London as a Business Hub
Why you should think about starting and running a business in London
About London:
Immediately after the 2016 referendum, a notion prevailed that the United Kingdom would lose its global position of being one of the financial leaders in the world and an important financial hub once it exits the European Union (EU). This proved to be a huge concern for the business community and professionals that were serving them such as Lawyers, Accountants, Bankers etc.. The post-referendum notion is however gradually proving to be somewhat incorrect, as the United Kingdom in 2019 still stands as one of the leaders of global trade and foreign exchange markets, a poll conducted by Z/Yen Group and the China Development Institute (CDI) confirmed its second position after New York as a leading financial centre. If you have been thinking about setting up shop in London, our startup guide can be a great starting point.
The City of London, popularly known as the Square Mile, hosts over 500 financial, insurance and banking institutions from all over the world. The lists include giants like Ernst and Young, Goldman Sachs, Aviva, Lloyds among many others. The city ranks at number 2 just below New York as one of the top financial cities in the world, with a Global Financial Centres Index (GFCI) rating of 787. The bank of international settlements (BIS) further confirmed the strong position of the UK by confirming that the global currency turnover of the United Kingdom surged to a record $ 6.6 trillion, reaffirming its global dominance as a financial hub.
The success and strong position of the UK is mainly due to London, the city with the most economic activity and a diverse labour force. The city is proud of its leading lawyers, the best accountants and highly skilled doctors, all of them can be considered the best in the world. There are also other reasons such as the time-zone of London. The official working hours in London overlaps with the working hours in the Middle East, Asia and North and South America both. This ideal time-zone makes trading between businesses from East and West, with London at its very centre, easy and profitable.
London also offers somewhat flexible business regulations for new and existing firms as compared to the rest of the world. Forming a company in London is not only simple but also extremely cost-effective. If you are thinking about forming a company why don’t you utilise our formation services which comes as a complimentary service with our compliance package?
The turning point…
The journey of London to become the world’s mightiest financial hub began in 1986 when the British Prime Minister Margaret Thatcher introduced the ‘Big Bang’ reforms.
The ‘Big bang’ reforms were introduced to replace barriers that were contributing to the slow growth of many firms in industry at a slow pace, with much more flexible regulations that were necessary for sluggish financial markets to grow faster.
Soon after the implementation of these reforms, a large chunk of firms that were underperforming transformed into huge corporations and conglomerates within a matter of years. These reforms not only allowed the firms to grow at high speed but also allowed entrepreneurs to evolve their businesses innovatively.
We now see a majority of businesses introducing sophisticated financial practices, like virtual banking etc. to fulfil their daily business obligations and trade globally without any geographic or communication barriers.
London’s future outlook 2020 and beyond
With an ever-increasing population of the UK, London is expected to be populated by over 9 million people by 2020. London is all set to become a ‘Megacity’ by 2030 with its expected population to reach 10 million.
To meet the rising business demands and needs, the administration of London unveiled a business initiative ‘Towards a Greater London’ for Londoners. This initiative aims to make London an ideal destination for global trading.
The London Chamber of Commerce is already researching and surveying different business leaders in the industry to gather valuable information and provide insights to policy-makers. The steps proposed by the chamber, are aimed at providing the relevant expertise to the policy-makers to help them carve out the best business-friendly policies, and make London as one of the biggest generators of economic activities worldwide.
This article discusses the essentials steps undertaken by the administration as part of the initiative ‘Towards a Greater London’:
-Diverse workforce:
According to statistics released by LCCI (London Chamber of Commerce), more than half (51%) businesses struggle to find the right staff with the required skills. Also, two-thirds (67%) of the companies operating in London believe that students must gain work experience to acquire the soft skills needed to survive in the business world.
According to the initiative, the administration wants to maintain its primary commissioning control over the budget of the Skills Funding Agency in London to make way for demand-led training.
More steps will be taken to win the government’s approval for a London Visa for established sector-specific companies to sponsor non-EEA workers on the request of recognized small businesses.
By providing the necessary support to London Ambitions Career Offers, the initiative also plans to introduce a proper career counselling system that ensures every student knows what to do with their future, from school year 7.
The skill shortage makes hiring the best sometimes an issue, London, however, has a 5.1 on the global skills index, slightly behind the US at 5.7. There are however alternative opportunities which can compensate for the mediocre skill availability, London has the best in class professionals in the world, using these professionals such as Accountants or Lawyers for their expertise or to outsource work can add immense value, alternatively, you can use these specialists to upskill your employees.
-Promote digital advancement
Statistics presented by LCCI (2015) suggested that almost a quarter (24%) of businesses in London do not utilize digital marketing for their benefit.
With the initiative’s prime purpose to induce a friendly business environment, the administration plans to encourage new digital business practices in the City.
The administration believes that it is imperative to raise awareness about the benefits associated by having an online presence amongst traders and small businesses that are operating in the industry offline.
The administration also plans on prioritizing and promoting ‘London Digital Security Centre‘ to make sure that every small and medium-sized business operating in the industry, gets to avail this service sooner or later.
-Modify the housing system:
Almost 48% of London business owners believe that the undersupply of affordable housing acts as one of three barriers to London’s position as the best business place in the world. There is an incredible 47% of business leaders, that believe that government should take sufficient steps to increase the availability of affordable homes to rent.
As mentioned in the initiative, the administration aims to collaborate with the local authorities to relocate the perilous commercial space for residential usage and promote the increase of housing units around any local transport centre.
