Country outlook United Kingdom - CaixaBank Research
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Country outlook United Kingdom
Form of Government: Parliamentary monarchy
United Kingdom Capital: London
Official language: English
Population: 66.1 million inhabitants (2017)
Currency: Pound sterling (GBP)
Exchange rate: 1
EUR = 0.88 GBP (31/05/2018)
1 USD = 0.75 GBP (31/05/2018)
GDP: $2.6248 trillion (2.3% of world GDP)
GDP per capita: $39,735 ($44,118 purchasing power parity)
Ease of doing business: 7th in the world out of 190
according to the World Bank (Doing Business)
Religion: Christian: 59%
Time zone: 1 hour behind mainland Spain
Country outlook is a publication by CaixaBank Research that contains information and opinions from sources considered to be reliable. This document is for informative purposes only and
CaixaBank is not liable in any way for any use made thereof. The opinions and estimates are those of the CaixaBank Research and are liable to change without prior notice.
United Kingdom United Kingdom
Economic GDP. Year-on year change (%) CPI. Year-on-year change (%)
Forecast
forecast 4
Forecast
4
3
3
1.8 2.7 2.4
2 1.6 2.2
1.2
2
1
0 1
-1 0
Average 2013 2014 2015 2016 2017 2018 2019 Average 2013 2014 2015 2016 2017 2018 2019
2008-12 2008-12
• The economy will continue growing at a modest pace, below • After rebounding in 2017 due to pound’s sharp loss in value,
the euro area average, due to a slowdown in consumption. inflation will fall slowly as the depreciation’s impact on prices
We can still see signs of the inflationary upturn caused by wanes. Moreover, this drop will be partially offset by the
the depreciation of the pound and of investment, generated increased wage4 pressures of a labour market close to full
by the Brexit related uncertainty. Even so, the economic employment. We expect inflation to settle near the Bank of
slowdown4 will be contained thanks to the support provided 3
England’s target of 2% in 2019.
by a labour
3
market close to full employment and the Bank of
England’s accommodating monetary policy. In 2019 we 2
expect to2 see activity rebound slightly as the uncertainty
surrounding the Brexit negotiations lifts. 1
1
0
0
Economic Benchmark interest rate (%) Fiscal balance (% GDP)
-1 Forecast
policy and exchange rate (GBP/USD) Forecast 0
2 0.96
0.78 -2
0.72 0.71 -1.5
-1.8
-2.3
0.64 -4
1
-6
0.9 0.32
-8
0.5
0.3
0 0.00 -10
Average Average 2013 2014 2015 2016 2017 2018 2019 Average 2013 2014 2015 2016 2017 2018 2019
2008-12 2008-12 2008-12
Benchmark interest rate (left scale)
Exchange rate (right scale)
0,96
Current account (% GDP) Public debt (%0,64
GDP)
2 Forecast Forecast
0
0 100
0,32 87.0 86.3 85.9
-2
80
-2
1 -3.4 -4
-3.7 60 0,00
-4.1
-4 -6
40
-6 -8
0 20
-10
-8 0
Average 2013 2014 2015 2016 2017 2018 2019 Average 2013 2014 2015 2016 2017 2018 2019
2008-12 2008-12
• After reacting to Brexit with a preventive shift towards a • Following several years of austerity, the British Treasury has
more expansive monetary policy, the Bank of England abandoned its target of returning to surplus in 2020 in the
partially reversed its stance by raising interest rates in late interest of a plan that will provide it with the flexibility to
2017, as a result of rebounding inflation and the continuous implement a short-term fiscal stimulus if necessary while
improvement of the labour market. Looking ahead to 2018 preserving0 long-term fiscal sustainability. This room for
and 2019, and given the context of high uncertainty, we manoeuvre will not prevent the pubic debt to GDP ratio
expect the Bank to maintain its cautious attitude and from declining
-2100 gradually in upcoming years.
