Denmark

Executive Summary

Denmark is regarded by many independent observers as one of the world’s most attractive business environments and ranks highly in indices measuring political, economic, and regulatory stability. It is a member of the European Union (EU), and Danish legislation and regulations conform to EU standards on virtually all issues. It maintains a fixed exchange rate policy, with the Danish Krone linked closely to the Euro. Denmark is a social welfare state with a thoroughly modern market economy heavily driven by trade in goods and services. Given that exports account for about 60 percent of GDP, the economic conditions of its major trading partners – the United States, Germany, Sweden, and the United Kingdom – have a substantial impact on Danish national accounts.

Denmark is a world leader in “green technology” industries, such as offshore wind and energy efficiency, and in sectors such as shipping and life sciences. Denmark is a net exporter of food. Its manufacturing sector depends on raw material imports. Within the EU, Denmark is among the strongest supporters of liberal trade policy. Transparency International regularly ranks Denmark as being perceived as the least corrupt nation in the world. Denmark is strategically situated to link continental Europe with the Nordic and Baltic countries. Transport and communications infrastructures are efficient.

The Danish economy experienced a contraction of 2.1 percent of GDP in 2020 due to COVID-19 followed by a 4.7 percent rebound in 2021, thereby weathering the pandemic with among the lowest declines in GDP in the EU. Denmark’s economic activity and employment have surpassed their pre-pandemic levels and trends, but companies across sectors cite labor shortages as a key challenge. In May 2022, the Ministry of Finance revised its GDP growth projections, forecasting 3.5 percent GDP growth in 2022, decelerating to 2 percent annual GDP growth in 2023. The Ministry projects the Danish economy will weather headwinds from the Russian invasion of Ukraine and surging energy prices, as well as elevated levels of inflation, due to its robust foundation, although economic activity will be at a slightly lower level. The Ministry anticipates the impact will mainly be through increased inflation and disruption of trade. Denmark’s underlying macroeconomic conditions, however, are healthy, and the investment climate is sound. The entrepreneurial climate, including female-led entrepreneurship, is robust.

New legislation establishing a foreign investment screening mechanism to prevent threats to national security and public order came into effect on July 1, 2021. The mechanism requires mandatory notification for investments in the following five sectors: defense, IT security and processing of classified information, companies producing dual-use items, critical technology, and critical infrastructure. It allows for voluntary notification for all sectors. The legislation does not apply to Greenland or to the Faroe Islands, though both are looking into potential legislation.

In 2020, the Danish parliament passed the Danish Climate Act, which established a statutory target for reducing greenhouse gas emissions by 70 percent from 1990 levels in 2030 and achieving net zero by 2050. In April 2022, the government presented a reform proposal on Danish energy policy to move towards the above goals and simultaneously achieve independence from Russian natural gas. The proposal includes plans for increased domestic production of biogas as well as natural gas from the North Sea, a quadrupling of combined onshore wind and solar power production capacity by 2030, and an expansion of district heating. The government also proposed green taxation to finance the transition with a differentiated carbon emission tax in addition to the EU carbon trading system.

Note: Additional information on the investment climates in the constituent parts of the Kingdom of Denmark, the Faroe Islands and Greenland, can be found at the end of this report.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 1 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 9 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 9.9 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 63,010 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

As a small country with an open economy, Denmark is highly dependent on foreign trade and investment. Exports comprise the most significant component (60 percent) of GDP. The Economist Intelligence Unit (EIU) ranks Denmark as the world’s sixth-most attractive business environment and the leading nation in the Nordic region. The EIU characterizes Denmark’s business environment as reflecting excellent infrastructure, a friendly policy towards private enterprise and competition, low bureaucracy, and a well-developed digital sector. Principal concerns include low productivity growth, a high personal tax burden, and potential capacity constraints on the labor market. Overall, however, operating conditions for companies are broadly favorable. Denmark ranks highly in multiple categories, including its political and institutional environment, macroeconomic stability, foreign investment policy, private enterprise policy, financing, and infrastructure.

As of February 2022, the EIU rated Denmark an “AA” country on its Country Risk Service, noting the country is on the “cusp of an upgrade.” Denmark ranked tenth out of 140 on the World Economic Forum’s 2019 Global Competitiveness Report and sixth on the EIU 2021 Democracy Index. Denmark has an AAA rating from Standard & Poor’s, Moody’s, and Fitch Group. “Invest in Denmark,” an agency of the Ministry of Foreign Affairs and part of the Danish Trade Council, provides detailed information to potential investors. Invest in Denmark has prioritized six sectors in its strategy to attract foreign investment: tech, cleantech, life sciences, food, maritime, and design and innovation. The website for the agency is https://investindk.com .

As an EU member state, Denmark is bound by EU rules on the free movement of goods, capital, persons, and certain services. Denmark welcomes foreign investment and does not discriminate between EU and other investors.

Denmark’s central and regional governments actively encourage foreign investment on a national-treatment basis, with relatively few foreign control limits, nor any reported bias against foreign companies from municipal or national authorities when compared to domestic investors. A foreign investment screening mechanism came into force July 1, 2021, to prevent threats to national security and public order from foreign direct investment, but there are otherwise no additional permits required by foreign investors. The mechanism requires mandatory notification for five sectors and allows for voluntary notification for all sectors. The sectors requiring mandatory notification are defense, IT security and processing of classified information, companies producing dual-use items, critical technology, and critical infrastructure. Mandatory notification applies for investments reaching 10 percent ownership or control, and voluntary notification can be made for investments where the company reaches 25 percent ownership or control. A pre-screening process exists to determine if the investment is in the critical technology or critical infrastructure sector. Notification and guidance all take place online, handled by the Danish Business Authority: https://businessindenmark.virk.dk/topics/Economy/Investments/ 

A foreign or domestic private entity may freely establish, own, and dispose of a business enterprise in Denmark. The capital requirement for establishing a corporation (Aktieselskab A/S) or Limited Partnership (Partnerselskab P/S) is $63,000 (DKK 400,000) and for establishing a private limited liability company (Anpartsselskab ApS) $6.300 (DKK 40,000). In 2019, the government lowered the capital requirements to set up a private limited liability company, which brought Denmark more in line with other Scandinavian countries. No restrictions apply regarding the residency of directors and managers.

Since October 2004, any private entity may establish a European public limited company (SE company) in Denmark. The legal framework of an SE company is subject to Danish corporate law, but it is possible to change the nationality of the company without liquidation and re-founding. An SE company must be registered at the Danish Business Authority if its official address is in Denmark. The minimum capital requirement is $137,000 (EUR 120,000).

Danish professional certification and/or local Danish experience are required to provide professional services in Denmark. In some instances, Denmark may accept equivalent professional certification from other EU or Nordic countries on a reciprocal basis. EU-wide residency requirements apply to the provision of legal and accountancy services.

In addition to investment screening cases, ownership restrictions apply to the following sectors:

Oil and Gas: Requires 20 percent Danish government participation on a “non-carried interest” basis.

Defense: The Minister of Justice must approve foreign investment in defense companies doing business in Denmark if such investment exceeds 40 percent of the equity or more than 20 percent of the voting rights, or if the investment gives the foreign interest a controlling share. This approval is generally granted unless there are security or other foreign policy considerations weighing against approval.

Maritime Services: There are foreign (non-EU resident) ownership requirements on Danish-flagged vessels other than those owned by an enterprise incorporated in Denmark. Ships owned by Danish citizens, Danish partnerships, or Danish limited liability companies are eligible for registration in the Danish International Ships Register (DIS). Vessels owned by EU or European Economic Area (EEA) entities with a genuine, demonstrable link to Denmark are also eligible for registration. Foreign companies with a significant Danish interest can register a ship in the DIS.

Civil Aviation: For an airline to be established in Denmark, it must have majority ownership and be effectively controlled by an EU state or a national of an EU state, unless otherwise provided for through an international agreement to which the EU is a signatory.

Financial Services: Non-resident financial institutions may engage in securities trading on the Copenhagen Stock Exchange only through subsidiaries incorporated in Denmark.

Real Estate: Ownership of holiday homes, also known as summer houses, is restricted to Danish citizens. Such homes are generally located along the Danish coastline and may not be used as full-year residences. On a case-by-case basis, the Ministry of Justice may waive the citizenship requirement for those with close familial, linguistic, cultural, or other close connections to Denmark or the specific property. In general, EU and EEA citizens may purchase full-year residential property or real estate that supports self-employment without obtaining prior authorization from the Ministry of Justice. Companies domiciled in an EU or an EEA Member State that have set up or will set up subsidiaries or agencies or will provide services in Denmark may, in general, also purchase real property in Denmark without prior authorization. Non-EU/EEA citizens must obtain authorization from the Ministry of Justice to purchase real estate in Denmark, which is generally granted to those with permanent residence in Denmark or who have lived in Denmark for a consecutive period of five years.

The most recent United Nations Conference on Trade and Development (UNCTAD) review of Denmark occurred in March 2013 and is available here:  unctad.org/en/PublicationsLibrary/webdiaeia2013d2_en.pdf . There is no specific mention of Denmark in the latest WTO Trade Policy Review of the European Union, revised in December 2019.

The EU Commission’s European Semester documents for Denmark are available here:  ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-correction/european-semester/european-semester-your-country/denmark_en   A 2017 Foreign Investment Regulation review by DLA Piper can be found here:  www.dlapiper.com/~/media/files/insights/publications/2017/11/denmark.pdf

Denmark ranked first out of 180 in Transparency International’s 2021 Corruption Perceptions Index. In the IMD 2021 World Competitiveness Ranking, Denmark ranked third out of 64 countries. The World Intellectual Property Organization (WIPO) ranked Denmark ninth out of 132 in its 2021 Global Innovation Index.

The Danish Business Authority (DBA) is responsible for business registrations in Denmark. As a part of the DBA, “Business in Denmark” provides information on relevant Danish rules and online registrations to foreign companies in English. The Danish business registration website, www.virk.dk , is the principal digital tool for licensing and registering companies in Denmark and offers a business registration process that is clear and complete.

Registration of sole proprietorships and partnerships is free of charge. For other types of businesses, online registration costs $106 (DKK 670). Registration by email or mail costs $341 (DKK 2,150).

The process for establishing a new business is distinct from that of registration. The Ministry of Foreign Affairs’ “Invest in Denmark” program provides a step-by-step guide to establishing a business at https://investindk.com/publications/step-by-step-guide-to-do-business-in-denmark , along with other relevant resources at https://investindk.com/our-services/how-to-set-up-a-business-in-denmark . The services are free of charge and available to all investors, regardless of country of origin.

The processing time for establishing a new business varies depending on the chosen business entity. Establishing a Danish private limited liability company (ApS), for example, generally takes four to six weeks for a standard application. Establishing a sole proprietorship (Enkeltmandsvirksomhed) is more straightforward, with processing generally taking about one week.

