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Doing Business in Britain

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Britain has recorded an increasing number of foreign direct investments in recent years. Multinational companies prefer to start up businesses in Britain rather than other locations in Europe. Such an immense inflow of investors cannot be possible unless there are attractive factors and conditions for starting up businesses. However, at the same time, other local companies prefer to set up businesses in other countries other than Britain. This also implies that there may be factors that discourage the establishment of businesses in the country. This essay examines some of the benefits of staring up businesses in Britain, and the risks involved.

Benefits of Starting Up Businesses in Britain

High Economic Growth

Britain has been a remarkable force in Europe in terms of economic growth. Over the past years, the country has outpaced other European countries in terms of economic growth. This means that the country has an internal infrastructure that enhances growth of young businesses, which consequently leads to national economic growth. This gives an incentive to business entrepreneurs to start up businesses in the country (ukti.gov.uk, 2012).

Exchange Rates

The UK government has enacted policies that have helped in maintaining a stable and competitive pound, which has been consistent with the price stability objective of the country. Stability of a domestic currency is a key player in the success of any new business. Thus, small businesses can benefit from the stability of the pound, which will reduce the exposure of such companies to price volatility risks (ukti.gov.uk, 2012).

Inflation

The central bank of Britain is fully independent in controlling the level of interest rate in the economy, in order to meet the government's inflation target of 2% for the annual increase in CPI. This inflation control policy ensures that there is minimum or no volatility of prices of raw materials or other input factors, which are necessary for running a new business. Thus, owners of new businesses can enjoy stable and fair price of input factors in the primary stages of the business (Lopez, 2011).

Taxation of Businesses and Companies

The United Kingdom is a relatively light taxed economy. On an average, the overall tax burden in Britain is below the tax burden in countries like Germany, France, Belgium, and Denmark. In the case of companies, the government intends to reduce the corporate tax level from 24% to 22% as from 2014. Businesses can take advantage of this fair taxation policy of Britain, since they will get high after-tax income than would be the case in other countries in Europe (ukti.gov.uk, 2012).

ICT Infrastructure Development

Britain boasts of being among the countries that have the strongest ICT infrastructures in the world. With the privatization of a number of ICT service providers, the economy has enjoyed additional competition and reduced prices. It would be beneficial, therefore, for one to start a business in Britain, in order to enjoy the low costs of quality ICT services (ukti.gov.uk, 2012).

Despite the above benefits that individuals may enjoy by starting businesses in Britain, there are risks and obstacles that the businesses may encounter during their life.

Risks and Challenges to Starting Businesses in Britain

The British Reserve

Culturally, the British people tend to be highly reserved and distant to people who come from other foreign countries. It may take long for local individuals in Britain to accept and embrace a business owned by a foreign individual. Thus, before one starts a business in Britain, they must expect a certain degree of hostility on terms of acceptability of the business by the British community (communicaid.com, 2010).

Foreign business owners can face the risk of failure in business, in the event, that they lack a sense of humor in dealing with clients. Humor is an essential constitute of communication in Britain. Humor plays a substantial role in the success of businesses in Britain. This is because it is practically part of the culture of the British people. Thus, starting a business in the country without staff members that bear such traits may be a risky venture. It almost guarantees the business a 100% assurance to fail (communicaid.com, 2010).

Companies that intend to start businesses in Britain face the risk of harsh government regulations and policies. The UK is among the countries that have strict requirements to starting up businesses in the country. For example, it is hard for a company from a foreign country to acquire permission to run a business in the country. Thus, it remains to be that small businesses may have to incur extremely high costs to acquire legal permission to establish operations in the country (Cave, 2012).

Britain's wage rates are among the highest within the European zone. A large part of the work force of Britain is highly educated and competent, which makes it demand high wages. In fact, most domestic and established companies have resolved to outsource processes or labor from other countries such as China. Thus, starting up a business may imply that the business is highly likely to incur losses due to the high wage costs to employees within the organization (Cave, 2012).

Conclusion

Britain remains to be a rapidly developing country economically. This is evident from the number of immigrants in the country for employment purposes, and the inflow of multinational companies into the country. As much as there may be risks to establishing businesses in the country, it is evident that the benefits outweigh the risks. Britain is a suitable destination for starting businesses. Companies need to take advantage of the benefits that the British economy provides for business operations.

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