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U.S. Department of State
United Kingdom Country Commercial Guide
Office of the Coordinator for Business Affairs
COUNTRY COMMERCIAL GUIDE
SECTION I EXECUTIVE SUMMARY
SECTION II ECONOMIC TRENDS
- Major Trends and Outlook
- Principal Growth Sectors (host-country perspective)
- Government Role in the Economy
- Balance of Payments Situation
- Infrastructure Situation
SECTION III POLITICAL ENVIRONMENT
- Nature of Political Relationship with the U.S.
- Major political issues affecting business climate
- Brief synopsis of political system - schedule for election and
orientation of major political parties.
SECTION IV MARKETING U.S. PRODUCTS & SERVICES
- Distribution & Sales Channels
- Use of Agents & Distributors; Finding a Partner
- Direct Marketing
- Joint Ventures/Licensing
- Steps to Establishing an Office
- Selling Factors/Techniques
- Advertising & Trade Promotion
- Pricing Product
- Sales Service/Customer Support
- Selling to the Government
- Protecting your Product from IPR Infringement
- Need for a Local Attorney
- The "Showcase Europe" Initiative.
SECTION V - LEADING SECTORS FOR U.S. EXPORTS & INVESTMENT
- Best Prospects for Non-Agricultural Goods & Services
- Best Prospects for Agricultural Products
SECTION VI TRADE REGULATIONS & STANDARDS
- Trade Barriers, including tariffs, non-tariff barriers and import
- Customs Valuation
- Import Licenses
- Export Controls
- Import/Export Documentation
- Temporary Entry
- Labeling, Marking Requirements
- Prohibited Imports
- Standards (e.g. ISO 9000 Usage)
- Free Trade Zones/Warehouses
- Special Import Provisions
- Membership in Free Trade Arrangement
SECTION VII INVESTMENT CLIMATE STATEMENT
A1. - Openness to Foreign Investment (including information on
A2. - Conversion & Transfer Policies
A3. - Expropriation and Compensation
A4. - Dispute Settlement
A5. - Performance Requirements/Incentives
A6. - Right to Private Ownership and Establishment
A7. - Protection of Property Rights
A8. - Regulatory System: Laws and Procedures
A9. - Efficient Capital Markets and Portfolio Investment
A10. - Political Violence
B) - Bi-Lateral Investment Agreements
C) - OPIC & Other Investment Insurance Programs
D) - Labor
E) - Foreign Trade Zones/Free Ports
F) - Capital Outflow Policy (Do not repeat Ch. IV. info)
G) - Foreign Direct Investment Statistics
H) - Major Foreign Investors
I) - Opportunities in Northern Ireland.
SECTION VIII TRADE & PROJECT FINANCING
- Brief Description of Banking System
- Foreign Exchange Controls Affecting Trading (as opposed to
- General Financing Availability
- How to Finance Exports / Methods of Payment
- Types of Available Export Financing and Insurance (including bi-
- Project Financing Available
- List of Banks with Correspondent U.S. Banking Arrangements
IX BUSINESS TRAVEL
- Business Customs
- Travel Advisory and Visas
- Business Infrastructure
A) Country Data
B) Domestic Economy
D) Investment Statistics
E) U.S. & Country Contacts
F) Market Research
G) Trade Event Schedule
This Country Commercial Guide (CCG) presents a comprehensive look at the
United Kingdom's commercial environment through economic, political and
The CCGs were established by recommendation of the Trade Promotion
Coordinating Committee (TPCC), a multi-agency task force, to consolidate
various reporting documents prepared for the U.S. business community.
Country Commercial Guides are prepared annually at U.S. Embassies
through the combined efforts of several U.S. government agencies.
I. EXECUTIVE SUMMARY
Political stability, low rates of direct taxation, assured property
rights, a flexible labor market, first-class financial markets and a
geographic location in close proximity to the continental European
markets make the United Kingdom especially attractive to U.S. exporters
and investors. Entry into the market by U.S. firms is greatly
facilitated by a common language, legal heritage and similar business
institutions and practices.
For the last decade and a half the UK government has striven to expose
the economy to the invigorating influence of market forces and to
encourage freer movement of capital and labor. It has pursued a policy
to reduce the role of the state in the economy, cut public spending, and
to revive UK industry. Specific measures taken include; tax reform,
abolition of capital controls, privatization of national industries,
deregulation of financial services, telecommunications and
transportation, and labor law reform. These steps have generated
significant structural changes in the economy and increased its
As a result, the United Kingdom has entered a period of sustained, if
modest, economic expansion with a leaner, more competitive business
The UK's government perceives its primary role as developing a stable
macroeconomic environment, with low inflation and sound public finances
as the cornerstone, as well as ensuring a physical infrastructure
adequate to sustain business development. A high degree of labor
flexibility is also seen as essential to national competitiveness.
The United Kingdom (UK), remains solidly entrenched as the United
States' largest European market and fourth largest worldwide (after
Canada, Japan and Mexico). In 1994, UK imports from the United States
reached $26.8 billion, generating a $1.7 billion U.S. trade surplus.
Given just its size and growth potential, the United Kingdom represents
a uniquely important overseas market, and over the next few years new
and established U.S. exporters can expect to find exceptional trading
The UK market is based on a commitment to the principles of free
enterprise and open competition. International trade is vital to its
economy. The absence of major trade barriers and the relative ease of
doing business ensure that the United Kingdom remains an attractive
marketplace. Demand for U.S. goods and services is growing as the
sustained recovery in the United Kingdom's industrial sector strengthens
and as corporate investment is stepped up to meet the competitive
challenges of an integrated European Union.
Establishing an initial trading relationship with the United Kingdom is
an effective means to gain access to, and experience in, the European
Single Market of 370 million consumers. The abolition of many internal
trade barriers within the Single Market enables European-based firms to
operate relatively freely, and thereby achieve the economies of scale
necessary to compete on a regional and international basis. From the
United Kingdom, U.S. firms are well-positioned to take advantage of the
full range of opportunities that regional integration and a return to
economic growth in Europe are providing. Excellent transport and
communications infrastructure, and accommodating political and
commercial environment have already established the United Kingdom as a
gateway to Europe for many companies.