Those providing temporary services in Denmark must provide their company details to the Registry of Foreign Service Providers (RUT). The website ( www.virk.dk ) provides English guidance on registering a service with RUT. A public digital signature, referred to as a NemID or its replacement MitID, is required for those wishing to register a foreign company in Denmark. A CPR number (a 10-digit personal identification number) and valid identification are needed to obtain a NemID/MitID. Danish citizenship is not a requirement.

Denmark defines small enterprises as those with fewer than 50 employees. Annual revenue or the yearly balance sheet total must be lower than $14.1 million (DKK 89 million) or $7.0 million (DKK 44 million), respectively. Medium-sized enterprises cannot have more than 250 employees. Limits on annual revenue or the yearly balance sheet total are $49.7 million (DKK 313 million) or $24.8 million (DKK 156 million).

Danish companies are not restricted from investing abroad, and Danish outward investment has exceeded inward investments for more than a decade.

3. Legal Regime

Denmark’s judicial system is highly regarded and considered fair. Its legal system is independent of the government’s legislative branch and includes written and consistently applied commercial and bankruptcy laws. Secured interests in property are recognized and enforced. The World Economic Forum’s (WEF) 2019 Global Competitiveness Report ranked Denmark as the world’s tenth most competitive economy and fourth among EU member states, characterizing it as having among the best functioning and most transparent institutions in the world. Denmark ranks high on specific WEF indices related to macroeconomic stability (first), labor market (third), business dynamism (third), institutions (seventh), ICT adoption (ninth), and skills (third).

To facilitate business administration, Denmark maintains only two “legislative days” per year—January 1 and July 1—as the only days when new laws and regulations affecting the business sector can come into effect. Danish laws and policies granting national treatment to foreign investments are designed to increase FDI in Denmark. Denmark consistently applies high standards to health, environment, safety, and labor laws. Danish corporate law is generally in conformity with current EU legislation. The legal, regulatory, and accounting systems are relatively transparent and follow international standards.

Bureaucratic procedures are streamlined and transparent; proposed laws and regulations are published in draft form for public comment. Public finances and debt obligations are transparent.

The government uses transparent policies and effective laws to foster competition and establish “clear rules of the game,” consistent with international norms and applicable equally to Danish and foreign entities. The Danish Competition and Consumer Authority (CCA) works to make markets well-functioning so that businesses compete efficiently on all parameters. The CCA is a government agency under the Danish Ministry of Industry, Business, and Financial Affairs. It enforces the Danish Competition Act. This Act, along with Danish consumer legislation, aims to promote efficient resource allocation in society, promote efficient competition, create a level playing field for enterprises, and protect consumers.

Corporate tax records of all companies, associations, and foundations that pay taxes in Denmark are published by the tax authorities according to public law since December 2012 and are updated annually. The corporate tax rate is 22 percent. Greenland and the Faroe Islands retain autonomy for their respective tax policies.

Publicly listed companies in Denmark must adhere to the Danish Financial Statements Act when preparing their annual reports. The accounting principles are International Accounting Standards (IAS), International Financial Reporting Standards (IFRS), and Danish Generally Accepted Accounting Principles (GAAP). Financial statements must be prepared annually. The Danish Financial Statements Act covers all businesses.

Private limited companies, public limited companies, and corporate funds are obliged to prepare financial statements under accounting classes determined by company size. There are four different accounting classes: A, B, C and D. Accounting class B is further divided into micro B and B, and C is divided into medium-sized C and large C. The smallest companies belong to accounting class A, while the largest belong to accounting class D. The classification is based on the assessed size of the company based on two out of three parameters: net revenue, balance sheet, and number of employees.

Personal companies as well as companies with limited liability (Class A): Less than an annual average of 10 full-time employees and total assets not exceeding $1.1 million (DKK 7 million) or net revenue not exceeding $2.2 million (DKK 14 million) during the fiscal year. According to the Danish Financial Statements Act, personally-owned businesses, personally-owned general partnerships (multiple owners), and general funds are characterized as Class A; there is no requirement to prepare financial statements unless the owner voluntarily chooses to do so.

Class B. Private limited liability companies, commercial funds, and companies with limited liability. Micro businesses (Class micro B): Less than an annual average of 10 full-time employees and total assets not exceeding $429,000 (DKK 2.7 million) or net revenue not exceeding $858,000 (DKK 5.4 million) during the fiscal year.

Small businesses (Class B): Less than an annual average of 50 full-time employees and total assets not exceeding $7.0 million (DKK 44 million) or net revenue not exceeding $14.1 million (DKK 89 million) during the fiscal year.

Medium-sized enterprises (Class C medium): Less than an annual average of 250 full-time employees and total assets not exceeding $24.8 million (DKK 156 million) or net revenue not exceeding $49.7 million (DKK 313 million) during the fiscal year.

Large companies (Class C large): Companies that are neither small nor medium companies, and have an annual average of at least 250 full-time employees, total assets in excess of $24.8 million (DKK 156 million), or net revenue in excess of $49.7 million (DKK 313 million) during the fiscal year, but are not a class D company.

Accounting class D: Publicly-traded companies and state-owned stock-based enterprises.

Large companies (Class C and D) are required to report annually on environmental, social, and governance (ESG) efforts. This includes reporting on environmental; social; labor and human rights; and anti-corruption and bribery efforts. The reporting requirement covers four components: the company’s business model, material risks associated with each of the four issue areas, non-financial key performance indicators, and integrative referral to the financial amounts provided elsewhere in the annual report. There is no requirement for companies to have policies on the four issues, though they are required to follow a do-or-explain principle that requires companies to explain their policies in substance or explain why they have decided not to have a policy on the issue. For implemented policies, companies are required to disclose the substance of the policy and how they translate policies into action.

The rules on reporting generally follow EU Directive 2014/95/EU on disclosure of non-financial information though certain issues, including reporting on the company’s impact on climate change, are stricter in Denmark than the directive. The rules on reporting on these issues allow for an exception if the companies report on similar issues using international standards such as UN Global Compact’s Communication on Progress.

All government draft proposed regulations are published at “Høringsportalen” ( www.hoeringsportalen.dk ) and are available for comment from interested parties. Following the comment period, the government may revise draft regulations before publication on the Danish Parliament’s website ( www.ft.dk ). Final regulations are published at www.lovtidende.dk  and www.ft.dk . All ministries and agencies are required to publish proposed regulations. Denmark has a World Bank composite score of 4.75 for the Global Indicators of Regulatory Governance, on a zero to five scale. Concerning governance, the World Bank suggests the following areas for improvement:

Affected parties cannot request reconsideration or appeal adopted regulations to the relevant administrative agency.

There is no existing requirement that regulations be periodically reviewed to see whether they should be revised or eliminated.

Denmark is a member of the European Union and is an active supporter of the internal market. As a result, many aspects of business regulation are dictated by the EU and hence aligned with other EU Member States.

Denmark adheres to the WTO Agreement on Trade-Related Investment Measures (TRIMs); no inconsistencies have been reported.

Denmark’s decision-making power is divided into the legislative, executive, and judicial branches. The principles of separation of power and an independent judiciary help ensure democracy and Danish citizens’ legal rights. The district courts, the high courts, and the Supreme Court represent the Danish legal system’s three basic levels. The legal system also comprises other institutions with special functions, e.g., the Maritime and Commercial Court.

For further information, please see:  domstol.dk/om-os/english/the-danish-judicial-system/

As an EU member state, Denmark is bound by EU rules on the free movement of goods, capital, persons, and certain services. The government agency “Invest in Denmark” is part of the Danish Trade Council and is situated within the Ministry of Foreign Affairs. The agency provides detailed information to potential investors. The website for the agency is  investindk.com . The Faroese government promotes Faroese trade and investment through its website  faroeislands.fo/economy-business . For further information concerning Greenland’s investment potential, please see Greenland Venture at  www.venture.gl  or the Greenland Tourism & Business Council at  visitgreenland.com .

The Danish Competition and Consumer Authority (CCA) reviews transactions for competition-related concerns. A merger or takeover is subject to approval by the CCA. Large-scale mergers also require approval from EU competition authorities. According to the Danish Competition Act, the CCA requires notification of mergers and takeovers if the aggregate annual revenue in Denmark of all undertakings involved is more than $134 million (DKK 900 million) and the aggregate yearly revenue in Denmark of each of at least two of the undertakings concerned is more than $15.9 million (DKK 100 million), or if the aggregate annual revenue in Denmark of at least one of the undertakings involved is more than $604 million (DKK 3.8 billion) and the aggregate yearly worldwide revenue of at least one of the other undertakings concerned is more than $604 million (DKK 3.8 billion). When a merger results from the acquisition of parts of one or more undertakings, the calculation of the revenue referred to shall only comprise the share of the revenue of the seller or sellers that relates to the assets acquired. Merger control provisions are contained in Part Four of the  Danish Competition Act and in the Executive Order on the Notification of Mergers . Revenue is calculated under the Executive Order on the Calculation of Turnover in the Competition Act .

A full notification of a merger must include the information and documents specified in the full notification form, Annex 1 – Information for Full Notification of Mergers . A simplified notification of a merger must include the information and documents specified in the simplified notification form, Annex 2 – Information for Simplified Notification of Mergers . From August 1, 2013, merger fees are payable for merger notifications submitted to the CCA. The fee for a simplified notification amounts to $7,950 (DKK 50,000). The fee for a full notification amounts to 0.015 percent of the aggregate annual turnover in Denmark of the undertakings involved; this fee is capped at $238,400 (DKK 1,500,000).

Additional information concerning notification of mergers is available in the Guidelines to the Executive Order on Notification of Mergers and on Merger Fees . More general information on Danish merger control can be found in the Merger Guidelines .

By law, private property can only be expropriated for public purposes, in a non-discriminatory manner, with reasonable compensation, and under established principles of international law. There have been no recent expropriations of significance in Denmark.

Monetary judgments under the bankruptcy law are made in freely convertible Danish Kroner. The bankruptcy law addresses creditors’ claims in the following order: (1) costs and debt accrued during the treatment of the bankruptcy; (2) costs, including the court tax, relating to attempts to find a solution other than bankruptcy; (3) wage claims and holiday pay; (4) excise taxes owed to the government; and (5) all other claims.

4. Industrial Policies

Performance incentives are available to both foreign and domestic investors. Examples include grants or preferential financing in designated regional development areas. Foreign subsidiaries located in Denmark can participate in government-financed or subsidized research programs on a national-treatment basis.

