For small and mid-sized companies, expansion into the European marketplace presents senior management with plenty of challenges – many of which you have probably never faced before. Doing business overseas requires the implementation of strategies, which are specific to the cultural and economic needs of the nation into which you are expanding your operation. Because of both their undeniable influence on our cultural evolution and our shared language, expansion into the United Kingdom can be, for many small and mid-sized businesses, an attractive option for breaking into the European Marketplace.

One of only four European Union nations boasting a yearly GDP of over one trillion dollars (2004 estimated GDP $1.7 trillion), and an annual real GDP growth rate of over 3 percent, the United Kingdom is one of the strongest economies in Europe. Over the past two decades, the UK’s economy has shifted heavily to the services sector from manufacturing, with services currently accounting for 72 percent of the nations GDP, while manufacturing accounts for only 26 percent. This shift makes the United Kingdom a particularly attractive option for expansion to American manufacturing companies – particularly those firms that produce goods that are not manufactured by UK companies. Additionally, as opposed to many nations on the continent, in most cases the United Kingdom does not charge prohibitive tariffs on foreign goods and services, making it one of the most “user friendly” economies in Europe.

The United States and the United Kingdom have a long, rich history of both political and economic cooperation. Allies in both World Wars, and partners in most of the major geo-political events of the last seventy-five years, the attitude in the United Kingdom towards both the United States and American business tends to be one of the most positive in Europe for the most part. Culturally, while there are certainly many differences both in customs and in political areas, Americans remain closer to the British than we do to any other nation in Europe, both by virtue of having once been a part of the British Empire, and because of the shared language. When considering expansion into the British marketplace, it is helpful to keep in mind that the firms you will be dealing with will most likely be about seventy-five percent American and twenty-five percent European in the way they transact business. While the United Kingdom is a part of the European Union and that does have an increasing impact on how they do business, you will be likely to find more similarities than differences in both their practices and their expectations. As an example, several years ago I worked with a US client launching a new product in the medical industry in the United Kingdom. Speed and the need to get things done quickly and on schedule were of primary importance to the UK partners – who worked on a tight deadline with pressure to meet the markers per the schedule. This would not have been the case had we been working in France or Germany, where time is rarely of the essence in business, unless you can prove the need for speed.
While the British are more like us than any other nation in Europe, it is important to keep in mind that they are still a foreign nation, with their own laws and practices. Here are a few things you should consider when doing business in the UK

· Taxes and tariffs
As with doing business in any nation on Earth, taxes and tariffs need to be figured into your bottom line. The British system of taxation differs from what you will be used to in the United States in a number of ways, and will vary depending on the specific way you choose to handle your expansion. For example, while usually minimal, customs tariffs will apply when importing goods into the UK, however, if your firm manufactures its goods within the UK itself, your business will be taxed at the rate applicable to all UK business, which averages between 25 percent and 30 percent. Additionally, a V.A.T. (value added tax) of 17.5 percent is charged at every stage in the consumer goods chain, meaning that in most cases your company will be charged this tax on most of your expenses, but will be able to charge it back to your end customer. While it is one of the fairest systems of taxation in the world, it is also one of the most complicated and it is crucial that your firm hire a UK based Chartered Accountancy firm to advise you on all of its intricacies.

· Employing local workers and relocating staff
The standard work Visa in the United Kingdom is two years, with an option to renew. However, it is important to keep in mind that, due to their participation in the European Union, you will need to prove that the position you are relocating someone for cannot be filled by a citizen of an EU nation. It is therefore quite likely that while key executives or managers would receive work Visas, lower level members of their staff may not. With one of the lowest unemployment rates in Europe (currently running at about 4.4 percent) you can generally expect to pay salaries equal to or higher than what you pay for the same positions in the United States. One way of decreasing your local payroll – and this is particularly true for the manufacturing sector in the Northeast of England, or in Wales, both of which have been designated as “needy of investment” and attract a good deal of funding from within the EU itself. Not only is the compensation you can expect to pay significantly lower in these areas, but also Her Majesty’s Government will often offer companies incentives to locate their expansions in these areas.

· Dealing with your British partners
As stated above, in general, Americans and American business are viewed quite favorably by the majority of UK subjects. However, it is important to keep in mind that while we share a common language and many common interests, many of their customs and conventions are European as well as being uniquely British. The British value both honor and dignity very highly – both in themselves and in the Americans they do business with – and expect to be treated with respect. Often, what would be considered standard business tactics in the United States will appear “pushy” to your British partner. Even today, after more than 200 years, the fact that we were once colonies of the English who have outgrown them can grate. Additionally, it is important to remember that with a culture that is over one thousand years old and businesses that have been in existence for over three centuries, the British are some of the shrewdest negotiators in the world. Careful preparation and expert advice are both crucial when negotiating with UK companies.
There are many attractive reasons for considering expanding your business into the United Kingdom and, increasingly, many American businesses are doing just that. It is, however, crucial to the success of your expansion to remember that just because they look like us, and in many ways act like us, and even speak the same language, the British are not us, and London is not New York. Always keep in mind that it is their cricket field, and to play on it, you need to understand and abide by their rules!

Steve McLaughlin founded Global Market Insights, with offices in Europe and the U.S., with his vision of giving clients two synergistic competencies: knowledge of the global marketplace and industry expertise in manufacturing, finance and information technology. Steve McLaughlin has over twelve years of international experience in three continents, having started in executive search as a Beckett-Rogers Associate. Steve McLaughlin is a graduate of Rice University where he was student body president, and completed post-graduate studies in International Economics at the Universidad Mayor, Santiago, Chile. He is available for consultation and can be contacted directly by Email: smclaughlin@gmi.lu or Phone: 352-26364921. Additional information is located on his website: http://www.gmi.lu