proceed gradually with the normalisation of the monetary
policy. Meanwhile, the pound sterling reacted to the -4 80
referendum with a strong depreciation that will partially 60
recover in 2018 and 2019 as the uncertainly surrounding the -6
negotiations wanes. 40
-8
20
Financial Private credit (% GDP) Gross external
0 debt (% GDP)
Forecast
conditions 250
Forecast
400
200
167.5 168.0 166.5 300
309.9 308.6 308.0
150
200
100
100
50
0 0
Average 2013 2014 2015 2016 2017 2018 2019 Average 2013 2014 2015 2016 2017 2018 2019
2008-12 2008-12
• The pace of credit growth has slowed thanks to a slight • The United Kingdom’s high level of foreign debt is largely
tightening of lending standards and the cooling of the real due to it being an international financial centre. However,
estate market, in part due to the uncertainty surrounding a scenario where the split with the EU is not entirely
Brexit. However, the banking sector is well capitalised amicable, where there is no agreement on services trade,
(14.6% of 250
CET1 capital) so macrofinancial risks appear to be 400 is economic and political instability at home, may
and there
contained.200
Looking to the years ahead, we expect credit to put the United Kingdom in a highly vulnerable position
continue growing moderately as the Bank of England abroad.300
proceeds with
150 the normalisation of its monetary policy.
200
100
Source: CaixaBank Research, based on data from Thomson Reuters Datastream, IMF, Bloomberg and Oxford Economics.
50 100
116 |
0 0
United Kingdom United Kingdom
Rating
AA Aa2 AA
• The rating agencies downgraded their ratings and revised the outlook for the British economy after the Brexit referendum.
• Moody’s recently downgraded its rating again and changed its outlook on the British economy to stable. The agency expects that
public finances will be depleted due to heightened pressure to increase public spending and weak economic growth.
• A country has “investment grade” if its rating is BBB- or higher (S&P and Fitch) or Baa3 or higher (Moody’s).
Political situation • Theresa May failed to secure a parliamentary majority in the June
2017 elections. Despite her weak position, we expect the
financial obligations to the European budget and includes a
commitment that if no other solution is found, the United Kingdom
Conservative Party to keep the Government in power until the will remain, de facto, in the customs union and the single market in
United Kingdom leaves the EU (March of 2019). Both the setback order to ensure there are no borders between Ireland and Northern
for the conservatives and the EU’s position of strength in the Brexit Ireland. Likewise, in March of 2018 the two sides agreed to establish
negotiations have put the Government closer to a scenario of a a transition period, meaning the United Kingdom would remain in
“soft Brexit”. the single market and customs union until December of 2020. We
• In December of 2017 the United Kingdom and the EU reached an expect the United Kingdom and the EU to agree to a statement of
agreement on the terms of the separation. This agreement defines principles on the framework of the future relationship in late 2018,
the amount that the United Kingdom must pay the EU for its past and that the two sides will continue negotiating in 2019-2020.
Long-term GDP growth (%) Population. Milions inhabitants
outlook 2.0 70
1.7 69.0
69
1.5
68
1.1
1.0 67
66.1
66
0.5
65
0.0 64
Average 2008-17 Average 2018-28 2017 2027
• Leaving the EU will have a negative impact on the British • Once the new relationship with the EU is established, the British
economy, especially for the financial sector and foreign trade. In economy should return to rates of growth similar to those of
the short-run, the magnitude and depth will depend on how previous years. The government must pay special attention to
uncertainty evolves; in the long-run, it will depend on how the existing imbalances, such as the high public debt and external
new relationship with the EU is articulated, particularly in terms debt. Addressing low productivity concerns will be key for
of trade and free movement of people. dynamising the economy.
Risks SHORT-TERM LONG-TERM
• Increased tension with the EU - + • Unfavourable agreement with the EU - +
• High household indebtedness - + • Limited productivity gains - +
• Larger external imbalance - + • Obsolete infrastructure - +
• Bubble in the real estate sector - + • Uncertainty about the model of state - +
Business STRENGTHS WEAKNESSES
environment • Ease of doing business. • Political and institutional instability after Brexit.
• Labour market flexibility. • Loss of productivity.
• Efficiency of the goods market. • Low-quality infrastructure.
Main • Finance.
72,4 94,5 95,1
• Industry: chemical, pharmaceutical, automotive, gas and petro-
87,8 and aeronautics.