An important strand in our bilateral commercial relationship is the
investment each nation has made in the other's economy. The United
Kingdom is the largest investor in the United States, and has
traditionally been the most important destination of U.S. direct
investment in Europe. One in eight of the United Kingdom's five hundred
largest companies is an affiliate of a U.S. company. This economy
provides a unique commercial base for gaining entry to the markets of
the European Union (EU) and beyond through direct sales and investments,
or through strategic alliances formed with UK firms. In 1992, the UK
economy attracted 40 percent of all U.S. investment into the EU.
The United Kingdom imposes no impediments to foreign ownership, nor
restrictions to the free-flow of capital. Its regulatory environment is
pragmatic, featuring a deregulatory trend consistent with the
government's intention to provide a stable and unfettered commercial
environment in which private enterprise can flourish. Within the EU,
Her Majesty's Government (HMG) has shown itself to be a staunch defender
of the rights of any British- registered company, irrespective of
Soaring productivity in recent years has resulted in a rapid decline in
real terms of unit labor costs, and has put the United Kingdom in the
low-cost lead among the Group of Seven leading industrialized countries.
In addition, low inflation and interest rates, and the reputation as a
hospitable commercial environment, have enabled the United Kingdom to
maintain its position as the preferred investment location in Europe for
U.S., Japanese and other firms based outside this region.
The United Kingdom shares a long cultural heritage with the United
States, and the great sense of affinity which the British generally feel
toward Americans translates into a high level of receptivity to U.S.
goods, services and investment.
Bilateral trade and investment relations between our two countries are
generally harmonious, if not exemplary, reflecting a shared commitment
to the principles of an open and expansive multilateral trade system.
II. ECONOMIC TRENDS AND OUTLOOK
MAJOR TRENDS AND OUTLOOK
The resurgence of the British economy in the 1980's roughly paralleled
the return of the Conservative Party to power in 1979. The recovery
began in 1981 and continued for nine years, the longest running growth
period in British postwar history. Labor productivity in manufacturing
rose 4.8 percent a year from 1979 to 1989, and the 2.2 percent rate of
real GDP growth achieved in that period was among the highest rates in
After successfully emerging from its 1979-81 recession, the United
Kingdom was able to avoid the slowdown in economic growth in Western
Europe in the early 1980's that resulted, in part, from high interest
rates. UK government policy was to maintain a tight control over
domestic demand while engineering a competitive devaluation of the
Signs of economic overheating began to emerge in 1988 and were
unmistakable by 1990, as retail price inflation reached a rate of
approximately 11 percent and average annual wages were growing at nearly
10 percent. The government response to overheating and inflation
employed several strategies.
A tight monetary policy featuring higher interest rates was established
to rein in the momentum of the economy. Base (prime) rates were raised
incrementally from 7.5 in mid-1988 to 15 percent by the end of 1989. To
help curb inflation, the United Kingdom shifted from a floating exchange
rate system and entered the fixed Exchange Rate Mechanism (ERM) of the
European Monetary System in October 1990. Joining the ERM required the
government to maintain a fixed exchange rate of sterling against the
Deutsche mark (DM) at DM 2.95, a rate which proved increasingly
difficult to maintain.
By early 1990, the effects of monetary restraint were producing a
slowdown in the economy. Consumer spending declined sharply as
households paid off personal and mortgage debt incurred during the
earlier period of low interest rates. Concurrently, companies' fixed
investments declined, and inventories were drawn down. The resulting
recession, which was the longest since the 1930's, caused widespread
business failures and unemployment, and significantly increased the
public sector borrowing requirement. Both consumer and business
confidence were seriously undermined. Small firms were particularly
hard hit as larger companies stayed afloat by cutting costs, postponing
investment and by delaying payments to creditors.
From a high of 10.9 percent at the beginning of the recession in
September 1990, the underlying rate of inflation dropped to 2.6 percent
in April of 1995. (The UK Treasury prefers to monitor the "underlying"
rate of inflation instead of the "headline" rate which includes mortgage
interest payments exaggerating inflationary trends. The latter was 3.3
percent.) Steep declines in domestic demand early in the recession
drove down inflation; high levels of unemployment and restrained wage
growth should keep the underlying inflation rate from going much over
3.0 percent in 1995.
Interest rates were maintained at relatively high levels until September
1992, when intense speculative pressure on the currency exchange markets
caused the United Kingdom to withdraw from the ERM and allowed the pound
sterling to float. Freed from the constraints of the ERM, the UK
Treasury brought down the base rate from 10 percent in September 1992 to
5.25 percent in June 1994.
Very high levels of economic growth in mid-1994 prompted monetary
tightening from September. Three 50-basis point increases to 6.75
percent appear to be contributing to a slowing of growth to a more
The economic recovery, which began in mid-1992, has already lasted 12
quarters. However, it has been restrained by persistently low levels of
consumer confidence, in spite of vigorous export growth. The effective
devaluation of sterling upon leaving the ERM, and the return of economic
growth in the United States, had a positive impact on UK exports during
1993 and 1994. Also half the United Kingdom's trade is now with other
members of the EU, and economic recovery in Europe has contributed to
demand for British exports. At the same time, imports have remained
restrained so that the narrowing of the trade deficit made a significant
contribution to growth.
Real GDP grew at 3.8 percent in 1994, and in Q1 1995 GDP growth slowed
slightly to the annual rate of 3.7 percent. The UK Treasury stands
ready to raise interest rates again if necessary, but growth appears to
be slowing. The Government expects growth of about 3.2 percent in 1995
and most forecasters project slightly less than 3.0 percent in 1996.
Unemployment, which had been rising since mid-1990, peaked in January
1993 at 10.6 percent. The manufacturing sector was significantly
disrupted, and many white-collar jobs have been permanently lost.
Although employment has fallen, output has climbed back to early-1990
levels, indicating that firms are finding ways to operate more
productively with reduced staffing levels. The rate of unemployment is
falling slowly now, and remained at 8.3 percent in April of 1995. It is
expected to remain at relatively high levels for some time, however.
Grappling with a growing fiscal deficit, which reached 7.25 percent of
GDP in 1993-4, the Government's budgets of April and November 1993
contained a package of revenue enhancement and spending control measures
which, the UK's Treasury projects, will erase the fiscal deficit by the
year 2000. These include an extension of goods subject to the value
added tax, and a freeze on the total salary bill for the country's 5
million public sector employees through 1997. Any salary increases for
public sector employees must be paid for through productivity gains, and
by reductions in the administrative cost of providing public services.