Denmark is recognized as a global leader in green and renewable energy. The government provides a multitude of support programs to private households and companies for energy efficiency renovations. Similarly, several programs exist for maturation and tech commercialization of green technologies. In December 2021, the Danish parliament reached a political framework agreement for a total of $2.5 billion (DKK 16 billion) support for carbon capture, utilization, and storage (CCUS) between 2022 and 2030. The Energy Technology Development and Demonstration Program (EUDP) supports private companies and universities to develop and demonstrate new energy technologies, in support of Denmark’s goal of a 70 percent carbon reduction by 2030 and climate neutrality by 2050. The EUDP has contributed $905.9 million (DKK 5.7 billion) to more than 1,000 projects since its inception in 2007. An overview of the programs can be found on the Danish Energy Agency’s website in Danish: https://ens.dk/service/tilskuds-stoetteordninger .

The only free port in Denmark is the Copenhagen Free Port, operated by the Port of Copenhagen. The Port of Copenhagen and the Port of Malmö (Sweden) merged their commercial operations in 2001, including the free port activities, in a joint company named CMP. CMP is one of the largest port and terminal operators in the Nordic Region and one of the largest Northern European cruise ship ports; it occupies a key position in the Baltic Sea region for the distribution of cars and transit of oil. The facilities in the Free Port are mainly used for tax-free warehousing of imported goods, for exports, and for in-transit trade. Tax and duties are not payable until cargo leaves the Free Port. The processing of cargo and the preparation and finishing of imported automobiles for sale can freely be set up in the Free Port. Manufacturing operations can be established with permission of the customs authorities, which is granted if special reasons exist for having the facility in the Free Port area. The Copenhagen Free Port welcomes foreign companies establishing warehouse and storage facilities.

Danish law mandates performance requirements only in connection with investments in hydrocarbon exploration, where concession terms typically require a fixed work program, including seismic surveys, and in some cases, exploratory drilling, consistent with applicable EU directives. Performance requirements are primarily designed to protect the environment, mainly by encouraging reduced energy and water use. Several environmental and energy requirements are universally applied to households as well as businesses in Denmark, both foreign and domestic. For instance, Denmark was the first of the EU countries, in January 1993, to introduce a carbon dioxide (CO2) tax on business and industry. This includes specific reimbursement schemes and subsidy measures to reduce the costs for businesses, thereby safeguarding competitiveness.

Performance requirements are governed by Danish legislation and EU regulations and are applied uniformly to domestic and foreign investors. Potential violations of the rules governing this area are punishable by fines or imprisonment.

The Danish government does not follow “forced localization” policies, nor does it require foreign IT providers to turn over source code or provide access to surveillance. The Danish Data Protection Agency, the Ministry of Justice, and the Ministry of Culture are the entities involved with data storage.

5. Protection of Property Rights

Property rights in Denmark are well protected by law and in practice. Real estate is chiefly financed through the well-established Danish mortgage bond credit system, the security of which compares to that of government bonds. In compliance with the covered bond definition in the EU Capital Requirements Directive (CRD), the Danish mortgage banking regulation allows for commercial banks to have the same opportunities as mortgage banks and ship-financing institutions to issue covered bonds. Only issuers that have been granted a license from the Danish Financial Supervisory Authority (FSA) are permitted to issue Danish covered bonds.

Secured interests in property are recognized and enforced in Denmark. All mortgage credits in real estate are recorded in local public registers of mortgages. Except for interests in cars and commercial ships, which are also publicly recorded, other property interests are generally unrecorded. The local public registers are a reliable system of recording security interests. Denmark ranked ninth out of 129 countries in the Property Rights Alliance’s International Property Rights Index 2021, and sixth in its region.

Intellectual property rights (IPR) in Denmark are well protected and enforced. Denmark has ratified and adheres to key international conventions and treaties concerning protection of IPR, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and several treaties administered by the World Intellectual Property Organization (WIPO), including the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty.

For additional information about national laws and points of contact at local IPR offices, please see WIPO’s country profiles at www.wipo.int/directory/en .

A list of attorneys in Denmark known to accept foreign clients can be found at dk.usembassy.gov/u-s-citizen-services/attorneys.  This list of attorneys and law firms is provided by the U.S. Embassy as a convenience to U.S. citizens. It is not intended to be a comprehensive list of attorneys in Denmark, and the absence of an attorney from the list is in no way a reflection on competence. A complete list of attorneys in Denmark, Greenland, and the Faroe Islands may be found at the Danish Bar Association web site: www.advokatnoeglen.dk .

United Kingdom

Executive Summary    

The United Kingdom (UK) is a popular destination for foreign direct investment (FDI) and imposes few impediments to foreign ownership.  In the past decade, the UK has been Europe’s top recipient of FDI.  The UK government provides comprehensive statistics on FDI in its annual inward investment report:  https://www.gov.uk/government/statistics/department-for-international-trade-inward-investment-results-2020-to-2021.  

The COVID pandemic triggered a massive expansion of government support for households and businesses.  The government focused on supporting business cashflow and underwriting over £200 billion ($261 billion) in loans from banks to firms.  Although aggregate investment grew by 5.3 percent in 2021, levels remain below their pre-pandemic peak.  Most analysts expect a rebound in investment growth in 2022, however, driven in part by the government’s investment tax super-deduction, which allows business to claim back 130 percent of the cost of an eligible capital investment on their taxable profits up until March 2023, a more stable post-Brexit regulatory framework, and the reduction of economic and mobility restrictions imposed to cope with the pandemic.  Most of these measures were phased out by October 2021.  Their fiscal impact has been large, however, and the budget deficit reached 8.5 percent of GDP.  The government has committed to fiscal consolidation, and in September 2021 announced that it planned to increase the corporation tax rate from 19 percent to 25 percent by 2023 and national insurance contributions by 2.5 percent to fund additional health and social care spending.

In response to declining inward foreign investment each year since 2016, and amidst the sharp but temporary recession related to the pandemic, the UK government established the Office for Investment in November 2020.  The Office is focused on attracting high-value investment opportunities into the UK which “align with key government priorities, such as reaching net zero, investing in infrastructure, and advancing research and development.”  It also aims to drive inward investment into “all corners of the UK through a ‘single front door.’”

The UK formally withdrew from the EU’s political institutions on January 31, 2020, and from the bloc’s economic and trading institutions on December 31, 2020.  The UK and the EU concluded a Trade and Cooperation Agreement (TCA) on December 24, 2020, setting out the terms of their future economic relationship.  The TCA generally maintains tariff-free trade between the UK and the EU but introduced several new non-tariff, administrative barriers. Market entry for U.S. firms is facilitated by a common language, legal heritage, and similar business institutions and practices.  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 pound sterling is a free-floating currency with no restrictions on its transfer or conversion.  There are no exchange controls restricting the transfer of funds associated with an investment into or out of the UK.

UK legal, regulatory, and accounting systems are transparent and consistent with international standards.  The UK legal system provides a high level of protection.  Private ownership is protected by law and monitored for competition-restricting behavior.  U.S. exporters and investors generally will find little difference between the United States and the UK in the conduct of business, and common law prevails as the basis for commercial transactions in the UK.

The United States and UK have enjoyed a “Commerce and Navigation” Treaty since 1815 which guarantees national treatment of U.S. investors.  A Bilateral Tax Treaty specifically protects U.S. and UK investors from double taxation.  The UK has, however, taken some steps that particularly affect U.S. companies in the technology sector.  A unilateral digital services tax came into force in April 2020, taxing digital firms—such as social media platforms, search engines, and marketplaces—two percent on revenue generated in the UK.  The Competition and Markets Authority (CMA), the UK’s competition regulator, has indicated that it intends to scrutinize and police the sector more thoroughly.  From 2020-2021, the CMA investigated the acquisition of Giphy by Meta Platforms (formerly Facebook).  The CMA found that the acquisition may impede competition in both the supply of display advertising in the UK, and in the supply of social media services worldwide (including in the UK) and ordered Meta to sell Giphy.

The United States is the largest source of direct investment into the UK on an ultimate parent basis.  Thousands of U.S. companies have operations in the UK.  The UK also hosts more than half of the European, Middle Eastern, and African corporate headquarters of American-owned multinational firms.

In October 2021, the UK government introduced its Net Zero Strategy, which comprehensively sets out UK government plans to cut emissions, seize green economic opportunities, and use private investment to achieve a net zero economy by 2050.  The Net Zero Strategy allocates £7.8 billion ($10.5 billion) in new spending and aims to leverage up to £90 billion ($118 billion) of private investment by 2030.  In its latest spending review, Her Majesty’s Treasury’s (HMT) estimated that net-zero spending between 2021-22 and 2024-25 would total £25.5 billion ($34.5 billion).

The UK government is endeavoring to position the UK as the first net-zero financial center and a global hub for sustainable financial activity.  The UK Infrastructure Bank, established in 2021, is providing £22 billion ($29 billion) of infrastructure finance to tackle climate change.  In 2021 HMT sold £16 billion ($20.8 billion) worth of the UK’s Green Gilt to help fund green projects across the UK.  Through the Greening Finance Roadmap, HMT outlines the UK government’s intent to implement a detailed sovereign green taxonomy, which is expected to be published by the end of 2022, along with sustainable disclosure requirements that would serve as an integrated framework for sustainability throughout the UK economy.

Currency conversions have been done using XE and Bank of England data.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perception Index 2021 11 of 180  http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 4 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $890,086  https://www.bea.gov/data/intl-trade-investment/direct-investment-country-and-industry 

 

World Bank GNI per capita 2020 $45,870 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment   

The UK actively encourages inward FDI.  With a few exceptions, the government does not discriminate between nationals and foreign individuals in the formation and operation of private companies.  The Department for International Trade, including through its newly created Office for Investment, actively promotes inward investment and prepares market information for a variety of industries.  U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders.  Once established in the UK, foreign-owned companies are treated no differently from UK firms.  The UK government is a strong defender of the rights of any UK-registered company, irrespective of its nationality of ownership.

Foreign ownership is limited in only a few strategic private sector companies, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defense).  No individual foreign shareholder may own more than 15 percent of these companies.  Theoretically, the government can block the acquisition of manufacturing assets from abroad by invoking the Industry Act of 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.

The National Security and Investment Act (NSIA) 2021 came into force on January 4, 2022.  The NSIA created a new screening regime for transactions which might raise national security concerns in the UK called the Investment Security Unit (ISU).  The ISU sits within the Department for Business, Energy and Industrial Strategy (BEIS).  It is responsible for identifying, addressing and mitigating national security risks to the UK arising when a person gains control of a qualifying asset or qualifying entity.

The UK requires that at least one director of any company registered in the UK be ordinarily resident in the country.  The UK, as a member of the Organization for Economic Cooperation and Development (OECD), subscribes to the OECD Codes of Liberalization and is committed to minimizing limits on foreign investment.

