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United Kingdom: Market Profile

Picture: UK factsheet
Picture: UK factsheet

1. Overview

The United Kingdom (UK), 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 UK supports multilateral efforts to promote human and economic development, reduce poverty, and boost shared prosperity around the world.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

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

June 2017
Prime Minister Theresa May called early elections resulted in a hung parliament and a Conservative minority government, supported by an agreement with the main 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.

October 2018
In the 2018 Budget statement, the Chancellor of the Exchequer indicated his intention to introduce, by April 2010, a tax on search engines, social media platforms and online marketplaces at a rate of 2% on their UK revenue, to reflect the value they derived from the participation of users in the UK.

March 29, 2019
This date marks the end of the two-year negotiation phase, which began when the formal Article 50 exit notification was delivered in March 2017, following which the UK will no longer be a member of the EU.

Sources: 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: IMF, World Bank, Fitch Solutions
Date last reviewed: October 22, 2018

4. External Trade

4.1 Merchandise Trade

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

Sources: WTO, Fitch Solutions
Date last reviewed: October 22, 2018

Graph: United Kingdom major export commodities (2017)
Note: Unclassified products account for USD15.7 billion of exports
Graph: United Kingdom major export commodities (2017)
Note: Unclassified products account for USD15.7 billion of exports
Graph: United Kingdom major export markets (2017)
Graph: United Kingdom major export markets (2017)
Graph: United Kingdom major import commodities (2017)
Note: Unclassified Products account for nearly USD13.5 billion of imports
Graph: United Kingdom major import commodities (2017)
Note: Unclassified Products account for nearly USD13.5 billion of imports
Graph: United Kingdom major import markets (2017)
Graph: United Kingdom major import markets (2017)

Sources: Trade Map, Fitch Solutions
Date last reviewed: October 17, 2018

4.2 Trade in Services

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

e = estimate
Source: WTO
Date last reviewed: October 22, 2018

5. Trade Policies

  • The UK currently participates in the free trade arrangements of the EU and European Free Trade Association (EFTA), and is a member of the World Trade Organization (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's scheme on generalised system of preferences (GSP) entered into effect on January 1, 2014. Under the scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded USD4,000 for four years in a row. As a result, the number of countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the mainland China remains a beneficiary, many of its exports, such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been 'graduated' from the preferential treatment. Hong Kong has been fully excluded from the EU's GSP scheme since May 1, 1998.

  • Currently, a number of mainland China-origin products are subject to the EU's anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong and regional exporters. In November 2016, the European Commission (EC) imposed a provisional anti-dumping duty on imports of some primary and semi-processed metals from mainland China. The rate of duty is between 43.5% and 81.1% of the net, free-at-Union-frontier price before duty, depending on the company. By way of comparison, the rate of duty for similar goods from Belarus is 12.5% of the net, free-at-Union-frontier price before duty. As at end-October 2018, the EU is not applying any anti-dumping measures on imports 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 3 mm 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 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. 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.

  • The recast WEEE Directive entered into force on August 13, 2012. In brief, the WEEE Directive imposes 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. On the heels of the recast RoHS and WEEE Directives, the EU's new framework Directive for setting eco-design requirements for energy-related product (ErP) is 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 mainland China mainland at present.

Sources: WTO – Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Multinational Trade Agreements


  1. European Economic Area (EEA)-EU-EFTA: While this agreement enhances trade flows, of the four countries in EFTA, only Switzerland is a fairly major trading partner. The EEA unites the EU member states and the EFTA states (Iceland, Liechtenstein, Norway and Switzerland) 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 Agreement: 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 leading 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 EC 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. EU-Canada Comprehensive Economic and Trade Agreement (CETA): CETA is expected to strengthen trade ties between the two regions, having entered into force on September 21, 2017. 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. The UK joined the European Economic Community (as it then was) on January 1, 1973, along with Denmark and Ireland. The EU, as it has become, now comprises 28 member states and the UK currently follows the EU's common external trade policy and measures, which enables it to benefit from tariff-free trade with the 27 other member states across Europe. These 28 member nations constitute a 'common market' in which the transfer of capital, goods, services or labour between member nations enjoys 'free movement'. 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. On 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.

Ratification Pending

  1. EU-Japan Economic Partnership Agreement (EUJEPA): 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 EU and Japan have agreed 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 EC, EUJEPA will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, EUJEPA was finalised in late 2017 and is expected to come into force by the end of the current mandate of the EC in 2019. The total trade volume of goods and services between the EU and Japan is EUR86 billion, and EUJEPA is expected to increase total exports to Japan by EUR13 billion by 2035 and to boost sectors, such as agri-food, textiles and leather products. 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 October 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.

  2. Southern African Development Community (SADC)-Economic Partnership Agreement: An agreement was signed between the EU and the SADC on June 10, 2016, and it is awaiting ratification. SADC consists of Botswana, Lesotho, Mozambique, Namibia, South Africa, Swaziland, Angola, Comoros, Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Seychelles, Tanzania, Zambia and Zimbabwe.