These fiscal measures were received favorably by the business community
and financial markets, which appear to view them as a credible solution
to the deficit problem.
The November 1994 budget reaffirmed these measures, and on the basis of
higher-than-expected growth and lower-than-expected inflation, actually
increased fiscal tightening. The Government succeeded in reducing the
deficit to about 5.0 percent of GDP in 1994/95 and projects a further
reduction to 3.0 percent in 1995/96. A downside risk to this forecast,
however, is the strong likelihood of election-related tax cuts to shore
up an increasingly unpopular Conservative government.
The UK Treasury has set a target of maintaining the underlying rate of
inflation in the lower half of the monitoring range of one to four
percent. The rate remained well within the target range in 1994, but
has since reached 2.8 percent before falling back to 2.6 percent in
April 1995. Average earnings for the whole economy only rose 3.75
percent in 1994, influenced by a 1.5 percent pay ceiling imposed on
public sector employees. Manufacturing sector rises for the same period
were 4.75 percent.
The expansion in indirect taxes, contained in recent budget statements,
has exerted upward pressure on prices as well as rising commodity prices
and a weaker pound sterling. The rate of increase in producer price
inflation appears to be slowing, and has remained at 4.2 percent for
both April and May 1995. Headline retail price increases slowed from
3.5 percent to 3.3 percent in April 1995. With slowing economic growth
and continued moderate wage inflation, most economists expect underlying
inflation to slow shortly after reaching 3.0 percent later in 1995.
Productivity, expressed as output per person employed for the whole
economy, rose by 13 percent between 1984 and Q1 1993. However, the rise
for manufacturing industries was 40 percent during the same period, an
annualized rate of 4.5 percent. Productivity growth accelerated
dramatically during the tail end of the recession and into the recovery,
with manufacturing output surging by 6.0 percent in the Q3 and Q4 1994,
before falling back to a more sustainable rate of 3.0 percent in the
first quarter of 1995. This has resulted in a rapid decline in real
terms of unit labor costs, and has put the United Kingdom in the low-
cost lead among the Group of Seven leading industrialized countries.
Consumption, which comprises about 63 percent of GDP, was clearly the
driving force behind recovery in 1992 and 1993, turning positive in 1992
and growing at 2 percent in 1993. As expected, it dipped in Q2 1994
after the implementation of tax increases, but it recovered in Q3 and Q4
ending 1994 with 2.6 percent growth. Higher taxes and tighter money
appear to have caught up with the consumer, however, and consumption
actually contracted by 0.1 percent in Q1, 1995. Most analysts project
between 1.5 and 2.0 percent growth for all of 1995.
Reaching self-sufficiency in crude oil production in 1981, the economy
has maintained its role as a net exporter ever since. Output reached
2.3 million barrels per day (MMBD) in 1993 and is likely to continue to
rise at least until 1996 before beginning a gradual decline. However,
the recent reductions in margins for oil producers have resulted in a
decline in national revenues. Natural gas production is rising and will
account for an increasingly high proportion of the hydrocarbon resources
produced. The formerly state-owned coal industry has been privatized.
PRINCIPAL GROWTH SECTORS
The service sector now accounts for approximately 70 percent of the
United Kingdom's GDP, a share which has grown consistently over the last
few decades. The financial services sector is particularly strong.
Productivity growth in the manufacturing sector has increased at a rapid
rate since the early 1980's, driven by a high degree of labor
flexibility, acceptance of innovative technologies, and a supportive tax
The United Kingdom offers markets for the full gamut of U.S. exports.
The current government's commitment to open markets, deregulation and
privatization of industry will continue to offer opportunities for
competitive U.S. firms. Increasingly, public sector procurement policy
emphasizes "best value for money," regardless of origin, and
'outsourcing' is encouraged as a means of improving the quality of
public services, while containing cost.
Major domestic developments, notably recent pollution control
legislation, further planned privatization of state-owned industries,
reforms in the National Health Service, and further deregulation of the
telecommunications market, have created outstanding commercial
opportunities for U.S. exporters in such diverse sectors as healthcare,
environment, telecommunications, utilities and transport.
Plans to privatize all or part of the railroads, part of the prison
service, and air traffic control offer potential to exporters and joint-
venture partners. Britain's telecommunications sector is probably the
most liberal in Europe, and presents significant opportunities for both
equipment manufacturers and service providers.
The UK healthcare market, especially as the state-funded National Health
Service (NHS) restructures, presents opportunities for U.S. suppliers of
equipment and services, particularly where they can provide demonstrable
The United Kingdom is a major market for agricultural products, taking
about $936 million in agricultural imports from the U.S. In addition,
some $223 million in forestry products and $93 million in seafood is
imported from the U.S.
In Europe, growing public awareness of the consequences of environmental
pollution is creating higher EU and national environmental standards,
and more rigorous enforcement of existing regulations. U.S.
technological development has placed our environmental firms at a
distinct competitive advantage.
The UK Ministry of Defense (MoD) welcomes participation of U.S.
companies in procurement competitions. The MoD's procurement policy is
to secure "best value for money." In many competitions, U.S. companies
bring management expertise and leading edge technology not available
within the UK defense industrial base. Generally, the MoD's policy
enables U.S. companies to compete on a level playing field, whether as
prime contractor, or as a major sub-contractor to UK industry.
The U.S. Department of Defense (DOD) and UK's Ministry of Defence have a
Reciprocal Procurement Memorandum of Understanding (MOU) for defense
equipment. This MOU constitutes an effort by both governments to look
at each other's existing weapons systems to satisfy their requirements
and reduce legislative restrictions to reciprocal procurements. Of all
our allies, the UK military enjoys the closest operational relationship
with U.S. forces. Traditionally, this cooperation has resulted in many
UK procurements of U.S., or U.S.-compatible defense equipment.
GOVERNMENT ROLE IN THE ECONOMY
With its emphasis on deregulation of industry, free trade and minimal
intervention in the marketplace, the economic philosophy of the current
UK administration is perhaps closer to that of the United States than to
those of any of its European trading partners.