The Economist Intelligence Unit and the OECD’s Economic Forecast Summary have current investment policy reports for the United Kingdom:

http://country.eiu.com/united-kingdom 
https://www.oecd.org/economy/united-kingdom-economic-snapshot/ 

The UK government has promoted administrative efficiency successfully to facilitate business creation and operation.  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 the company has some degree of physical presence in the UK.  After registering their business with the UK governmental body Companies House, overseas firms must separately register to pay corporation tax within three months.  Since 2016, companies have had to declare all “persons of significant control.”  This policy recognizes that individuals other than named directors can have significant influence on a company’s activity and that this information should be transparent.  More information is available at this link: https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships .  Companies House maintains a free, publicly searchable directory, available at https://www.gov.uk/get-information-about-a-company.    

The UK offers a welcoming environment to foreign investors, with foreign equity ownership restrictions in only a limited number of sectors covered by the World Bank’s Investing Across Sectors indicators.

https://www.gov.uk/government/organisations/department-for-international-trade 
https://www.gov.uk/set-up-business 
https://www.gov.uk/topic/company-registration-filing/starting-company 
http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/starting-a-business 

The British Overseas Territories (BOTs) comprise Anguilla, British Antarctic Territory, Bermuda, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands (Islas Malvinas), Gibraltar, Montserrat, Pitcairn Islands, St. Helena, Ascension and Tristan da Cunha, Turks and Caicos Islands, South Georgia and South Sandwich Islands, and Sovereign Base Areas on Cyprus.  The BOTs retain a substantial measure of responsibility for their own affairs.  Local self-government is usually provided by an Executive Council and elected legislature.  Governors or Commissioners are appointed by the Crown on the advice of the British Foreign Secretary, and retain responsibility for external affairs, defense, and internal security.

Many of the territories are now broadly self-sufficient.  The UK’s Foreign, Commonwealth and Development Office (FCDO), however, maintains development assistance programs in St. Helena, Montserrat, and Pitcairn.  This includes budgetary aid to meet the islands’ essential needs and development assistance to help encourage economic growth and social development to promote economic self-sustainability.  In addition, all other BOTs receive small levels of assistance through “cross-territory” programs for issues such as environmental protection, disaster prevention, HIV/AIDS, and child protection.

Seven of the BOTs have financial centers:  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and the Turks and Caicos Islands.  These territories have committed to the OECD’s Common Reporting Standard (CRS) for the automatic exchange of taxpayer financial account information.  They are already exchanging information with the UK, and began exchanging information with other jurisdictions under the CRS from September 2017.

Of the BOTs, Anguilla is the only one to receive a “non-compliant” rating by the Global Forum for Exchange of Information on Request.  The Global Forum has rated the other six territories as “largely compliant.”  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, and the Turks and Caicos Islands have committed in reciprocal bilateral arrangements with the UK to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with near real-time access to this information.  These arrangements came into effect in June 2017.

Anguilla:  Anguilla is a neutral tax jurisdiction.  There are no income, capital gains, estate, profit or other forms of direct taxation on either individuals or corporations, for residents or non-residents of the jurisdiction.  The territory has no exchange rate controls.  Non-Anguillan nationals may purchase property, but the transfer of land to an alien includes a 12.5 percent tax on the assessed value of the property or the sales proceeds, whichever is greater.

British Virgin Islands:  The government of the British Virgin Islands offers a series of incentive packages aimed at reducing the cost of doing business on the islands.  This includes relief from corporation tax payments over specific periods, but companies must pay an initial registration fee and an annual license fee to the BVI Financial Services Commission.  Crown land grants are not available to non-British Virgin Islanders, but private land can be leased or purchased following the approval of an Alien Land Holding License.  Stamp duty is imposed on transfers of real estate and the transfer of shares in a BVI company owning real estate in the BVI at a rate of four percent for belongers (i.e., residents who have proven they meet a legal standard of close ties to the territory) and 12 percent for non-belongers.  There is no corporate income tax, capital gains tax, branch tax, or withholding tax for companies incorporated under the BVI Business Companies Act.  Payroll tax is imposed on every employer and self-employed person who conducts business in BVI.  The tax is paid at a graduated rate depending upon the size of the employer.  The current rates are 10 percent for small employers (those that have a payroll of less than $150,000, a turnover of less than $300,000 and fewer than seven employees) and 14 percent for larger employers.  Eight percent of the total remuneration is deducted from the employee, while the remainder of the liability is met by the employer.  The first $10,000 of remuneration is free from payroll tax.

Cayman Islands:  There are no direct taxes in the Cayman Islands.  In most districts, the government charges stamp duty of 7.5 percent on the value of real estate at sale, but certain districts, including Seven Mile Beach, are subject to a rate of nine percent.  There is a one percent fee payable on mortgages of less than KYD 300,000 ($360,237), and one and a half percent on mortgages of KYD 300,000 ($360,237) or higher.  There are no controls on the foreign ownership of property and land.  Investors can receive import duty waivers on equipment, building materials, machinery, manufacturing materials, and other tools.

Falkland Islands (Islas Malvinas):  Companies located in the Falkland Islands (Islas Malvinas) are charged corporation tax at 21 percent on the first £1 million ($1.4 million) and 26 percent for all amounts more than £1 million ($1.4 million).  The individual income tax rate is 21 percent for earnings below £12,000 ($16,800) and 26 percent above this level.

Gibraltar:  The government of Gibraltar encourages foreign investment.  Gibraltar has a buoyant economy with a stable currency and few restrictions on moving capital or repatriating dividends.  The corporate income tax rate is 20 percent for utility, energy, and fuel supply companies, and 12.5 percent for all other companies.  There are no capital or sales taxes.  Gibraltar is not currently a part of the EU, and its post-Brexit relationship with the bloc is the subject of ongoing negotiations between London and Brussels.  Under the terms of an agreement in principle reached between the UK and Spain on December 31, 2020, free movement of workers and goods across the land border between Gibraltar and Spain is temporarily continuing.

Montserrat:  The government of Montserrat welcomes new private foreign investment.  Foreign investors are permitted to acquire real estate, subject to the acquisition of an Alien Land Holding license, which carries a fee of five percent of the purchase price.  The government also imposes stamp and transfer fees of 2.6 percent of the property value on all real estate transactions.  Foreign investment in Montserrat is subject to the same taxation rules as local investment and is eligible for tax holidays and other incentives.  Montserrat has preferential trade agreements with the United States, Canada, and Australia.  The government allows 100 percent foreign ownership of businesses, but the administration of public utilities remains wholly in the public sector.

St. Helena:  The island of St. Helena is open to foreign investment and welcomes expressions of interest from companies wanting to invest.  Its government is able to offer tax-based incentives, which will be considered on the merits of each project – particularly tourism projects.  All applications are processed by Enterprise St. Helena, the business development agency.

Pitcairn Islands:  The Pitcairn Islands have approximately 50 residents, with a workforce of approximately 29 employed in 10 full-time equivalent roles.  The territory does not have an airstrip or safe harbor.  Residents exist on fishing, subsistence farming, and handcrafts.

Turks and Caicos Islands:  The islands operate an “open arms” investment policy.  Through the policy, the government commits to a streamlined business licensing system, a responsive immigration policy to give investment security, access to government-owned land under long-term leases, and a variety of duty concessions to qualified investors.  The islands have a “no tax” status, but property purchasers must pay a stamp duty on purchases over $25,000.  Depending on the island, the stamp duty rate may be up to 6.5 percent for purchases up to $250,000, eight percent for purchases $250,001 to $500,000, and 10 percent for purchases over $500,000.

The Crown Dependencies:

The Crown Dependencies are the Bailiwick of Jersey, the Bailiwick of Guernsey, and the Isle of Man.  The Crown Dependencies are not part of the UK but are self-governing dependencies of the Crown.  This means they have their own directly elected legislative assemblies, administrative, fiscal, and legal systems, and their own courts of law.  The Crown Dependencies are not represented in the UK Parliament.

Jersey’s standard rate of corporate tax is zero percent.  The exceptions to this standard rate are financial service companies, which are taxed at 10 percent; utility companies, which are taxed at 20 percent; and income specifically derived from Jersey property rentals or Jersey property development, taxed at 20 percent.  A five percent VAT is applicable in Jersey.

Guernsey has a zero percent rate of corporate tax.  Exceptions include some specific banking activities, taxed at 10 percent; utility companies, which are taxed at 20 percent; Guernsey residents’ assessable income is taxed at 20 percent; and income derived from land and buildings is taxed at 20 percent.

The Isle of Man’s corporate standard tax is zero percent.  The exceptions to this standard rate are income received from banking business, which is taxed at 10 percent, and income received from land and property in the Isle of Man, which is taxed at 20 percent.  In addition, a 10 percent tax rate also applies to companies that carry on a retail business in the Isle of Man and have taxable income in excess of £500,000 ($695,000) from that business.  A 20 percent rate of VAT is applicable in the Isle of Man.

The tax data above are current as of March 2022.

The UK is one of the largest outward investors in the world, often through bilateral investment treaties (BITs), which are used to promote and protect investment abroad and have been adopted by many countries.  The UK’s international investment position abroad (outward investment) in 2020 was $2.1 trillion.  The main destination for UK outward FDI is the United States, which accounted for approximately 25 percent of UK outward FDI stocks at the end of 2020.  Other key destinations include the Netherlands, Luxembourg, France, and Spain which, together with the United States, account for a little over half of the UK’s outward FDI stock.  Europe and the Americas remain the dominant areas for UK international investment positions abroad.

2. Bilateral Investment Agreements and Taxation Treaties    

The UK has concluded 105 bilateral investment treaties, which are known in the UK as Investment Promotion and Protection Agreements.  For a complete current list, including actual treaties, see:  http://investmentpolicyhub.unctad.org/IIA/CountryBits/221#iiaInnerMenu  

The United Kingdom is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and the Inclusive Framework’s October 2021 agreement on the global minimum corporate tax.

3. Legal Regime   

U.S. exporters and investors generally will find little difference between the United States and UK in the conduct of business.  The regulatory system provides clear and transparent guidelines for commercial engagement.  Common law prevails in the UK as the basis for commercial transactions, and the International Commercial Terms (INCOTERMS) of the International Chambers of Commerce are accepted definitions of trading terms.  In terms of accounting standards and audit provisions, firms in the UK must use the UK-adopted international accounting standards (IAS) instead of the EU-adopted IAS for financial years beginning on or after January 1, 2021.  The UK’s Accounting Standards Board provides guidance to firms on accounting standards and works with the IASB on international standards.

Statutory authority over prices and competition in various industries is given to independent regulators, for example the Office of Communications (Ofcom), the Water Services Regulation Authority (Ofwat), the Office of Gas and Electricity Markets (Ofgem), the Office of Fair Trading (OFT), the Rail Regulator, the Prudential Regulatory Authority (PRA), and the Financial Conduct Authority (FCA).  The PRA was created out of the dissolution of the Financial Services Authority (FSA) in 2013.  The PRA reports to the Financial Policy Committee (FPC) in the Bank of England.  The PRA is responsible for supervising the safety and soundness of individual financial firms, while the FPC takes a systemic view of the financial system and provides macro-prudential regulation and policy actions.  The FCA is a regulatory enforcement mechanism designed to address financial and market misconduct through legally reviewable processes.  These regulators work to protect the interests of consumers while ensuring that the markets they regulate are functioning efficiently.  Most laws and regulations are published in draft for public comment prior to implementation.  The FCA maintains a free, publicly searchable register of their filings on regulated corporations and individuals here: https://register.fca.org.uk/.   