  3. Central America-EU Association Agreement: This agreement between the EU and Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama was first signed on June 29, 2012, and it is awaiting ratification.

Under Negotiation

  1. EU-United States (Transatlantic Trade and Investment Partnership): This agreement was expected to increase trade and services, but talks were suspended in 2017.

  2. EU-Australia Trade Agreement: The EU is Australia's second largest trade partner and on May 22, 2018, the Council of the EU authorised the opening of negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48 billion in 2017, while bilateral trade in services added an additional EUR27 billion. The negotiations aim to remove trade barriers, streamline standards and put European companies exporting to or doing business in Australia on an equal footing with those from countries that have signed up to the Trans-Pacific Partnership or other trade agreements with Australia.

Sources: WTO Regional Trade Agreements database, European Commission, Fitch Solutions, Bruegel

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

Sources: UNCTAD, Fitch Solutions
Date last reviewed: October 22, 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 EU 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. Although the UK does not have a formalised investment review body to assess the suitability of foreign investments in areas of national security sensitivity, an ad hoc investment review process does exist and is led by the relevant government ministry with regulatory responsibility for the sector in question (for example, the Department for Business, Energy, and Industrial Strategy, which would have responsibility for the 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. 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 more than 100 bilateral investment treaties (BITs), which are known in the UK as Investment Promotion and Protection Agreements (IPPAs) with many states in Asia, Europe, Latin America and Africa. Of these, several have been terminated, but 94 are in force and 11 others are signed, but not yet in force.

  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, ITA, US Department of Commerce, UNCTAD

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
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.

Sources: US Department of Commerce, Fitch Solutions

8. Taxation – 2018


9. Foreign Worker Requirements

9.1 Foreign Worker 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) – which 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 (intra-company transfer). As a result, 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 12 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 (intra-company 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 (intra-company 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 12 months after their Tier 2 (intra-company transfer) permission has expired.

In 2016, the British government increased the Tier 2 minimum salary threshold to GBP30,000 for experienced workers. This change was phased in, with the minimum threshold increased to GBP25,000 in fall 2016 and to GBP30,000 in April 2017. The minimum threshold for new entrants will remain at GBP20,800. Employers will continue to be able to recruit non-EEA graduates of UK universities without first testing the resident labour market and without being subject to the annual limit on Tier 2 (General) places, which will remain at 20,700 places per year. Additionally, it shall give extra weighting within the Tier 2 (General) limit to businesses sponsoring overseas graduates, and will allow graduates to switch roles within a company once they have secured a permanent job at the end of their training programme.

9.2 Localisation Requirements

The UK Government does not mandate stringent local employment rules, although 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 a 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.

9.3 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 travelling 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 travelling 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.

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.

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.

Sources: 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

Sources: 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 Competitiveness20/61

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk Index Rank19/202
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 Rank8/201
Operational Risk Score75.1

Source: Fitch Solutions
Date last reviewed: October 22, 2018

10.4 Fitch Solutions Risk Summary

The government will attempt to cushion Brexit's disruptive impact for UK industries through a 'phased process of implementation' or (in other words) 'transitional agreements'. 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.

Although the economy will see downside risks over a multi-year horizon as Brexit-related economic restructuring and labour shortages start to take shape, 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
Data last reviewed: October 30, 2018

10.5 Fitch Solutions Political and 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: October 22, 2018

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
UK Score77.5
Developed States Average73.063.370.976.281.8
Developed States Position (out of 27)6
Global Average49.649.749.949.149.8
Global Position (out of 201)8

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 Security Risk Index
New Zealand77.573.075.772.089.4
United States76.979.075.282.870.5
Isle of Man63.862.061.849.282.3
Developed Markets Averages73.063.3
Global Markets Averages49.649.7

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 the 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)

Note: Graph shows the main Hong Kong exports to/import from the United Kingdom (by consignment)
Date last reviewed: October 22, 2018

Graph: Merchandise exports to UK
Graph: Merchandise exports to UK
Graph: Merchandise imports from UK
Graph: Merchandise imports from UK

Note: Graph shows Hong Kong exports to/import from the United Kingdom (by consignment)
Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: October 22, 2018

Growth rate (%)
Number of UK residents visiting Hong Kong555,353
Number of UK citizens residing in Hong Kong17,9421.6

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

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

Sources: Hong Kong Tourism Board, Fitch Solutions

11.2 Commercial Presence in Hong Kong

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

Sources: Hong Kong Census and Statistics Department, Fitch Solutions

11.3 Treaties and agreements between Hong Kong and the United Kingdom

  1. Double Taxation Agreement (Effective date: December 20, 2010)
  2. IPPA (Effective date: April 12, 1999)
  3. BIT (Effective date: April 12, 1999)

Sources: Hong Kong Inland Revenue Department, Hong Kong Trade and Industry Department, UNCTAD, Fitch Solutions

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

Source: UK Consulate-General in Hong Kong

11.5 Visa Requirements for Hong Kong Residents

Visa free access for 6 months available.

Sources: UK Consulate-General in Hong Kong, Fitch Solutions

Content provided by Picture: Fitch Solutions – BMI Research
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