the zone for export, attracting no tax until they reach the foreign market.
Research and Development (R&D) incentivesSMEs, as defined, are entitled to a deduction equal to 230% of the qualifying expenditure on R&D in the year in which it is incurred, which can be surrendered for a cash payment (at a rate of GBP33.35 for each GBP100 of qualifying R&D spend) by companies that are trading at a loss or have not yet started to trade. Large companies are granted an R&D 'above the line' tax credit of 12% (increased from 11% from January 1, 2018) of their qualifying expenditure. Where the taxable profits can be attributed to the exploitation of patents, a lower effective rate of corporation tax applies. For 2018/19, the rate is 10%. Profits can include a significant part of the trading profit from the sales of a product that includes a patent, not just income from patent royalties. This scheme closed to new entrants in June 2016 (but will continue until 2021 for existing taxpayers), when a new arrangement was introduced. The new scheme retains several of the features of the earlier scheme, but focuses more on UK-based activities and meets revised OECD principles.
Regional incentivesThe Department of International Trade actively promotes direct foreign investment, and prepares market information for a variety of industries. The UK offers a range of incentives for companies of any nationality locating in depressed regions of the country, as long as the investment generates employment. The state authorities work with partner organisations in the devolved administrations - Scottish Development International, the Welsh Government and Invest Northern Ireland - and with London and Partners and Local Enterprise Partnerships (LEPs) throughout England, to promote each region’s particular strengths and expertise to overseas investors. Local authorities in England and Wales also have power under the Local Government and Housing Act of 1989 to promote the economic development of their areas through a variety of assistance schemes, including the provision of grants, loan capital, property, or other financial benefits. Separate legislation, granting similar powers to local authorities, applies to Scotland and Northern Ireland. Where available, both domestic and overseas investors may also be eligible for loans from the European Investment Bank.
Other incentivesAll businesses, regardless of size, can claim an annual investment allowance of 100% on the first GBP200,000 tranche per annum of capital expenditure incurred on most qualifying expenditure. This is restricted to a single allowance for groups of companies or associated businesses. A deduction equal to 150% of the qualifying expenditure on the remediation of contaminated or derelict land is given in the year incurred, which can be surrendered for a cash payment (at a rate of GBP24 for each GBP100 of qualifying land remediation spend) by companies that are trading at a loss.

There are special tax reliefs available for certain expenditure on UK film production, high-end television, animation, video games, theatres, orchestras, and museum and gallery exhibitions. There are no tax holidays and no other special foreign investment incentives in the United Kingdom.