The UK government publishes regulatory actions, including draft text and executive summaries, on the Department for Business, Energy & Industrial Strategy webpage listed below.  The current policy requires the repeal of two regulations for any new one in order to make the business environment more competitive.

https://www.gov.uk/government/policies/business-regulation 
https://www.gov.uk/government/organisations/regulatory-delivery 

The UK’s withdrawal from the EU has not yet caused dramatic shifts in the UK’s regulatory regimes but has opened the door to regulatory divergence.  The future regulatory direction of the UK remains uncertain as the UK determines whether to maintain the current regulatory regime inherited from the EU or to deviate towards new regulations.  The UK is an independent member of the WTO and actively seeks to comply with all WTO obligations.

The UK is a common-law country.  UK business contracts are legally enforceable in the UK, but not in the United States or other foreign jurisdictions.  International disputes are resolved through litigation in the UK Courts or by arbitration, mediation, or some other alternative dispute resolution (ADR) method.  The UK has a long history of applying the rule of law to business disputes.  The current judicial process remains procedurally competent, fair, and reliable, which helps position London as an international hub for dispute resolution with over 10,000 cases filed per annum.

The Economic Crime (Transparency and Enforcement) Act 2022, which took effect March 15, 2022, established a registry of foreign beneficial owners of real property (freeholds or leases of seven years or more) expected to go into place in September 2022.  The Act requires registry of ultimate beneficial owners, including those controlling at least 25 percent of overseas entities that own such property.  The requirement applies retroactively to properties purchased in England and Wales since 1999 and in Scotland since December 2014.  Entities or their officers who refuse to register or keep their information up to date face tough restrictions on selling the property, and those who break the rules could face a fine of up to £2,500 ($3,270) per day or up to five years in prison.

The procedure for establishing a company in the UK is identical for British and foreign investors.  No approval mechanisms exist for foreign investment, apart from the process outlined in Section 1.  Foreigners may freely establish or purchase enterprises in the UK, with a few limited exceptions, and acquire land or buildings.  As noted above, the UK is currently reviewing its procedures and has proposed new rules for restricting foreign investment in those sectors of the economy with higher risk for affecting national security.

The National Security and Investment (NSI) Act 2021 – which applies equally to foreign or domestic investment – requires mandatory reporting of significant investments (generally over 25 percent) in 17 sensitive sectors; the reporting requirement extends to investments in intellectual property and in higher education and research.  The UK government aims to review cases expeditiously, with most reviews of notifications completed within 30 days.

Alleged tax avoidance by multinational companies, including by several major U.S. firms, has been a controversial political issue and subject of investigations by the UK Parliament and EU authorities.  Foreign and UK firms are subject to the same tax laws, however, and several UK firms have also been criticized for tax avoidance.  Foreign investors may have access to certain EU and UK regional grants and incentives designed to attract industry to areas of high unemployment, but these do not include tax concessions.  Access to EU grants ended on December 31, 2020.

In 2015, the UK flattened its structure of corporate tax rates.  The UK currently taxes corporations at a flat rate of 19 percent for non-ring-fenced companies, with marginal tax relief granted for companies with profits falling between £300,000 ($420,000) and £1.5 million ($2.1 million).  On March 3, 2021, Chancellor of the Exchequer Rishi Sunak announced that, starting in 2023, UK corporate tax would increase to 25 percent for companies with profits over £250,000 ($346,000).  A small profits rate (SPR) will also be introduced so that companies with profits of £50,000 ($69,000) or less will continue to pay Corporation Tax at 19 percent.  Companies with profits between £50,000 ($69,000) and £250,000 ($346,000) will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.  Tax deductions are allowed for expenditure and depreciation of assets used for trade purposes.  These include machinery, plant, industrial buildings, and assets used for research and development, such as cloud computing.  A special rate of 20 percent is given to unit trusts and open-ended investment companies.  There are different Corporation Tax rates for companies that make profits from oil extraction or oil rights in the UK or UK continental shelf, known as “ring-fenced” companies.  Small “ring-fenced” companies are taxed at a rate of 19 percent for profits up to £300,000 ($420,000), and 30 percent for profits over £300,000 ($420,000).  A supplementary tax known as the bank Corporation Tax Surcharge, is applied to companies in the banking sector at eight percent of profits in excess of £25 million ($33 million).  To maintain equitable tax rates for banks with the upcoming tax rise, the government has changed the surcharge rate to three percent applied to profits above £100 million ($132 million), starting in April 2023.

The UK has a simple system of personal income tax.  The marginal tax rates for 2020-2021 are as follows: up to £12,570 ($16,500), 0 percent; £12,501 ($17,370) to £57,700 ($75,740), 20 percent; £57,701 ($75,740) to £150,000 ($196,900), 40 percent; and over £150,000 ($196,900), 45 percent.

UK citizens also make mandatory payments of about 13.25 percent of income into the National Insurance system, which funds healthcare, social security, and retirement benefits.  The UK requires non-domiciled residents of the UK to either pay tax on their worldwide income or the tax on the relevant part of their remitted foreign income being brought into the UK.  If they have been resident in the UK for seven tax years of the previous nine, and they choose to pay tax only on their remitted earnings, they may be subject to an additional charge of £30,000 ($42,000).  If they have been resident in the UK for 12 of the last 14 tax years, they may be subject to an additional charge of £60,000 ($84,000).

The Scottish Parliament has the legal power to increase or decrease the basic income tax rate in Scotland, currently 20 percent, by a maximum of three percentage points.

For guidance on laws and procedures relevant to foreign investment in the UK, follow the link below:

https://www.gov.uk/government/collections/investment-in-the-uk-guidance-for-overseas-businesses  

The UK competition regime is established by the Competition Act 1998 and the Enterprise Act 2002, as amended by the Enterprise and Regulator Reform Act 2013.  This legislative framework created the UK’s independent competition authority, the Competition and Markets Authority (CMA), which is responsible for enforcing UK competition law.  The government has limited powers to intervene in either the assessment of mergers or the investigation of markets.

Before Brexit, the prohibitions in UK law on abusing dominant market positions and anti-competitive agreements were based on and underpinned by equivalent provisions in EU law.  Since Brexit, under the terms of the UK-EU trade agreements, EU competition law is no longer enforced in the UK, and the UK and EU now operate separate competition regimes.

The CMA is responsible for:

  1. investigating phase 1 and phase 2 mergers,
  2. conducting market studies and market investigations,
  3. investigating possible breaches of prohibitions against anti-competitive agreements under the Competition Act 1998,
  4. bringing criminal proceedings against individuals who commit cartel offenses,
  5. enforcing consumer protection legislation, particularly the Unfair Terms in Consumer Contract Directive and Regulations,
  6. encouraging sectoral regulators to use their powers to protect competition,
  7. considering regulatory references and appeals, and,
  8. regulation of public sector subsidies to business.

While merger notification in the UK is voluntary, the CMA may impose substantial fines or suspense orders on potentially non-compliant transactions.  The CMA has no prosecutorial authority, but it may refer entities for prosecution in extreme cases, such as those involving cartel activity, which carries a penalty of up to five years imprisonment.

In 2021, the UK established the Digital Markets Unit on a non-statutory basis within the CMA to oversee and operationalize a forthcoming pro-competition regime for digital markets.  Powers for the DMU and the new regulatory regime will require new legislation.  In the interim, the DMU is supporting and advising the government on establishing the statutory regime, including by gathering evidence on digital markets.

In addition to the CMA, the Takeover Panel, the Financial Conduct Authority, and the Pensions Regulator have principal regulatory authority:

  1. The Takeover Panel is an independent body, operating per the (the “Code”), which regulates takeovers of public companies, and some private companies, centrally managed or controlled in the UK, the Isle of Man, Jersey, and Guernsey.  The Code provides a binding set of rules for takeovers aimed at ensuring fair treatment for all shareholders in takeover bids, including requiring bidders to provide information about their intentions after a takeover.
  2. The Financial Conduct Authority administers Listing Rules, Prospectus Regulation Rules, and Disclosure Guidance and Transparency Rules, which can apply to takeovers of publicly listed companies.
  3. The Pensions Regulator has powers to intervene in investments in pension schemes.

The UK is a member of the OECD and adheres to the OECD principle that when a government expropriates property, compensation should be timely, adequate, and effective.  In the UK, the right to fair compensation and due process is uncontested and is reflected in all international investment agreements.  Expropriation of corporate assets or the nationalization of industry requires a special act of Parliament.  In response to the 2007-2009 financial crisis, the UK government nationalized Northern Rock bank (sold to Virgin Money in 2012) and took major stakes in the Royal Bank of Scotland (RBS) and Lloyds Banking Group.

As a member of the World Bank-based International Center for Settlement of Investment Disputes (ICSID), the UK accepts binding international arbitration between foreign investors and the State.  As a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the UK provides local enforcement on arbitration judgments decided in other signatory countries.

London is a thriving center for the resolution of international disputes through arbitration under a variety of procedural rules such as those of the London Court of International Arbitration, the International Chamber of Commerce, the Stockholm Chamber of Commerce, the American Arbitration Association International Centre for Dispute Resolution, and others.  Many of these arbitrations involve parties with no connection to the jurisdiction, but who are drawn to the jurisdiction because they perceive it to be a fair, neutral venue with an arbitration law and courts that support efficient resolution of disputes.  They also choose London-based arbitration because of the general prevalence of the English language and law in international commerce.  A wide range of contractual and non-contractual claims can be referred to arbitration in this jurisdiction including disputes involving intellectual property rights, competition, and statutory claims.  There are no restrictions on foreign nationals acting as arbitration counsel or arbitrators in this jurisdiction.  There are few restrictions on foreign lawyers practicing in the jurisdiction as evidenced by the fact that over 200 foreign law firms have offices in London.

ICSID Convention and New York Convention

In addition to its membership in ICSID, the UK is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.  The latter convention has territorial application to Gibraltar (September 24, 1975), Hong Kong (January 21, 1977), Isle of Man (February 22, 1979), Bermuda (November 14, 1979), Belize and Cayman Islands (November 26, 1980), Guernsey (April 19, 1985), Bailiwick of Jersey (May 28, 2002), and British Virgin Islands (February 24, 2014).