Since coming to power in 1979, the ruling Conservative government's
specific policies have included the return to private ownership of
state-owned industries, the reduction of both personal and corporate tax
rates, and the abolition of capital controls and labor law reform. In
addition, the Conservatives deregulated financial services,
telecommunications, and transportation, liberalized mortgage regulations
and transformed much of the public housing stock into owner-occupied
dwellings. These changes have increased the efficiency and growth
potential of the economy, and made the United Kingdom more competitive
in world markets.
Since 1979, HMG has privatized the telephone, water, gas and electric
utilities. It also sold its majority interest in the country's major
automobile and aerospace companies, and in its national airline.
Moreover, it has encouraged contracting, to private sector firms, many
of the services provided by national and local government. Future
candidates for privatization include the rail system, coal mining, the
prison and postal services, and air traffic control system.
HMG perceives its primary role as developing a stable macroeconomic
environment, with low inflation and sound public finances as the
cornerstone, as well as ensuring a physical infrastructure adequate to
sustain business development. A high degree of labor flexibility is
also seen as essential to national competitiveness.
HMG has also demonstrated a firm commitment to the goals of the European
Single Market. However, plans for the UK's participation in a
politically and financially-united "federal" Europe are less clear.
"Euro-skeptics" from both the ruling Conservative Party and the
opposition Labour Party assert the unease among much of the country's
population over the effects the "New Europe" will have on the country's
political and economic sovereignty. Although the current Conservative
government holds a small majority in Parliament, it is nonetheless
confident that it has the political means to carry out its policies.
The current administration views the near collapse of the ERM in mid-
1993 as a vindication of its earlier decision to withdraw from the
mechanism, and it appears unlikely that the United Kingdom will soon
participate in any form of monetary union. The problems of the ERM and
the difficulties experienced by several EU members ratifying Maastricht
have also reduced the momentum for greater political union, which built
up in the late 1980's. There are clear indications that, in the short
term, European "pro-marketeers" will shift their efforts towards the
more achievable goals of strengthening commercial cooperation between
member countries. The Conservative government also favors the
rapid integration of Eastern Europe into the Union.
The Social Chapter of the Treaty on European Union (Maastricht Treaty)
codifies, across the European Union, issues of employees' rights in the
work place, equitable wages, communal bargaining and employee
consultation. By securing for the United Kingdom the right to "opt-out"
of the Social Chapter, HMG wishes to sustain the climate of minimal
intervention in labor markets which has prevailed during its
administration. It hopes to facilitate job-creation and maintain the
UK's position as a competitively attractive destination for foreign
investment. It is generally supported in this endeavor by the private
sector, which fears the increased business costs experienced on the
Continent by conformance to the Social Chapter's provisions.
HMG does not have a formal policy to protect its defense industrial
base. The MoD's "best value for money" procurement policy has forced UK
defense companies to rationalize the industrial base in order to remain
competitive internationally. Some senior UK MoD officials have indicated
that certain sectors of the defense industrial base (aerospace, tanks,
shipbuilding, and nuclear technology) will not be allowed to perish.
Additionally, the increased emphasis on UK "industrial participation"
(offsets) in contracts awarded to offshore firms bolsters the economy by
maintaining quality jobs.
The MoD preferred procurement policy is to purchase "off-the-shelf" via
a direct commercial contract with industry. "Off-the-shelf" normally
entails long, complex development programs, and the MoD usually expects
the prime contractor to assume all risks. The UK industrial base has
failed to retain its portion (13%) of the global market in 1994/95.
Industrial associations have organized to bring pressure on HMG to
support the defense industrial base. They are asking HMG for changes in
the procurement policy which, if adopted, would favor UK sources in
competitions or would reduce the number of procurements conducted in a
Occasionally, DoD officials will limit U.S. defense equipment sales to
FMS only. MoD officials continue to question this policy when pursuing
U.S. systems designated "FMS" only. Some senior UK MoD officials have
indicated that certain sectors of the defense industrial base (systems
integration, process technology, materials and structures, aerodynamics,
sensor systems/data fusion/data processing, high-integrity/real-time
software, simulation/modelling/synthetic environments) will not be
allowed to perish.
Taxation and Fiscal Policy:
The government seeks to minimize the tax burden on both individuals and
corporations, and direct tax rates are among the lowest in the EU.
The highest personal tax rate of 40 percent is applicable to only the
top 6 percent of income earners. The majority fall within the lower 25
percent tax rate, known as the base rate. It is the stated intention of
the current government to reduce the base rate to 20 percent, when
economic conditions permit. A start has already been made in that
direction with the 20 percent rate applying to the first tranche of zero
to 3,000 British pounds sterling (BPS) of taxable income.
The full corporate tax rate of 33 percent applies to companies with
profits in excess of BPS 1.25 million. Partial tax relief is available
to firms with profits of less than BPS 250,000 to bring their effective
tax rate to 25 percent. Profits between these limits are taxed on a
formula basis which results in a total tax rate between 25 and 33
A central theme of the current government's fiscal policy has been its
emphasis on taxing spending rather than earnings. Since coming to
office, it has increased indirect taxes while reducing direct income
taxes to the levels outlined above. The United Kingdom now levies a
value-added tax (VAT) of 17.5 percent on the purchase price of most
goods, a rate which is comparable to those charged by other EU
BALANCE OF PAYMENTS SITUATION
Following a modern trend for the United Kingdom, the recent deficit in
"visible" trade, that is trade in tangible goods, has been partially
offset by a surplus in "invisible" trade, the gains from financial
transactions and the provision of services. In 1994 visible exports of
US$206.9 billion and visible imports of $222.9 billion produced a UK
merchandise trade deficit of $16.0 billion (1993: $30.7 billion).
However, service credits of $59.2 billion exceeded debits by $3.7
billion and, when combined with a $17.1 billion net investment surplus,
produced a current account deficit of under $300 million.
The economy has run a deficit in visible trade since 1983. This surged
during the "boom" of the late 1980's, as consumer demand for imported
goods ballooned. Once the recession took hold, imports dropped,
reducing the visible trade deficit dramatically in 1991. The
depreciation of the pound, following the UK's September 1992 withdrawal
from the ERM, increased the cost of imports and enhanced UK
competitiveness. This turn of events came as the global economy was
expanding and UK exporters were able to gain market share.