Source: US Department of Commerce, Fitch Solutions

8. Taxation – 2018

  • Value added tax: 20%
  • Corporate income tax: 19%

Source: PwC Taxes at a Glance 2018

8.1 Important Updates to Taxation Information

  • Extensive and far reaching reforms to the UK's corporation tax system have been made in recent years. The reforms have a stated aim of creating a tax system that is easy to understand, simple to engage with, and hard to evade, that successfully supports investment in business and encourages hard work. The reforms are also intended to maintain the UK’s competitive position. The main areas of reform have included:
    • Reductions in the rate of corporation tax
    • Redefining the corporate tax base, including aspects of the OECD base erosion and profit shifting (BEPS) project
    • Policy and practice concerning tax evasion and unacceptable tax avoidance
    • Administration and collection, including plans for increased use of digital systems
  • For companies making claims under the large company research and development expenditure credit (RDEC) scheme, the 'above the line' tax credit was increased from 11% to 12% of qualifying expenditure from January 1, 2018. The UK introduced, with effect from September 30, 2017, a corporate criminal offence for facilitating tax evasion. Since April 2018, there has been an added levy on producers of soft drinks. Up to 2017, most of the reforms to tax rules were typically announced in November/December and March each year before becoming law in the Finance Act, usually in the following July. This pattern is disrupted in years of a general election. Therefore, a truncated Finance Act 2017 became law in April 2017 ahead of the general election that year. A more extensive Finance Act became law in November 2017 with several of those reforms effective from April 1, 2018.
  • The rate of corporation tax is 19% for both large and small companies. Legislation has been enacted to further decrease the rate to 17%, effective from April 1, 2020. The main rate of corporation tax for ring-fence profits (that is, profits from oil extraction and oil rights in the United Kingdom and the UK continental shelf) is 30% (small profits rate of 19%). The rates for ring-fence profits are not scheduled to change.
  • The United Kingdom has ratified its agreement to the OECD's Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the 'Multilateral Instrument' or 'MLI') and will deposit that instrument of ratification with the OECD in due course. The MLI will enter into force in the United Kingdom three clear months after the date of deposit. The MLI will have a fundamental impact on how taxpayers access double tax treaties (DTTs) to which it applies.
  • Upcoming reforms: a reduced rate of corporation tax for businesses based in Northern Ireland may be introduced. This is subject to joint approval by the Northern Ireland government and the UK Treasury. The commencement date has not yet been finally determined. It is proposed that, with effect from April 2019, non-resident companies will be liable to UK tax on the disposal of UK property; and, with effect from April 2020, income and gains that non-resident companies receive from UK property will be chargeable to corporation tax. Generally, reforms are expected to become law in February or March each year. Specifics on all major changes on treatment of tax are subject to Brexit negotiations.
8.2 Business Taxes
Type of TaxTax Rate and Base
Corporate Income Tax Rate19%
Profits that arise from oil or gas extraction, or oil or gas rightsSubject to a full rate of 30% and a small profits rate of 19%
Banking Sector Tax Rate19%; A supplementary tax is applicable to companies in the banking sector at 8% on profits in excess of GBP25 million
Capital Gains Tax Rate20%
Branch Tax Rate20%
Withholding Tax: Interest and Royalties20%
Withholding Tax: Branch Remittance Tax0%
Value-added tax (VAT); on any supply of goods or services, other than an exempt supply, made in the United Kingdom by a taxable person in the course of business (for businesses established in the United Kingdom only); taxable if annual supplies exceed GBP81,0000%/5%/20%
Stamp Duty; imposed on transfers of shares, securities and interests in certain partnerships; duty charged on the stampable consideration0.5%

Source: PwC Tax Summaries 2018
Date last reviewed: August 29, 2018

9. Foreign Worker Requirements

9.1 Localisation Requirements

The UK Government does not mandate stringent local employment rules, though at least one director of any company registered in the UK must be ordinarily resident in the UK.

The UK invoked Article 50 of the Lisbon Treaty on March 29, 2017, thereby triggering a two-year period in which the UK is set to negotiate new relationships with the EU and its member states, covering areas including immigration and trade. Notably, the ability of EEA nationals to live and work in the UK will continue unimpeded at least until the UK formally exits the EU, which is expected to be no earlier than two years after Article 50 is invoked (March 2019). It is expected that EEA nationals who are currently living and working in the UK will be permitted to stay once the UK has left the EU, but this is subject to final agreement between the UK and the EU. It is also unclear whether EEA nationals who seek to enter the UK after the UK has left the EU will be required to obtain work permission, and if so, whether they will need to do so on the same terms as non-EEA nationals. Both principles will be decided by the UK’s negotiations with Europe over the coming months and years.

9.2 Entry Requirements

In general, to enter the UK, you must have a travel document (in most cases a passport) that is usually required to be valid for six months after your proposed return date. Regardless of the duration or purpose of their visit, nationals of certain countries must obtain entry clearance (a visa) before traveling to the UK. Individuals from the relevant countries are commonly known as 'visa nationals'. In contrast, 'non-visa nationals' are not required to obtain entry clearance if traveling to the UK as visitors or business visitors (performing certain activities) for a period not exceeding six months. If the purpose of the visit is for work or employment, individuals, including non-visa nationals, must obtain appropriate entry clearance before traveling to the UK.

The UK government has introduced an immigration health surcharge (separate from the visa fee). The surcharge is payable by most non-EEA migrants coming to the UK for more than six months (to live, work or study), with exemptions available in some cases. The surcharge is set at GBP200 per year for the main applicant and each dependent, and GBP150 per year for a student.