The United Kingdom has consciously elected not to follow the UNCITRAL Model Law on International Commercial Arbitration.  Enforcement of an arbitral award in the UK is dependent upon where the award was granted.  The process for enforcement in any particular case is dependent upon the seat of arbitration and the arbitration rules that apply.  Arbitral awards in the UK can be enforced under a number of different regimes, namely:  The Arbitration Act 1996, The New York Convention, The Geneva Convention 1927, The Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933, and Common Law.

The Arbitration Act 1996 governs all arbitrations seated in England, Wales, and Northern Ireland, both domestic and international.  The full text of the Arbitration Act can be found here: http://www.legislation.gov.uk/ukpga/1996/23/data.pdf.  

The Arbitration Act is heavily influenced by the UNCITRAL Model Law, but it has some important differences.  For example, the Arbitration Act covers both domestic and international arbitration; the document containing the parties’ arbitration agreement need not be signed; an English court is only able to stay its own proceedings and cannot refer a matter to arbitration; the default provisions in the Arbitration Act require the appointment of a sole arbitrator as opposed to three arbitrators; a party retains the power to treat its party-nominated arbitrator as the sole arbitrator in the event that the other party fails to make an appointment (where the parties’ agreement provides that each party is required to appoint an arbitrator); there is no time limit on a party’s opposition to the appointment of an arbitrator; parties must expressly opt out of most of the provisions of the Arbitration Act which confer default procedural powers on the arbitrators; and there are no strict rules governing the exchange of pleadings.  Section 66 of the Arbitration Act applies to all domestic and foreign arbitral awards.  Sections 100 to 103 of the Arbitration Act provide for enforcement of arbitral awards under the New York Convention 1958.  Section 99 of the Arbitration Act provides for the enforcement of arbitral awards made in certain countries under the Geneva Convention 1927.

Under Section 66 of the Arbitration Act, the court’s permission is required for an international arbitral award to be enforced in the UK.  Once the court has given permission, judgment may be entered in terms of the arbitral award and enforced in the same manner as a court judgment or order.  Permission will not be granted by the court if the party against whom enforcement is sought can show that (a) the tribunal lacked substantive jurisdiction and (b) the right to raise such an objection has not been lost.

The length of arbitral proceedings can vary greatly.  If the parties have a relatively straightforward dispute, cooperate, and adopt a fast-track procedure, arbitration can be concluded within months or even weeks.  In a substantial international arbitration involving complex facts, many witnesses and experts and post-hearing briefs, the arbitration could take many years.  A reasonably substantial international arbitration will likely take between one and two years.

There are two alternative procedures that can be followed in order to enforce an award.  The first is to seek leave of the court for permission to enforce.  The second is to begin an action on the award, seeking the same relief from the court as set out in the tribunal’s award.  Enforcement of an award made in the jurisdiction may be opposed by challenging the award.  The court may also, however, refuse to enforce an award that is unclear, does not specify an amount, or offends public policy.  Enforcement of a foreign award may be opposed on any of the limited grounds set out in the New York Convention.  A stay may be granted for a limited time pending a challenge to the order for enforcement.  The court will consider the likelihood of success and whether enforcement of the award will be made more or less difficult as a result of the stay.  Conditions that might be imposed on granting the stay include such matters as paying a sum into court.  Where multiple awards are to be rendered, the court may give permission for the tribunal to continue hearing other matters, especially where there may be a long delay between awards.  UK courts have a good record of enforcing arbitral awards.  The courts will enforce an arbitral award in the same way that they will enforce an order or judgment of a court.  At the time of writing, there are no examples of the English courts enforcing awards which were set aside by the courts at the place of arbitration.

Most awards are complied with voluntarily.  If the party against whom the award was made fails to comply, the party seeking enforcement can apply to the court.  The length of time it takes to enforce an award which complies with the requirements of the New York Convention will depend on whether there are complex objections to enforcement which require the court to investigate the facts of the case.  If a case raises complex issues of public importance the case could be appealed to the Court of Appeal and then to the Supreme Court.  This process could take around two years.  If no complex objections are raised, the party seeking enforcement can apply to the court using a summary procedure that is fast and efficient.  There are time limits relating to the enforcement of the award.  Failure to comply with an award is treated as a breach of the arbitration agreement.  An action on the award must be brought within six years of the failure to comply with the award or 12 years if the arbitration agreement was made under seal.  If the award does not specify a time for compliance, a court will imply a term of reasonableness.

The UK has strong bankruptcy protections going back to the Bankruptcy Act of 1542.  Today, both individual bankruptcy and corporate insolvency are regulated in the UK primarily by the Insolvency Act 1986 and the Insolvency Rules 1986, regulated through determinations in UK courts.  The World Bank’s Doing Business Report Ranks the UK 14 out of 190 for ease of resolving insolvency.

Regarding individual bankruptcy law, the court will oblige a bankrupt individual to sell assets to pay dividends to creditors.  A bankrupt person must inform future creditors about the bankrupt status and may not act as the director of a company during the period of bankruptcy.  Bankruptcy is not criminalized in the UK, and the Enterprise Act of 2002 dictates that for England and Wales bankruptcy will not normally last longer than 12 months.  At the end of the bankrupt period, the individual is normally no longer held liable for bankruptcy debts unless the individual is determined to be culpable for his or her own insolvency, in which case the bankruptcy period can last up to 15 years.

For corporations declaring insolvency, UK insolvency law seeks to distribute losses equitably between creditors, employees, the community, and other stakeholders in an effort to rescue the company.  Liability is limited to the amount of the investment.  If a company cannot be rescued, it is liquidated and assets are sold to pay debts to creditors, including foreign investors.  In March 2020, the UK government announced it would introduce legislation to change existing insolvency laws in response to COVID-19.  The new measures enabled companies undergoing a rescue or restructuring process to continue trading and help them avoid insolvency.  These measures expired in March 2022.

HMG does not currently require environmental, social, and governance disclosure to help investor and consumers distinguish between high- and low-quality investments.  The majority of ESG reporting is not currently mandatory in the UK.  However, some specific metrics that come under the ESG regulation reporting umbrella are mandatory, including:

  1. Greenhouse gas reporting:  Mandatory for quoted companies since 2013 under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
  2. Energy use:  Quoted companies must report on their global energy use, and large businesses must disclose their UK annual energy use and greenhouse gas emissions. This is required by the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
  3. Gender pay gap:  Any employer with a headcount of 250 or more must comply with gender pay gap reporting regulations.
  4. Modern Slavery: UK organizations with an annual turnover of £36 million ($47 million) or more must publish an annual statement setting out the steps to prevent modern slavery.

4. Industrial Policies   

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.  DIT works with its partner organizations 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 benefit.  Separate legislation, granting similar powers to local authorities, applies to Scotland and Northern Ireland.

Invest NI is the economic development agency for Northern Ireland.  Invest NI provides guidance and support to businesses seeking to invest in Northern Ireland throughout the lifespan of their investment.  This support includes grants for employment, R&D, training, and assistance with recruitment and real estate.

HMG offers tax incentives for businesses that purchase new:

  1. Electric cars and cars with zero CO2 emissions
  2. Plant and machinery for gas refueling stations, for example storage tanks, pumps
  3. Gas, biogas and hydrogen refueling equipment
  4. Zero-emission goods vehicles
  5. Equipment for electric vehicle charging points
  6. Plant and machinery for use in a freeport tax site

If businesses buy an eligible asset, they can deduct the full cost from their profits before tax.  They cannot normally claim on items bought to lease to other people or for use within a home they let out.  Most analysts suggest these incentives have helped uptake of green vehicles.

HMG’s Feed-In Tariff Scheme (FITS) ran from 2010 and was closed to new entrants in 2019.  FITS helps to promote the uptake of renewable and low-carbon electricity generation technologies through payments made for the electricity a business generates and exports.

In March 2021, the UK government identified eight sites as post-Brexit freeports to spur trade, investment, innovation, and economic recovery.  The eight sites are: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Thames, and Teesside.  The UK government has said it will establish at least one freeport in each of Scotland, Wales, and Northern Ireland in the future. The designated areas will offer special customs and tax arrangements and additional infrastructure funding to improve transport links.

The EU’s General Data Protection Regulation (GDPR) is retained in domestic UK law as the UK GDPR, though the UK has the independence to keep the framework under review.  Entities based in the UK must also continue to comply with the amended version of the Data Protection Act (DPA) 2018, which sits alongside UK GDPR.  The Information Commissioner’s Office (ICO) is the UK’s independent data protection authority.

The UK permits transfers of data from the UK to the European Economic Area (EEA).  In 2021, the EU Commission published data adequacy decisions for the UK.  As a result, data transfers from the EEA to the UK are permitted in most cases.  Transfers of personal data for the purposes of UK immigration control, or which would otherwise fall within the scope of the immigration exemption in the DPA 2018, are excluded from the scope of the adequacy decision.

While the UK GDPR does not impose data localization requirements, it requires controllers and processors of personal data to put in place appropriate technical and organizational measures to implement data protection effectively and safeguard individual rights.  This may include an organization’s appointment of a data protection officer (DPO).  A DPO is anyone an organization appoints to monitor internal compliance, inform and advise on data protection obligations, provide advice regarding Data Protection Impact Assessments (DPIAs), and act as a contact point for data subjects and the ICO.  A DPO can be an existing employee or externally appointed, but must be independent, an expert in data protection, adequately resources, and report to the highest management level.

The UK has robust real property laws stemming from legislation including the Law of Property Act 1925, the Settled Land Act 1925, the Land Charges Act 1972, the Trusts of Land and Appointment of Trustees Act 1996, and the Land Registration Act 2002.

Interests in property are well enforced, and mortgages and liens have been recorded reliably since the Land Registry Act of 1862.  The Land Registry is the government database where all land ownership and transaction data are held for England and Wales, and it is reliably accessible online: https://www.gov.uk/search-property-information-land-registry .  Scotland has its own Registers of Scotland, while Northern Ireland operates land registration through the Land and Property Services.

Long-term physical presence on non-residential property without permission is not typically considered a crime in the UK.  Police take action if squatters commit other crimes when entering or staying in a property.

The UK legal system provides a high level of intellectual property rights (IPR) protection.  Enforcement mechanisms are comparable to those available in the United States.  The UK is a member of the World Intellectual Property Organization (WIPO).  The UK is also a member of the following major intellectual property protection agreements: the Bern Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, and the Patent Cooperation Treaty.  The UK has signed and, through implementing various EU Directives, enshrined into UK law the WIPO Copyright Treaty (WCT) and WIPO Performance and Phonograms Treaty (WPPT), known as the internet treaties.

The Intellectual Property Office (IPO) is the official UK government body responsible for intellectual property rights, including patents, designs, trademarks, and copyright.  The IPO web site contains comprehensive information on UK law and practice in these areas.

https://www.gov.uk/government/organisations/intellectual-property-office   

According to the Intellectual Property Crime Report (IPCR) for 2019/20, imports of counterfeit and pirated goods to the UK accounted for as much as £13.6 billion ($18.8 billion) in 2016 – the equivalent of three percent of UK imports in genuine goods.  The most recent IPCR for 2020/2021 does not quantify the UK’s counterfeit imports.