56,8
• Legal and management consulting. leum,
sectors 66,2 70,7 79,6 71,5 60,2
CIBI | CaixaBank Index POSITION IN PILLARS 1. Accessibility SUBPILLARS
for Business COUNTRY RANKING
100
Top
Internationalisation 72.4 80 Investment relations with Spain
1 60 Similar tastes to Spain
Credit
67
40
5. Stability 94.5 2. Ease
56.8 20
of operating
0 Bottom
Macroeconomic stability
Distance, communications, and
agreements with Spain
Institutional stability
87.8
4. Financial 95.1 3. Commercial
environment attractiveness
— Western Europe — United Kingdom
(Min. 0 - Max. 100)
100
Note: The CIBI Index measures the ease of internationalisation for Spanish companies in each country.
80
The analysis is carried out for a total of 67 countries, resulting in a ranking that
reflects their attractiveness to Spanish companies. In the global ranking, the lower the number, the60 easier the internationalisation. In the pillars, on the other hand, the higher the
number, the easier the internationalisation. See the document “CIBI. CaixaBank Index for Business Internationalisation”, available at http://www.caixabankresearch.com/
40
Source: CaixaBank Research, based on data from Thomson Reuters Datastream, IMF, Bloomberg and Oxford Economics.
20
| 117United Kingdom United Kingdom
Taxation The United Kingdom is considered to be one of the United Kingdom is subject to this country’s taxes if it
countries in the world with the best tax breaks, both is founded in the United Kingdom or, otherwise, if its
for individuals and for companies. Corporate tax is main place of management and control is located in
set at 20% for small enterprises with earnings of up the country. Value added tax has a general rate of 20%
to GBP 300,000, although the government has while some product groups are levied at 5% and 0%.
announced a cut in this tax below 15%. In the United The 5% rate is applied, for instance, to baby products
Kingdom it is necessary to differentiate between such as car seats, prams, etc., materials related to
resident companies, which are subject to corporate energy saving in the home or residential buildings,
tax according to their overall earnings, and non- hygiene products, etc. The products included in the 0%
resident companies which only pay corporate tax on VAT category are basically foods, books, baby clothes,
the income obtained in the UK, as well as on any transport (caravans, boats, etc.), construction and
taxable income from assets used in order to set up or residential properties. Financial services, insurance,
become a permanent establishment. If a non-resident etc. are exempt. Special taxes are levied on certain
company carries out an investment related to a products, such as tobacco products, alcoholic drinks
source of income in the United Kingdom, this will be and oil.
subject to income tax. A resident company in the
Investment In the United Kingdom, foreign direct investment for with the services sector (financial, professional and
2015 was 39.532 billion dollars, putting it in eighth business). The main investing countries are: the US,
place worldwide. Most investments are associated the Netherlands and France.
Establishment LOCAL COMPANY
The most popular option for foreign investors is to market, such as the London Stock Exchange. Another
set up a limited liability company, either as an option is an unlimited company, where all
independent company or as a subsidiary of a foreign- shareholders have unlimited liability. Other forms of
owned company. The main advantage of a limited less common establishment are ordinary limited
company is that shareholders are liable for the shares partnerships, which has two types of partners with
they hold. There are also companies limited by different liabilities, or limited liability partnerships
guarantee, where each member of the company (LLP), which provide the advantages of limited
undertakes to contribute with an amount of company liability but allow partners freedom in internal
assets (form used for clubs, associations or other non- organisation and other arrangements typical of a
profit organisations) and limited public companies, conventional partnership.
where the shares in the company are listed on a
UK ESTABLISHMENT
Term used to unify concepts such as “representative and addresses of the company’s permanent
office” and “branch”. A foreign firm that wishes to representatives and/or the person resident in the
operate via these two forms must be registered as an United Kingdom authorised to represent the firm.
“Establishment” in the company registry (Companies The OS IN01 form must be accompanied by certified
House). To do this, it must complete a form (OS IN01) copies of the deed of incorporation and a copy of the
with details of the company in the United Kingdom, most recent accounts.
of the director and secretary, as well as the names
Alliances FREE TRADE ZONE
strategic There are five free trade zones in the United Kingdom: Liverpool Free Zone, Prestwick Airport Free Zone, Port
of Sheerness Free Zone, Southampton Free Zone and Port of Tilbury Free Zone.