9.3 Work Permits

UK employers are now required to pay an Immigration Skills Charge (ISC) for employing Tier 2 (General) and Tier 2 (ICT) migrant workers with some exceptions. The exact amount depends on the size of the organisation and how long the worker will be employed. For large sponsors, this amount is GBP1,000 per person per year. The Tier 2 (Minister of Religion) category applies to individuals coming to the UK as religious workers for religious organisations. Individuals coming to the UK under this category are required to meet the English language requirement at Level B2.

Immigration rules (HC1888) that came into effect on April 6, 2012 have wide-ranging implications for foreign employees, primarily affecting businesses looking to sponsor migrants under Tier 2 as well as migrants looking to apply for settlement in the UK. In particular, the UK Government has introduced a 12-month cooling off period for Tier 2 (General) applications similar to the one that is currently in place for Tier 2 (intracompany transfer). The effect of this is that, while those who enter the UK under Tier 2 (General) to work for one company will be able to apply in-country under Tier 2 (General) to work for another company, if they leave the UK, they will not be able to apply to re-enter the UK under a fresh Tier 2 (general) permission until twelve months after their previous Tier 2 (general) permission has expired.

In addition, those who enter the UK under Tier 2 (intra-company transfer) after April 6, 2011 will not be able to change their status in-country to Tier 2 (General) under any circumstances. If they leave the UK, they will also not be able to apply to enter the UK under Tier 2 (general) until 12 months after their previous Tier 2 (intra-company transfer) permission has expired. These provisions represent a significant tightening of the Tier 2 requirements. One of the consequences is that, where an individual is sent to the UK on assignment under Tier 2 (intracompany transfer), and the sponsoring company subsequently wishes to hire them permanently in the UK, they will not be able to apply either to remain in the UK under Tier 2 (General) or leave the UK and submit a Tier 2 (General) application overseas. This change will mean that employers will have to carefully consider the long-term plans for all assignees that they send to the UK and whether Tier 2 (intracompany transfer) is the most appropriate category. This is because, if the assignee is subsequently required in the UK on a long-term basis, it will not be possible for them to make a new application under Tier 2 (General) until at least twelve months after their Tier 2 (intra-company transfer) permission has expired.

9.4 New Tier 2 Rules (2016)

Intended for the stay associated with the performance of a highly qualified employment. A foreigner holding a blue card may reside in the country and work in the job for which the blue card was issued, or change that job under the conditions defined. High qualification means a duly completed university education or higher professional education which has lasted for at least three years. The blue card is issued with the term of validity three months longer than the term for which the employment contract has been concluded, however for the maximum period of two years. The blue card can be extended. One of the conditions for issuing the blue card is a wage criterion - the employment contract must contain gross monthly or yearly wage at least at the rate of 1.5 multiple of the gross average annual wage.

9.5 Business Travellers

Individuals coming to the UK as tourists or business visitors are normally granted admission for a period of six months. The rules regarding business visitors are complex and should be considered on a case-by-case basis. In general, business visitors are prohibited from working while in the UK or receiving a salary in the UK. However, they are allowed to attend meetings, transact business and negotiate contracts with UK companies. It is advisable that an individual planning to come to the UK as a business visitor have a letter from his or her employer stating the purpose and duration of the visit. The UK government has identified specific categories of individuals who are permitted to perform paid activities in the UK.

9.6 EEA and Swiss Nationals

Nationals of all EEA member countries, except Croatia, have full rights of free movement in the UK and do not require a work permission in order to work. Their dependents, including a spouse or civil partner, children and grandchildren who are under 21 years of age and parents or grandparents may join them in the UK, and enjoy a right of residence. For the purposes of entry on the grounds of employment, the list of countries extends to Switzerland, notwithstanding the fact that Switzerland is not a member of the EEA. Nationals of EEA countries have varying degrees of access to the UK labour market.

