Firms look to overseas investment as UK economy falters

Chancellor George Osborne revealed a weak UK economy that is barely growing at all – indeed, he was forced to reduce his economic growth forecast for 2013 from 1.2 per cent to 0.6 per cent. It is no wonder therefore that British firms are turning their attentions overseas when considering their next investment as they feel there is no alternative but to boost the bottom line by looking abroad.

Among those countries that businesses are targeting are those in the Gulf as well as the fast-growing “BRIC” countries – Brazil, Russia, India and China.

As the likes of Dubai and Bahrain continue to diversify their economies away from an over-reliance of oil, international trade in the UAE has increased in recent years. Much of this is down to the so-called “free zones” that have heralded an important change for overseas investors. Previously, companies in the UAE, for example, had to be at least 51 per cent UAE-owned but now foreign investors can retain 100 per cent of their business in almost all sectors.

The very liberal tax policies in the UAE and neighbouring states also make the area attractive to foreign investors as does its straightforward but fair employment laws that mean hiring staff is an uncomplicated process. Throw in the largest man-made harbour in the world and a lack of customs duty and exporting to Dubai suddenly becomes even more attractive.

The Gulf States are also diversifying their economies away from a reliance on oil so that the likes of financial services and tourism – boosted by events such as the Bahrain Grand Prix – are now becoming a larger part of their economies and aiding further growth.

The so-called BRIC countries are also proving popular with British investors looking overseas. The “big four” are predicted by some to economically outgrow the G7 nations within the first half of this century – with around a quarter of the world’s land area and about 40 per cent of the world’s population, most of whom are under 30, it is clear to see why. Investment in these kinds of emerging markets is seen as a key part of long-term growth, with some western funds already investing heavily in the area.

Areas such as the Gulf and other emergent economies are also looking more attractive in the face of even greater financial uncertainty in markets closer to home – with nations such as Ireland, Portugal, Spain, Greece and most recently Cyprus in dire financial trouble. A recent survey found that around a third of mid-size UK businesses are most concerned about currency fluctuations, weak economies abroad and foreign regulations when investing overseas, so are keen to avoid economies that are making the headlines for the wrong reasons.

For more help in exporting your goods and services overseas, click here for the government’s UK Trade & Investment department, which offers a range of services and information to any UK business looking to trade overseas.

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