The UK is not on the Special 301 Report nor on the Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

London houses one of the oldest and most developed financial markets in the world.  London offers the full range of financial services underpinned by high quality regulation and strong standards of disclosure and transparency, a supportive market infrastructure, and a dynamic, highly skilled workforce.

The UK government is generally hospitable to foreign portfolio investment.  Government policies are intended to facilitate the free flow of capital and to support the flow of resources in product and services markets.  Foreign investors are able to obtain credit in local markets at normal market terms, and a wide range of credit instruments are available.  The principles underlying legal, regulatory, and accounting systems are transparent, and they are consistent with international standards.  In all cases, regulations have been published and are applied on a non-discriminatory basis by the Bank of England’s Prudential Regulation Authority (PRA).

The London Stock Exchange is one of the most active equity markets in the world and has seen robust activity in 2021 in terms of both the number of IPOs as well as the amount of equity raised.   London’s markets have historically been the main financial hub serving the EU and have the advantage of bridging the gap between the day’s trading in the Asian markets and the opening of the U.S. market.  Despite the pandemic and Brexit, the UK retains its global place and has the lead in trading in areas such as foreign exchange, cross border bank lending, and international insurance premium income.  Starting in early 2021, the UK government, based on the review of the London listing regime led by Lord Hill, the UK’s former European Commissioner for Financial Services, has introduced a series of reforms to the UK’s listing regime to improve its competitiveness and enhance London’s attractiveness as a listing location for innovative and high growth businesses.  Further reforms are expected during 2022 based on reviews and consultations now underway.  In May 2017, the LSE launched a new market for non-equity securities, known as the International Securities Market (ISM).  This market is aimed at professional investors and is outside the scope of the UK Prospectus Regulation regime.  The Alternative Investment Market (AIM), established in 1995 as a sub-market of the London Stock Exchange, is specifically designed for smaller, rapidly expanding companies.  The AIM has a more flexible regulatory system than the main market and has no minimum market capitalization requirements.  Since its launch, the AIM has raised more than £68 billion ($95 billion) for more than 3,000 companies.

The UK banking sector assets totaled £10.3 trillion ($14.3 trillion) at the end of the first half of 2021, the third largest in the world and the largest in Europe.  In 2020, the financial services sector contributed £164.8 billion ($221 billion) to the UK economy, accounting for 8.6 percent of total economic output.  There were 1.1 million financial services jobs in the UK in Q1 2021, accounting for 3.3 percent of all jobs.  The long-term impact of Brexit and the pandemic on the financial services industry has been minor so far.  Some firms continue to move limited numbers of jobs outside the UK to service EU-based clients, but the UK is anticipated to remain a top financial hub.

The Bank of England (BoE) is the central bank of the UK.  According to its guidelines, foreign banking institutions are legally permitted to establish operations in the UK as subsidiaries or branches.  More than 200 foreign banks have branches in London, and London serves as an important center for global private and investment banking firms.  Responsibilities for the prudential supervision of a foreign branch are split between the parent’s home state supervisors and the PRA.  The PRA, however, expects the whole firm to meet the PRA’s threshold conditions.  The PRA expects new foreign branches to focus on wholesale and corporate banking and to do so at a level that is not critical to the UK economy.  The Financial Conduct Authority (FCA) is the regulator for all banks operating in the United Kingdom.  For foreign bank branches operating in the UK, the FCA’s Threshold Conditions and conduct of business rules apply, including rules in areas such as anti-money laundering.  Eligible deposits placed in foreign branches may be covered by the UK deposit guarantee program and therefore foreign branches may be subject to regulations concerning UK depositor protection.

There are no legal restrictions that prohibit foreign residents from opening a business bank account; setting up a business bank account as a non-resident is in principle straightforward.   In practice, however, most banks will not accept applications from overseas due to fraud concerns and the additional administration costs.  To open a personal bank account, an individual must at minimum present an internationally recognized proof of identification and prove residency in the UK.  This is a problem for incoming FDI and American expatriates.  Unless the business or the individual can prove UK residency, they will have limited banking options.

Foreign Exchange

The pound sterling 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 are not exercised.

Remittance Policies

Not applicable.

The United Kingdom does not maintain a national wealth fund.  Although there have at time been calls to turn The Crown Estate – created in 1760 by Parliament as a means of funding the British monarchy – into a wealth fund, there are no current plans to do so.  Moreover, with assets of just under $20 billion, The Crown Estate would be small in relation to other national funds.

There are 20 partially or fully state-owned enterprises in the UK.  These enterprises range from large, well-known companies to small trading funds.  Since privatizing the oil and gas industry, the UK has not established any new energy-related state-owned enterprises or resource funds.

The privatization of state-owned utilities in the UK is now essentially complete.  With regard to future investment opportunities, the few remaining government-owned enterprises or government shares in other utilities are likely to be sold off to the private sector when market conditions improve.

Businesses in the UK are accountable for a due-diligence approach to responsible business conduct (RBC), or corporate social responsibility (CSR), in areas such as human resources, environment, sustainable development, and health and safety practices – through a wide variety of existing guidelines at national, EU, and global levels.  There is a strong awareness of CSR principles among UK businesses, promoted by UK business associations such as the Confederation of British Industry and the UK government.

The British government fairly and uniformly enforces laws related to human rights, labor rights, consumer protection, environmental protection, and other statutes intended to protect individuals from adverse business impacts.  The UK government adheres to the OECD Guidelines for Multinational Enterprises.  It is committed to the promotion and implementation of these Guidelines and encourages UK multinational enterprises to adopt high corporate standards involving all aspects of the Guidelines.  The UK has established a National Contact Point (NCP) to promote the Guidelines and to facilitate the resolution of disputes that may arise within that context.  The NCP is part of the Department for International Trade.  A Steering Board monitors the work of the UK NCP and provides strategic guidance.  It is composed of representatives of relevant government departments and four external members nominated by the Trades Union Congress, the Confederation of British Industry, the All Party Parliamentary Group on the Great Lakes Region of Africa, and the NGO community.

The results of a UK government consultation on CSR can be found here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/300265/bis-14-651-good-for-business-and-society-government-response-to-call-for-views-on-corporate-responsibility.pdf.  

Information on UK regulations and policies relating to the procurement of supplies, services and works for the public sector, and the relevance of promoting RBC, are found here: https://www.gov.uk/guidance/public-sector-procurement-policy.   

Additional Resources

Department of State

Department of the Treasury

Department of Labor

Climate Issues

In October 2021, the UK government introduced its Net Zero Strategy (NZS), which comprehensively sets out UK government plans to cut emissions, seize green economic opportunities, and use private investment to achieve a net zero economy by 2050.  The NZS allocates £7.8 billion ($10.5 billion) in new spending and aims to leverage up to £90 billion ($118 billion) of private investment by 2030.  In its latest spending review, Her Majesty’s Treasury’s (HMT) estimated that net-zero spending between 2021-22 and 2024-25 would total £25.5 billion ($34.5 billion).  HMG has committed to several policies in its NZS, including:

1.     Quadruple offshore wind capacity by 2030

2.      5GW of low carbon hydrogen production capacity by 2030

3.     End the sale of new gasoline and diesel cars and vans by 2030

4.    Install 600,000 heat pumps in homes by 2028

5.      Capture and store 10Mt of CO2 per year by 2030

6.      Restoring approximately 280,000 hectares of peat in England by 2050 and trebling woodland creation rates in England, contributing to the UK’s overall target of increasing planting rates to 30,000 hectares per year by the end of the Parliament

7.     Eco-labelling regulation introduction by the late 2020s

8.     Introduce Local Nature Recovery Strategies (LNRS), a spatial planning tool for nature, which allows local government and communities to identify priorities and opportunities for nature recovery and nature-based solutions across England

HMG’s public procurement policy states that contracting authorities should consider 1) creating new businesses, new jobs and new skills; 2) tackling climate change and reducing waste; 3) improving supplier diversity, innovation and resilience, alongside any additional local priorities in their procurement activities.

Through the Greening Finance Roadmap, HMT outlines the UK government’s intent to implement a detailed sovereign green taxonomy, which is expected to be published by the end of 2022, along with sustainable disclosure requirements that would serve as an integrated framework for sustainability throughout the UK economy.

The UK ranked fourth in the Global Energy Innovation Index (GEII), five spaces higher than its 2016 score.  The GEII is available here: https://itif.org/publications/2021/10/18/2021-global-energy-innovation-index-national-contributions-global-clean  

The UK ranked 17th in the Green Future Index (GFI), which noted that 40 percent of its energy is derived from renewable sources.  The GFI is available here: https://www.technologyreview.com/2021/01/25/1016648/green-future-index/  

The UK ranked 23rd in the Green Growth Index (GGI), a fall of eight spaces from its 2005 ranking.  The GGI is available here: https://greengrowthindex.gggi.org/wp-content/uploads/2021/01/2020-Green-Growth-Index.pdf  

Although isolated instances of bribery and corruption have occurred in the UK, U.S. investors have not identified corruption of public officials as a factor in doing business in the UK.

The Bribery Act 2010 amended and reformed UK criminal law and provided a modern legal framework to combat bribery in the UK and internationally.  The scope of the law is extra-territorial.  Under the Act, a relevant person or company can be prosecuted for bribery if the crime is committed abroad.  The Act applies to UK citizens, residents, and companies established under UK law.  In addition, non-UK companies can be held liable for a failure to prevent bribery if they do business in the UK.

Section 9 of the Act requires the UK government to publish guidance on procedures that commercial organizations can put in place to prevent bribery on their behalf.  It creates the following offenses: active bribery, described as promising or giving a financial or other advantage; passive bribery, described as agreeing to receive or accepting a financial or other advantage; bribery of foreign public officials; and the failure of commercial organizations to prevent bribery by an associated person (corporate offense).  This corporate criminal offense places a burden of proof on companies to show they have adequate procedures in place to prevent bribery ( http://www.transparency.org.uk/our-work/business-integrity/bribery-act/adequate-procedures-guidance/ ).  To avoid corporate liability for bribery, companies must make sure that they have strong, up-to-date and effective anti-bribery policies and systems.  It is a corporate criminal offense to fail to prevent bribery by an associated person.  The briber must be “associated” with the commercial organization, a term which will apply to, amongst others, the organization’s agents, employees, and subsidiaries.  A foreign corporation which “carries on a business, or part of a business” in the UK may therefore be guilty of the UK offense even if, for example, the relevant acts were performed by the corporation’s agent outside the UK.  The Act does not extend to political parties and it is unclear whether it extends to family members of public officials.

The UK formally ratified the OECD Convention on Combating Bribery in 1998 and ratified the UN Convention Against Corruption in 2006.