Source: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Aa2 (Stable)22/09/2017
Standard & Poor'sAA (Negative)
Fitch Ratings
AA (Negative)27/04/2018

Source: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness18/61

Source: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World ranking
Economic Risk Index Rank20/202
Short-Term Economic Risk Score
Long-Term Economic Risk Score73.2
Political Risk Index Rank10/202
Short-Term Political Risk Score
Long-Term Political Risk Score89.5
Operational Risk Index Rank10/201
Operational Risk Index Score75.1

Source: Fitch Solutions
Date last reviewed: August 29, 2018

10.4 Fitch Solutions Risk Summary

The triggering of Article 50 of the Lisbon treaty in March 2017 has set a two-year timeframe during which time the British government will have to negotiate its post-Brexit relationship with the EU. The breadth of options available is significant with regard to both the British economy and political landscape. The government will attempt to cushion the disruptive impact for UK industries through a 'phased process of implementation', or in other words 'transitional agreements'. There is a non-negligible risk that this may not be agreed in the allotted time and the UK may have to revert to WTO rules. As Britain will remain in the EU until the conclusion of an exit agreement, significant changes may take time to unfold. However, currency and economic growth risks could result in a weaker appetite for imports into the UK over the medium term.

While the economy will see downside risks over a multiyear horizon as Brexit-related economic restructuring and labour shortages start to take shape, but the risk of a sharp correction is limited. This is because the UK is one of the most globalised economies among developed states, with a world-leading financial services sector and deep and liquid domestic markets. As such, the improvement in global economic conditions will provide much-needed tailwinds to growth and the business environment.

Source: Fitch Solutions
Date last reviewed: August 31, 2018

10.5 Fitch Solutions Political & Economic Risk Indices

Graph: United Kingdom short term political risk index
Graph: United Kingdom short term political risk index
Graph: United Kingdom long term political risk index
Graph: United Kingdom long term political risk index
Graph: United Kingdom short term economic risk index
Graph: United Kingdom short term economic risk index
Graph: United Kingdom long term economic risk index
Graph: United Kingdom long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 21, 2018

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
UK Score77.3
Developed States Average72.963.370.975.881.8
Developed States Position (out of 27)8
Developed States Average72.963.370.975.881.8
Developed States Position (out of 27)8
Global Average49.749.850.049.349.9
Global Position (out of 201)10

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: United Kingdom vs global and regional averages
Graph: United Kingdom vs global and regional averages
Operational Risk IndexLabour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Secruity Risk Index
New Zealand78.0
Isle of Man65.0
Developed Markets Averages72.9
Global Markets Averages49.7

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 21, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with United Kingdom

Graph: Major export commodities to UK (2017)
Graph: Major export commodities to UK (2017)
Graph: Major import commodities from UK (2017)
Graph: Major import commodities from UK (2017)
Graph: Merchandise exports to UK
Graph: Merchandise exports to UK
Graph: Merchandise imports from UK
Graph: Merchandise imports from UK

Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Source: Hong Kong Census and Statistics Department, Fitch Solutions

Growth rate (%)
Number of UK residents visiting Hong Kong555,353
Number of UK citizens residing in Hong Kong117,942N/A

Visitor numbers Source: Hong Kong Tourism Board
Resident numbers Source: United Nations Population Division, Fitch Solutions

Growth rate (%)
Number of European residents visiting Hong Kong1,929,824

Source: Hong Kong Tourism Board

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of UK companies in Hong Kong675
- Regional headquarters122
- Regional offices221
- Local offices332

Source: Hong Kong Census and Statistics Department

11.3 Treaties and agreements between Hong Kong and United Kingdom

Alongside the Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) effective since 20 December 2010, Hong Kong also signed an IPPA with the UK in April 1999.

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

The British Chamber of Commerce in Hong Kong
Address: Room 1201, Emperor Group Centre, 288 Hennessy Road, Wan Chai, Hong Kong
Tel: (852) 2824 2211

Source: The British Chamber of Commerce in Hong Kong

UK Consulate in Hong Kong
Address: 1 Supreme Court Road, Admiralty, Hong Kong
Contact Form: Click here
Tel: (852) 2901 3000

Source: UK Consulate in Hong Kong

11.5 Visa Requirements for Hong Kong Residents

Visa free access for 6 months available.

Source: Visa on Demand

Content provided by Picture: Fitch Solutions – BMI Research
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