Moreover, with cooperation from local authorities, the London administration wants to make sure that there are enough houses available to rent in the new upcoming development projects. As an entrepreneur, you could focus on solutions to solve these problems. We as an Accounting firm work with developers, landlords and property tech specialists to help them set up and grow their businesses effectively.
LCCI’s initiative also brings about new recommendations to improve the transport infrastructure in London. You can learn more about the plan by going through the official document of ‘Towards a Greater London‘ on LCCI’s website.
Ease of doing business index
Ease of doing business index measures the impact of the country’s legislation and regulations on the business environment in quantifiable terms. It does not directly take into account the country’s infrastructure, inflation rate, crime rate and proneness to the broader markets.
In 2019, the UK jumped one spot up from number 9 in 2018 to number 8 with an Ease of doing business index score of 83.5 according to World Bank Group’s annual ratings.
This Ease of doing business index is an average of the scores assigned to 10 ‘Doing Business’ indicators.
Here are the statistics of 10 ‘doing business topics’ in the UK for the year 2019:
(Statistics for Ease of doing business index in the UK for 2019)
Starting a Business in London
London is a wonderland of renowned historical architecture, entertainment, theatre and business. It also holds the reputation of being one of the world’s most multicultural cities, making it the world’s melting pot for businessmen and women from different cultures, religions and ethnicities.
The surge in the number of startups over the past five years in the UK is an indication that London is the perfect spot for starting a business, growing a family and living life in general.
If you have decided to set up your business in London, then here is what you should do next:
Choose your business legal structure.
You will be required to choose a legal structure for your business when starting a business in the UK. The type of structure can be selected from the following:
- Sole Trader
- General Partnership
- Limited Partnership
- Limited Liability Partnership (LLP)
- Private Limited company (PLC)
- Public Limited Company
- Unlimited Company
- Social Enterprise
Choose a location and name your company:
After deciding on a legal structure, you will have to select a business name and an address for your company to get registered with HMRC for tax purposes, and to get it added to the list of registered companies in the UK.
If you prefer to work as a sole trader, then you may use your own name while registering, however, you’ll be required to provide details about your business address.
As far as Limited companies are concerned, they are required to register a business name with companies house.
Responsibilities when getting registered as a Limited Company
If you want to set a Limited Company in the UK, you have to hire directors and secretaries to manage your routine business activities early on. You will be legally required to set up a system that works out your shares and dividends.
You will also be expected to open a separate bank account, write memorandum and articles of association and register your company for corporation tax. You can do this easily by hiring an expert accountant.
If tax is a concern you might want to read the differences in tax implications between an LTD and a Sole-trader before making your decision.
Consult Gov.UK website or an accountant to know about additional rules
Every legal structure has its own obligations and requirements to be met, so it’s always wise to speak to an expert Accountant in London or contact Gov.uk for any additional requirements you need to know about, for instance, if you need a license for selling liquor or organizing music festivals.
You will also need to work out your insurance obligations and get yourself enrolled under a government pension regime.
NOTE: WHAT IF A FOREIGNER WANTS TO START A BUSINESS IN LONDON?
If you are a foreigner planning to base your business in London, then you need to make sure that you have the required visa and residence permit in hand.
You may contact the Home Office for any visa-related query or speak to an accountant in London, as they can advise you better on what to do and what not to do.
Finding an Accountant in London
Managing the company’s key finances can become somewhat tricky and daunting, so it’s always advisable to seek assistance by speaking to a nearby accounting firm, chartered accountant or business accountant before you begin.
Having a good accountant on board means you have a good advisor that is always ready to provide you with sound financial and tax advice, anytime and anywhere you want.
You will also have to work out your Corporation Tax, Annual Returns, Payroll (which includes RTI submissions), VAT returns and ensure your company’s compliance with key legislation.
Accountants are usually high in demand, and for this very reason, it can be somewhat exhausting to find an accountant that is fit for your business type.
You can utilize social media or other online platforms to search for available accountants in London; for instance, you can find a list of accountants by searching on google or use accounting directories. You can also review ACCA’s find a firm directory to find qualified accountants by area and expertise.
The best way is to attend business conferences and events that happen on a weekly or monthly basis. By attending these conferences, you may get a chance to interact and socialize with prominent market leaders in the industry. Networking with professionals from the similar industry will increase the likelihood of getting yourself referred to experienced accountants by someone.
You can also ask your industry organisation to refer an accountant in London from within their network.
Key business contacts in London when doing business
You can use the City Business Library to connect with other businesses (B2Bs) in London. Start making your B2B connections by using the mentioned databases below. Good news! These are free
- Fame: Fame consists of enormous data on 4 million companies actively operating in the UK.
- Mint: Mint consists of vast financial information of over 160 million active International companies.
You can also utilize other electronic resources to learn about the financial profiles of different companies. These are:
- IBISWorld
- MarketLine Advantage
- Passport (Euromonitor)
- Mint Global
- Retail Directory
Key terms to know about when starting a business in London
- HMRC: Her Majesty’s Revenue and Customs
- HMT: Her Majesty’s Treasury
- ACCA: Association of Chartered Certified Accountants
- ICAS: Institute of Chartered Accountants of Scotland
- BCC: British Chamber of Commerce
- BoE: Bank of England
- LCCI: London Chamber of Commerce and Industry
- APFA: Associate of Professional Financial Advisers
- BIS: Department for Business, Innovation and Skills
- UKTI: UK Trade & Investment
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