The United Kingdom is the second largest overseas investor (behind only
the U.S.) with the United States the favorite destination. The
cumulative total of British investments in the United States reached $96
billion in 1993. The United Kingdom has an extremely important service
sector, of which banking and insurance are the largest and contribute
close to 20 percent of GDP.
Excellent transportation facilities exist between the United States and
the United Kingdom. There are daily sailings of cargo vessels and
scheduled air freight services from U.S. ports and major cities.
The United Kingdom has 80 ports of commercial significance.
Major development projects have recently been completed at eastern and
southern ports. The most important for container traffic are London,
Felixstowe, and Southampton. The major ports for roll-on/roll-off are
Dover, Harwich, Felixstowe, and Grimsby/Immingham.
New facilities are being developed to accommodate bulk and container
shipments on the Medway, and for bulk and roll-on cargoes on the Humber.
Terminals and supply bases for offshore oil and gas installations have
been built at a number of ports in Scotland.
There are reportedly 137 licensed commercial airports in the United
Kingdom, of which 7 are owned and operated by BAA plc, the successor
company to the statutory British Airports Authority. The seven airports
owned by BAA include Heathrow, Gatwick and Stanstead in England, and
Glasgow, Edinburgh, Prestwick and Aberdeen in Scotland.
These airports handle 72 percent of air passengers and 83 percent of
airfreight in the United Kingdom. Heathrow Airport, located 15 miles
from London, is one of the busiest airports in the world. Gatwick
Airport, 25 miles south of London, was developed as a second airport
serving the city. The main airports used by international scheduled
airlines are Heathrow, Gatwick, and Prestwick.
Road haulage accounts for nearly 80 percent of all inland freight
movement with most of the traffic carried in vehicles of over 25 tons
gross laden weight. International road haulage has grown rapidly, and
nearly 7 million tons of freight are transported annually by UK vehicles
to and from Continental Europe and Ireland.
There are 363,000 kilometers of well-maintained highways, and population
centers are connected by an excellent system of 'motorways.' Plans are
currently being implemented to widen large stretches of motorway to
relieve congestion, particularly in the London area.
The state-owned railroad system provides excellent service between major
cities and towns. A system of express freight trains, called freight
liners, has been developed and serves a freight rail system having more
than 20 major freight terminals. As of March 1988, British Rail had
23,557 miles of standard gauge lines and sidings in use.
In 1994 the United Kingdom ceased technically to be an island. The
Channel Tunnel project provides twin rail tunnels between the United
Kingdom at Folkestone and France near Calais. Separate passenger and
freight shuttles operate in the 31-mile tunnel between the two
terminals. In addition, a high-speed rail link will be constructed over
the next few years to connect the Tunnel to London and beyond. This
will service the increased freight and passenger traffic expected.
MAJOR INFRASTRUCTURE PROJECTS UNDERWAY
Major projects include the Cross-London Rail Link, the extension of
London Underground's Jubilee Line to Canary Wharf, the construction of
the High-Speed rail Link to the Channel Tunnel, revitalization of the
main west-coast rail line and the planned construction of another runway
for Heathrow Airport.
III. POLITICAL ENVIRONMENT
NATURE OF THE POLITICAL RELATIONSHIP WITH THE UNITED STATES
The important Anglo-American partnership is one of the most enduring of
our bilateral relationships. It remains securely anchored in historical
traditions, common political systems and values, compatible security
interests and a shared cultural heritage. At the government level, the
closeness of the relationship ensures a remarkable degree of cooperation
on a very broad range of issues.
With the end of the Cold War and the diminished relative importance of
security issues, and with the movement towards European integration, our
bilateral relationship has further evolved. The United States now
emphasizes to a greater extent than previously the value of our economic
interests in Asia and Latin America. The United Kingdom, for its part,
is working now more closely with its European partners on political,
trade and other economic matters.
Yet the US-UK alliance continues to be a key one for both countries, and
the pattern of productive cooperation is expected to continue. We share
very similar, if not identical, views on such priority issues as
extending security to Eastern Europe, promoting political and economic
reform in the former Soviet Union, and furthering peace in the Middle
MAJOR POLITICAL ISSUES AFFECTING BUSINESS CLIMATE
BRIEF SYNOPSIS OF POLITICAL SYSTEM, SCHEDULE FOR ELECTIONS, AND
ORIENTATION OF MAJOR POLITICAL PARTIES
The United Kingdom of Great Britain and Northern Ireland is comprised of
four national entities: England, Scotland, Wales (together making Great
Britain), and Northern Ireland. The United Kingdom is a constitutional
The constitution is largely unwritten, and almost all political power is
vested in one chamber of the bicameral Parliament--the House of Commons.
The other chamber, the House of Lords, consisting of hereditary and life
peers, as well as senior officials of the Church of England, has limited
legislative powers. The House of Commons consists of 651 members -- 524
from England, 72 from Scotland, 38 from Wales, and 17 from Northern
Ireland. Members are elected from specific geographic constituencies,
each representing about 60,000 voters.
Because of population shifts, constituencies in England vary
considerably over time. General elections are held no more than five
years apart, the last having been in April 1992. They are always held
at a date of the government's choosing. The next election must be held
by the spring of 1997.
The government, a cabinet headed by a Prime Minister, is formed by
whichever party, or coalition of parties, can command a majority in the
Commons. Legislation is passed by majority vote.
At present, the major parties are the ruling Conservatives (Tory Party)
and the opposition Labour Party. The Liberal Democrats constitute the
only other significant political force.
Administratively, the United Kingdom acts as a centralized state. The
national government, consisting of some 17 cabinet-level departments,
plus smaller entities, is staffed by career, nonpartisan civil servants.
Only the three or four senior policy positions in each department (the
Secretary of State, the Minister of State, and the junior ministers) are
occupied by political appointees. They are drawn from the ranks of the
ruling party in the House of Commons or the House of Lords.
The current Conservative government under Prime Minister John Major is
pro-business in orientation and seeks to maximize the growth of private
enterprise. While still coping with the economic and social effects of
having "weathered" Britain's longest recession in decades, it remains
enthusiastically committed to the philosophy and policies of the
previous Thatcher administration.