JOINT VENTURE
A company can enter the United Kingdom market via a joint venture; the most widely used forms for this type
of establishment are limited companies or partnerships.
118 |United Kingdom United Kingdom
Customs FREE TRADE AGREEMENTS
conditions The 27 European Union Member States form part of tariff is applied for imported products; once effective,
the same territory for customs purposes. The very goods can circulate freely throughout all countries in
definition of a customs union validates the inexistence the EU.
of tariff barriers between Member States. A common
FREE TRADE ZONE
Goods are exempt from VAT and import duties and restricted. If the goods are re-exported, they will not
tariffs. In the free trade zones of the EU, goods can be pay any customs duties or internal indirect taxes. If,
processed under customs control prior to them on the other hand, the goods are released for free
entering EU territory or under the regime of inward circulation, the corresponding customs duties and
processing prior to re-exportation. When goods leave taxes for importation from the destination territory
a free trade zone, their final destination is not will have to be paid.
GENERALISED SYSTEM OF PREFERENCES (GSP)
The United Kingdom is one of the countries that grants tariff preferences by applying zero duty or reduced
tariffs to beneficiary countries (less developed countries).
Negotiations BUSINESS CULTURE
and protocol A formal, professional approach is taken. UK must always be present. It is not essential to exchange
businesspeople look for short-term results and only business cards. It’s also important to control effusive
accept an appointment if they are really interested as and excessive behaviour as they tend to be very
they value their time highly. Courtesy and discipline reserved.
Top fairs • Your Wedding Exhibition. • Olympia Beauty Show.
• Moving and Handling People. • The Franchise Show.
• Surface Design Show.
Websites • United Kingdom Tax Office (HM Revenue & Customs): https://www.gov.uk/government/organisations/hm-
of interest revenue-customs
• The London Chamber of Commerce: http://www.londonchamber.co.uk/
• Food Standards Agency: http://www.food.gov.uk/
• The Natural Environment Research Council (NERC): http://www.nerc.ac.uk/
• British Standards Institution: http://www.businesslink.gov.uk/
• HM Revenue & Customs: http://www.hmrc.gov.uk/
• Confederation of British Industries (CBI): http://news.cbi.org.uk/
• UK Trade & Investment | 1 More London Place | London SE1 2AF | Tel: +44 (0) 7880054760. http://www.gov.uk/
government/organisations/uk-trade-investment
Payment MEANS OF COLLECTION
and charging Payment is generally made by transfer, against they are considered good payers. Another widely
methods invoice, within 30-45 days. used measure is documentary credit, which can be
It is illegal for companies to withhold payments used to provide the seller with more guarantees of
beyond the time agreed with suppliers, and therefore collecting payment.
MEANS OF PAYMENT
Transfers are used in general, because it is a fast, Another option is documentary credit, especially
effective method, in pounds sterling or in euros. when the customer is not known.
EXCHANGE RATE INSURANCE
There are not usually large fluctuations with regard to the euro. Nonetheless, it is advisable to hedge against
exchange rate risk for future transactions.
CaixaBank We offer financing and services for companies in the United Kingdom through the CaixaBank branch in London.
in the country
| 119CaixaBank Date this edition was closed: 31/05/2018
in the world
Branches
Representative offices
Strategic alliances
Bogotá (Colombia)
New York (US)
Agadir (Morocco)
Casablanca (Morocco)
London (United Kingdom)
Paris (France)
Frankfurt (Germany)
Warsaw (Poland)
Singapore
Vienna (Austria)
Beijing (China)
Shanghai (China)
Hong Kong (China)
New Delhi (India)
Dubai (United Arab Emirates)
Cairo (Egypt)
Johannesburg (South Africa)
Istanbul (Turkey)
Milan (Italy)
Algiers (Algeria)
Tangier (Morocco)
Lisbon (Portugal)
São Paulo (Brazil)
Santiago de Chile (Chile)
Lima (Peru)
Mexico City (Mexico)United Kingdom branch Contact details 8th floor, 63 St Mary Axe Director: Joseph Zacharioudakis London, EC3A 8AA Tel. (+44) 0 20 7936 4227 United Kingdom
You can also read