UK law provides criminal penalties for corruption by officials, and the government routinely implements these laws effectively.  The Serious Fraud Office (SFO) is an independent government department, operating under the superintendence of the Attorney General with jurisdiction in England, Wales, and Northern Ireland.  It investigates and prosecutes those who commit serious or complex fraud, bribery, and corruption, and pursues them and others for the proceeds of their crime.

All allegations of bribery of foreign public officials by British nationals or companies incorporated in the United Kingdom—even in relation to conduct that occurred overseas—should be reported to the SFO for possible investigation.  When the SFO receives a report of possible corruption, its intelligence team makes an assessment and decides if the matter is best dealt with by the SFO itself or passed to a law enforcement partner organization, such as the Overseas Anti-Corruption Unit of the City of London Police (OACU) or the International Corruption Unit of the National Crime Agency.  Allegations can be reported in confidence using the SFO’s secure online reporting form: https://www.sfo.gov.uk/contact-us/reporting-serious-fraud-bribery-corruption/ .

Details can also be sent to the SFO in writing:

SFO Confidential

Serious Fraud Office

2-4 Cockspur Street

London, SW1Y 5BS

United Kingdom

In March 2022, the UK strengthened its Unexplained Wealth Order (UWO) regime to enable law enforcement to investigate the origin of property and recover the proceeds of crime.  A UWO is an investigatory order placed on a respondent whose assets appear disproportionate to their income to explain the origins of their wealth.

A UWO requires a person who is a Politically Exposed Person (PEP) or reasonably suspected of involvement in, or of being connected to a person involved in, serious crime to explain the origin of assets (minimum combined value of £50,000) that appear to be disproportionate to their known lawfully obtained income.

A UWO is not (by itself) a power to recover assets.  However, any response from a UWO can be used in subsequent civil recovery proceedings.

A failure to respond will mean that the assets can be made subject to civil recovery action under the Proceeds of Crime Act 2002.

A person can also be found guilty of an offence if they provide false or misleading information in response to an UWO.

The UK’s terrorism threat level was at the third-highest rating (“substantial”) for most of 2021. On February 4, the UK lowered the threat level from “severe” to “substantial,” indicating a terrorist attack remains “likely” rather than “highly likely,” citing a “significant reduction in the momentum of attacks in Europe.”  On November 15, 2021, following the October 15, 2021 stabbing of David Amess MP and the November 14, 2021 Liverpool bombing, the UK increased the threat level to “severe” due to an overall change in the threat picture.  UK officials categorize Islamist terrorism as the greatest threat to national security, though they recognize the growing threat of racially and ethnically motivated terrorism (REMT), also referred to as “extreme right-wing” terrorism.  On November 18, the Home Office reported that in the year ending March 2021, the UK’s Prevent counterterrorism program received more referrals related to “extreme right-wing” radicalization (1,229) than “Islamist” radicalization (1,064) for the first time.  From March 2017 to December 2021, police and security services disrupted 32 plots, including 18 related to Islamist extremism; 12 to “extreme right-wing” extremism; and two to “left, anarchist, or single-issue terrorism.”

On February 9, 2022, the UK Government passed legislation designed to strengthen the political stability of Northern Ireland’s devolved Government.  This legislation allows the Northern Ireland Executive cabinet and the NI Assembly to continue to function for an extended period should either the First Minister or deputy First Minister resign from their positions in the Executive.  Northern Ireland’s terrorist threat level rating was reduced to substantial from severe in March 2022.

Environmental advocacy groups in the UK have been involved with numerous protests against a variety of business activities, including: airport expansion, bypass roads, offshore structures, wind farms, civilian nuclear power plants, and petrochemical facilities.  These protests tend not to be violent but can be disruptive, with the aim of obtaining maximum media exposure.

Brexit has waned as a source of political instability.  Nonetheless, the June 2016 EU referendum campaign was characterized by significant polarization and widely varying perspectives across the country.  Differing views about the future UK-EU relationship continue to polarize political opinion across the UK.  Some Scottish political leaders have indicated that the UK leaving the EU may provide justification to pursue another Referendum on Scotland leaving the UK.

Implementation of the Withdrawal Agreement has contributed to heightened political and sectarian tensions in Northern Ireland.  The Northern Ireland Protocol, part of the Brexit Withdrawal Agreement, entered into force on January 1, 2021.  The Protocol allows businesses based in Northern Ireland to export free from customs declarations, rules of origin certificates, and non-tariff barriers on the sale of goods to both Great Britain and the EU.  Under the terms of the Protocol, Northern Ireland remains a part of the UK customs territory but is subject to EU standards and customs regulations as far as trade in goods is concerned.  Goods shipped from Great Britain to Northern Ireland are subject to customs declarations but are tariff free unless deemed “at risk” of transshipment and use within the EU. Goods shipped to Northern Ireland from outside the EU are subject to the UK Global Tariff, unless deemed “at risk” of onward travel into the EU – in which case they would be liable to the EU’s Common Customs Tariff (CCT). Northern Ireland is included in the territorial scope of any free trade agreement the UK concludes with other countries, provided that such an agreement does not prejudice the application of the Protocol.  Northern Ireland remains in the UK VAT area but will align with EU VAT rules; lower VAT rates or exemptions in the Republic of Ireland may be applied in Northern Ireland.

Checks on goods entering Northern Ireland, both physical and documentary, are conducted at the region’s ports and airports, not at the land border with the Republic of Ireland, where goods flow freely between the two jurisdictions. However, not all Protocol checks have yet been fully implemented because of temporary grace periods implemented by the UK in coordination with the EU, which remain in force. The EU and UK continue to discuss potential changes to the Protocol to ease the flow of goods between Great Britain and Northern Ireland.

The UK formally departed the bloc on January 31, 2020, following the ratification of the Withdrawal Agreement, and completed its transition out of the EU on December 31, 2020.

The Conservative Party, traditionally the UK’s pro-business party, was, until the COVID-19 pandemic, focused on implementing Brexit, a process many international businesses oppose because they expect it to make trade in goods, services, workers, and capital with the UK’s largest trading partners more problematic and costly, at least in the short term.  In addition, the Conservative Party-led government has implemented a Digital Services Tax (DST), a two percent tax on the revenues of predominantly American search engines, social media services and online marketplaces which derive value from UK users and has legislated for an increase in the Corporation Tax rate from 19 percent to 25 percent.  The Labour Party’s leader, Sir Keir Starmer, is widely acknowledged to be more economically centrist than his predecessor.  In his first major economic speech following his election as Labour Party leader, Starmer declared his intention to repair and improve the party’s relationship with the business community but has proposed few policies as the UK’s political system contended with the COVID-19 crisis.

The UK’s labor force comprises more than 34.7 million workers.  The employment rate between November 2021 and January 2022 was 75.6 percent, with 29.7 million workers employed full-time. There were 1.3 million workers unemployed in January 2022, or 3.9 percent.  The female employment rate was 72.2 percent.

The most serious issue facing British employers is a skills gap derived from a high-skill, high-tech economy outpacing the educational system’s ability to deliver work-ready graduates.  The government has placed a strong emphasis on improving the British educational system in terms of greater emphasis on science, research and development, and entrepreneurial skills, but any positive reforms will necessarily lag in delivering benefits.  The UK’s skills base stands around the OECD average and continues to improve.

As of 2020, approximately 23.7 percent of UK workers belonged to a union.  Public-sector workers represented a much higher share of union members at 52 percent, while the private sector was 13 percent.  Manufacturing, transport, and distribution trades are highly unionized.  Unionization of the workforce in the UK is prohibited only in the armed forces, public-sector security services, and police forces.  Union membership has risen slightly in recent years, despite a previous downward trend.

In the 2019, a total of 234,000 working days were lost from 35 official labor disputes.  The Trades Union Congress (TUC), the British nation-wide labor federation, encourages union-management cooperation.

On April 1, 2022, the UK raised the minimum wage to £9.50 ($12.47) an hour for workers ages 23 and over.  The increased wage impacts about 2 million workers across Britain.

The 2006 Employment Equality (Age) Regulations make it unlawful to discriminate against workers, employees, job seekers, and trainees because of age, whether young or old.  The regulations cover recruitment, terms and conditions, promotions, transfers, dismissals, and training.  They do not cover the provision of goods and services.  The regulations also removed the upper age limits on unfair dismissal and redundancy.  It sets a national default retirement age of 65, making compulsory retirement below that age unlawful unless objectively justified.  Employees have the right to request to work beyond retirement age and the employer has a duty to consider such requests.

HMG brought forward new immigration rules on January 1, 2021.  The new rules have wide-ranging implications for foreign employees, students, and EU citizens.  The new rules are points-based, meaning immigrants need to attain a certain number of points in order to be awarded a visa.  The previous cap on visas has been abolished.  Applicants will need to be able to speak English and be paid the relevant salary threshold by their sponsor.  This will either be the general salary threshold of £25,600 ($33,600) or the going rate for their job, whichever is higher.  If applicants earn less–but no less than £20,480 ($26,880)–they may still be able to apply by “trading” points on specific characteristics against their salary.  For example, if they have a job offer in a shortage occupation or have a PhD relevant to the job.  More details are available here: https://www.gov.uk/guidance/new-immigration-system-what-you-need-to-know 

The DFC does not prioritize investments in the UK.  Export-Import Bank of the United States (Ex-Im Bank) financing is available to support major investment projects in the UK.  A Memorandum of Understanding (MOU) signed by Ex-Im Bank and its UK equivalent, the Export Credits Guarantee Department (ECGD), enables bilateral U.S.-UK consortia intending to invest in third countries to seek investment funding support from the country of the larger partner.  This removes the need for each of the two parties to seek financing from their respective credit guarantee organizations.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $2,910,000  2019 $2,880,000 https://data.worldbank.org/country/united-kingdom 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2020 $629,016 2020 $890,086 BEA data available at https://apps.bea.gov/international/
factsheet/
Host country’s FDI in the United States ($M USD, stock positions) 2020 $524,906 2020 $446,179 BEA data available at https://www.selectusa.gov/country-fact-sheet/United-Kingdom 
Total inbound stock of FDI as % host GDP 2020 19%  2020 16.2% Calculated using respective GDP and FDI data 

 

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data (through 2020)
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $2,532 Proportion Total Outward $2,178 Proportion
USA $628.80 24.8%  USA $523.70 24.8% 
Netherlands  $262.90  10.4% Netherlands $243.50 11.2%
Belgium  $172   6.8%  Luxembourg $130  6%
Germany  $139.90 5.5%  France $112.30 5.2%
Japan   $134.30  5.3% Spain   110.7 5.1%
“0” reflects amounts rounded to +/- USD 500,000.

 

U.S. Embassy London
Economic Section
33 Nine Elms Ln
London SW11 7US
United Kingdom
+44 (0)20-7499-9000
LondonEconomic@state.gov

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