Even though firmly focused on implementing the Single Market program,
some Conservative Members of Parliament express deep concern over the
effects that full European integration will have on the country's
sovereignty. Britain opted out of the "social chapter" of the
Maastricht Treaty and deferred a decision on joining the European
Monetary Union, if and when it becomes operational. Division over these
and other related issues has led to a spate of factional disputes, at
times weakening the Conservatives' capacity to present a united policy
Since the early 1980's, the opposition Labour Party has attempted to
widen its popular appeal by moving steadily towards a more moderate
position nearer to the political center. In the process, it has reduced
the traditional dominant influence of the trade unions over party
policies. It is not anticipated that a future Labour government would
seek to re-nationalize privatized industries and utilities, or
significantly reverse legislation restricting trade union business
sector activities. A Labour government would most probably pursue
orthodox fiscal and monetary policies. Labour is more pro-European than
the Conservatives; it endorses the Maastricht "social chapter," but has
its own concerns about European Monetary Union, such as the need for
economic convergence of all member states in such a union.
The third major force in British politics is the centralist Liberal
Democrats, formed in the early 1980's when several Labour Party Members
of Parliament, dissatisfied with the strongly left-wing orientation of
their party at that time, joined forces with the majority of the small
Liberal Party. The Liberal Democrats have commanded a sizable share of
the popular vote. However, due to the current "first-past-the-post"
voting system, they have managed to secure only 25 seats in Parliament.
Cultivating an independent identity, strongly pro-European and
supporting Parliamentary reforms favoring increased openness in
government, the Liberal Democrats might conceivably hold the swing vote
in any future "hung" Parliament.
IV. MARKETING U.S. PRODUCTS AND SERVICES
DISTRIBUTION AND SALES CHANNELS
The United Kingdom has a well-developed network of import channels.
British importers are well versed in foreign trade and have long
experience in handling all types of products. Import channels vary with
the nature of the product. Selection of an appropriate marketing
channel is of critical importance to the success of any export marketing
Channels through which foreign goods move range from the branch offices
of overseas manufacturers to import houses that purchase abroad and sell
on their own account. Between these two extremes are sales agents (some
of them manufacture equipment similar to the products they import),
commission agents, specialized importers, brokers, and importing
distributors. Frequently, larger business firms engaged in manufacture
or domestic trade buy directly from overseas suppliers, while smaller
firms find it more convenient to buy through intermediaries.
Industrial equipment is generally handled by sales agents, while office
machinery is sold through branch offices or representatives of overseas
manufacturers. Chemical products are largely imported by merchants.
Foodstuffs and some consumer products move through specialized
importers. Computers, traditionally handled by a sales agent and, more
preferably, by a distributor, have been successfully marketed by
"salesmen" that have evolved as an interface between suppliers and
In the case of capital goods and raw materials, direct selling is
sometimes employed by foreign manufacturers, since the range of buyers
is more limited. The distinction between the various types of import
channels is not clear cut. Considerable variation exists even within a
single group of products.
A recent development is the appearance of organizations that take care
of the costing, warehousing, distribution, pricing, and factoring
(guaranteeing of manufacturers' invoices) of import goods. These firms--
sometimes referred to as "importers/ factors"--began as forwarding
agents. As market conditions changed, they gradually extended their
activities. Today, importers/factors still provide shipping, forwarding,
and customs clearance services.
Developing sales is still the responsibility of exporters. They can
hold inventories and control sales in the United Kingdom through the use
of these importers/factors, thus dispensing with
Larger UK distributors have an annual turnover which greatly exceeds the
average manufacturer. Consequently, they expect that foreign
manufacturers will already have their products adapted for local sale
and use. This is especially relevant for the mass marketing of
Distribution methods of U.S. firms selling to the UK market vary with
the product, and depend on the firm's knowledge of local market
conditions. Generally, firms new to the UK market find it more
convenient to appoint one distributor to cover the whole country.
Later, in order to achieve greater market penetration, they often
appoint other regional distributors.
Wholesale and Retail Channels:
There are many types of wholesale establishments in the United Kingdom.
Some wholesalers carry a wide range of complementary and competitive
merchandise, extending credit to retailers and even financing
manufacturers. At the other extreme are commission agents or brokers
who operate without inventory (and frequently on credit), placing orders
only to cover their sales and, therefore, operating on an especially low
markup in comparison with other wholesalers who carry out more
Methods of distribution vary according to the type of merchandise
handled. Fresh fish, for example, is distributed directly by importers
and wholesalers to processors (canners, curers, and meal and oil
processors), freezers, and fast-food manufacturers. Importers also sell
fresh and chilled fish to large catering and local retail outlets.
Medical equipment sales are most effectively promoted by the use of
specialist importers or in collaboration with UK manufacturers of
noncompetitive equipment. Electronic components marketing through
agents and distributors is the standard practice for sales of non-
customized components; specialized components may require a different
In recent years, independent wholesalers have faced increasing
competition from large-scale retail organizations with direct access to
manufacturers. They are able to promote sales through their own retail
outlets and through mail-order businesses. As a result, only a portion
of the trade in consumer goods now passes through wholesalers.
This change has stimulated the creation of new forms of wholesale
organizations for the benefit of both wholesalers and retailers.
Smaller retailers, as a defense against the larger groups, have joined
organizations incorporating one or more wholesalers. Through these
organizations, they benefit from economies of bulk purchasing without
the loss of independence with the advantages of sales promotion schemes.
Computer marketing and sales practices have changed dramatically in
recent years. As computers have become like other commodities,
marketing practices have evolved to resemble those found in the United
As declining prices and margins have made distributors and dealers'
profits vulnerable, retailing is likely to evolve into heavy-volume,
small-profit selling by superstores and value-added hardware sales that
incorporate software and systems integration. By the second half of
this decade the majority of all personal computer sales will eventually
be made by retailers.
UK defense equipment acquisition programs are driven by senior level
approved military requirements, much like DoD programs. The central
staff (Land, Sea, Air, and Joint Systems) Operational Requirements
departments are responsible for defining these equipment requirements,
and obtaining the funding line. Once approved for acquisition, the
MoD's Procurement Executive (PE) acts as the main executive agent for
program competition in the UK. The U.S. Embassy's Office of Defense
Cooperation maintains a close liaison with all of these organizations.
Additionally, the MoD's New Suppliers Services and Defense Export
Services Organization are excellent sources of information for U.S.
companies on: application procedures for acceptance to the MoD's Defense
Contractors List; the MoD's acquisition organizational structure; and UK
industry points of contact for teaming and sub-contract possibilities.
The majority of retailers, wholesalers, manufacturers and caterers let
importers and distributors handle logistics and take the risks
associated with importing food products. Some retailers, who deal in
large volumes of produce, occasionally import directly. In such cases,
the retailer has a buyer or produce technician in the United States who
places the order.
Many importers of non frozen and chilled foods have in-house
distribution networks and warehousing facilities, while smaller
importers contract out. Many fresh produce importers have controlled
atmosphere warehousing facilities and even pack houses catering to the
growing retail demand for pre-packed, and sometimes trimmed fruits and
vegetables. Almost all importers of frozen and chilled foods contract
out to specialized storage, handling and distribution companies.
U.S. tourism providers seeking to secure a significant share of the UK
travel market must first negotiate with tour operators for inclusion in
the next season's brochures. The structure of the UK travel industry is
such that, unless a destination or attraction is included in a tour
operator's catalog, it is unlikely to be booked by other than
independent travel agents, who are in the minority.
USE OF AGENTS/DISTRIBUTORS: FINDING A PARTNER
The United Kingdom has rules and practices concerning agency agreements.
Companies should obtain legal advice, both in the United States and in
the United Kingdom, to ensure that they are not violating U.S. antitrust
laws and that they are in compliance with local UK laws and business
National laws governing the relationships between agents/ distributors
and manufacturers/suppliers are being harmonized throughout the European
Union. The EU Directive, which is the basis of these laws, establishes
the rights and obligations of the principal and his agents, the agent's
remuneration, and the conclusion and termination of an agency contract.
Each member state can choose between two options for compensation in
case of termination of a contract: indemnity (based on past and
anticipated performance) and damages (based on immediate costs at the
time of termination.)
The Directive, concerning EU-based contracts, has been effective since
January 1994 and applies to anyone who is "self employed" and has
authority to negotiate and/or conclude sales or purchases of goods on
behalf of a principal. With this broad definition, the Directive covers
a wide variety of business people ranging from sales representatives to
territorial sales agents.
General duties of the agent, outlined by the Directive, include
negotiating and concluding transactions as well as communicating to the
principal all necessary information. The responsibilities of the
principal include providing the agent with adequate documentation on the
goods covered and keeping in close contact with his agent on any
commercial transactions involving both parties.
The Directive also sets rules pertaining to payment, conditions
pertaining to commission, and the circumstances for termination of the
Prospective agents overseas normally have standard agency agreements
that they sign with foreign manufacturers. The Commercial Section in
the U.S. Embassy in London can provide advice with respect to these
types of agreements and can also supply a list of attorneys in the
United Kingdom whom the U.S. Embassy has found to be reliable. Local
U.S. Department of Commerce district offices, international banks, and
freight forwarders also may know attorneys who specialize in foreign
The Department of Commerce's Agent/Distributor Service (ADS) helps U.S.
firms identify prospective distributors or sales representatives in
overseas markets. Through the ADS application form, the U.S. company
representative specifies the characteristics sought in a prospective
That information and appropriate product information is forwarded to the
Commercial Section in the U.S. Embassy in London, which then makes a
search of its database of appropriate local companies and consults with
trade associations and chambers of commerce to determine the suitability
and interest of UK firms in representing an American company's product
The process takes about 60-90 days from receipt of an ADS request. An
ADS report intends to identify a minimum of three qualified firms that
have expressed interest in a proposal. A typical ADS report includes
the name and title of the person to contact, the telephone number, the
cable address and telex number, and brief comments about the firm or its
stated interest in the proposal.
The Commerce Department sponsors a variety of trade events for the
purpose of bringing U.S. exporters in direct contact with potential
agents, distributors and, in certain cases, joint venture partners or
Commerce Department-sponsored events provide U.S. corporate participants
with previously screened appointments, booth space and utilities, pre-
show promotion, etc. Information on these events can be obtained from
Department of Commerce district offices located throughout the United
The U.S. Embassy in London houses the Commerce Department-operated
International Marketing Center (IMC). The IMC provides a prestigious
venue for all types of promotional events, exclusively for American
companies, their subsidiaries, agents, or distributors. Facilities
include a 2,000 square-foot exhibition hall and an auditorium,
complemented by a comprehensive range of marketing support services.
The latter includes assistance in identifying business prospects,
printing show catalogs, flyers, invitations and arranging appointments.
The service also includes secretarial assistance and other logistical
needs. Booking of the IMC is made directly with its staff; telephone:
011 (44-171) 409-2927; fax: 011 (44-171) 495-2944.
The U.S. Embassy's Office of Defense Cooperation and the Foreign
Commerce Section are excellent sources of information on the UK defense
business climate. Information is available on UK industrial
capabilities and various consultancy services. The MoD's New Supplier
Service and Defense Export Services Organization provide information on
UK industry for teaming and sub-contract opportunities.
The Office of Agricultural Affairs at the U.S. Embassy, London can
assist U.S. food and agricultural commodity exporters to identify
potential importers for their products/commodities. Resource materials
available include: an annual American Food Directory (cross-referenced
listing of UK importers handling U.S. foods and beverages); a USA Wine
Directory, computerized importer listings by product/commodity under the
AgExport Connections database.
Franchising is a relatively new but widely accepted form of business in
the United Kingdom. As a low-risk method of doing business, it has
outstanding potential in the UK market. Even during the last economic
recession, the franchise sector in general experienced positive growth
and significantly outperformed the economy as a whole. The availability
of a pool of relatively inexpensive labor, coupled with a regulatory
environment in the UK which encourages labor flexibility, help reduce
the risk and costs in establishing a labor-intensive service franchise.
A principal advantage for new U.S. entrants is the number and generally
good reputation of U.S. franchise enterprises already present. Frequent
exposure to U.S. franchises has generated positive feelings about
American brand name products and services which has made their
acceptance in these overseas markets even easier. The UK is also
America's largest source of tourists, and many returning British
vacationers have brought back an appreciation for the service and value-
for-money which they experienced with franchise operations in America.
This has made the UK exceptionally receptive to American franchises,
particularly in food services and retailing.
Although direct marketing in the United Kingdom is similar in many ways
to that of the U.S., legal restrictions, postal requirements, subtle but
key linguistic and cultural differences, and differences in list
management/availability and response mechanisms make it advisable to use
a UK advertising agency or direct marketing house to create parallel UK
direct marketing campaigns, or to adjust U.S.-generated promotions for
the UK market.
The British Code of Advertising Practice (CAP) has established rules for
direct mail advertising and list and database management. The rules set
the obligations of advertisers on conformity to product standards,
delivery times, goods sent on approval, customer lists and privacy
protection, etc. The code and the supplementary rules can be obtained
from the CAP at Brook House, Torrington Place, London WC1E 7HN;
telephone: (44) 171 580-5555; fax: (44) 171 631-3051.
The Post Office's bulk handling center in Swindon handles more than 230
million items per year. Growth is expected in the telemarketing and
product fulfillment services.
Consignments of goods imported by letter or parcel post must comply with
internationally agreed arrangements that are established in UK postal
and customs regulations. One essential requirement is that postal
packages must be accompanied by a properly completed customs
declaration. Normally, a formal Customs and Excise import entry is only
necessary for consignments of high value, for goods eligible for certain
tariff relief, or where further information is required.
JOINT VENTURES/ LICENSING
Joint-venture and licensing agreements are common practice in the United
Kingdom. Recent developments in the economy include the further
privatization of state-owned industries, reforms in the National Health
Service and further deregulation of the telecommunications market.
These developments present opportunities to U.S. firms as joint-venture
partners and licensors.
Plans to privatize all or part of the railway system, the prison
service and air traffic control offer significant joint venture
possibilities to U.S. businesses. The inclusion of private U.S. firms
possessing the products, operating experience and best practices as
partners with established UK firms can add credibility to their bids for
franchises. Such Anglo-American joint ventures have been successful in
winning franchises for operating prisons, and the national lottery.
The requirement for industrial participation in major UK defense
acquisition programs has driven U.S. contractors to establish commercial
partnerships with UK companies. In various programs, U.S. contractors
have chosen a UK firm to lead the bidding as prime contractor, in order
to overcome the "buy national" advantage of onshore competitors.
STEPS TO ESTABLISHING AN OFFICE
Establishing an office in the United Kingdom is relatively inexpensive
and straight-forward. A wide range of support services are available to
assist in this task. The appointment of a local representative already
established in the market and experienced in the ways of doing business
in the United Kingdom, is a simple task. The Foreign Commercial
Service, the Travel and Tourism Office, and the Agricultural Trade
Office, all at the U.S. Embassy in London, are able to provide advice
and assistance. The Invest in Britain Bureau of the British Department
of Trade and Industry offers help to those interested in investing in
the United Kingdom. (Please see the contact list in the Appendix.)
Tax Treaty with the United States:
A convention between the United States and the United Kingdom with
respect to income taxation has been in existence since April 1945. A
number of protocols amending this basic convention have since come into
force. Details relating to double taxation arrangements between the
United States and the United Kingdom can be found in Statutory
Instrument 568, entitled Double Taxation Relief (Taxes on Income) (USA).
The convention applies to the taxation of profits arising from a
permanent, commercial establishment in the United Kingdom. Copies of
this document are available from Her Majesty's Stationary Office at 49
Holborn, London WC1 6HB, Tel: 011-44-71-873-0011, or by calling their
representative in the U.S., Kraus-Thompson Publishing, at (914) 762-
Under the provisions of the U.S.-UK Double Tax Treaty, certain classes
of income arising in the one country are exempt from the other country's
tax, if the income flows to a resident of the other country who is
subject to tax on it there. For taxation purposes, foreign-owned firms
are categorized as non-resident companies, that is, companies controlled
and managed abroad but conducting business through a permanent
establishment in the United Kingdom. A company which is merely
represented by a commission agent or a broker is not regarded as a
permanent establishment unless the agent has the authority to negotiate
and conclude contracts on behalf of the foreign principal. The term
"permanent establishment" includes branches, offices, factories,
workshops, mines, oil and gas wells, quarries, or other places of
extraction of natural resources, and building, construction or
installation projects that exist for more than 12 months.
Business may be carried on through a broker, general commission agent or
other independent agent, or through a salesman not authorized to
conclude contracts, without incurring permanent establishment status.
In addition, licensing another company to make and sell products in the
United Kingdom will produce royalty income exempt from UK withholding
tax under the tax treaty.
The Competition Act:
The U.K.'s Competition Act (of 1980) governs agreements such as
exclusive agency, exclusive chain selling, exclusive supply
arrangements, exclusive purchasing contracts, restrictive terms, and
other related matters. Manufacturers and exporters are able to appoint
exclusive agents and to determine the method of distribution. However,
they may not prevent the import or sale of competitive goods from other
sources, including parallel, or "grey" imports from dealers and
distributors in other countries.
Practices of concern under the act are those anti-competitive measures
that restrict the production/distribution pattern to benefit the
manufacturer by making it difficult for competitors of the
manufacturer's appointed agents to attract customers or suppliers. Such
restrictions may make it difficult or impossible for new competitors to
enter a market and may be subject to challenge under the Competition
On the other hand, "vertical restraints" may improve the efficiency of
distribution without harming competition. Such circumstances would not
amount to an anti-competitive practice under the act.
Anti-competitive practice is defined in the act as a course of conduct
pursued by a person in the course of business that has, or is intended
to have, the effect of restricting, distorting, or preventing
competition in connection with the production, supply, or securing of
goods or services in the United Kingdom, or any part of it.
The act does not apply to agreements between a UK resident and a
nonresident. These agreements are generally covered by contract law,
which takes a laissez-faire approach to terms and conditions freely
agreed upon between the parties.
The European Union has adopted legislation establishing the obligations
and conditions of European agents and their foreign suppliers. The
purpose of this legislation is to harmonize the laws and provisions of
the member states.
The directive also establishes conditions regarding remuneration of the
agent and the conclusion and termination of the agency contract. To
date, implementation of the directive has been slow, but U.S. firms
entering into agency contracts in the European Union should be aware of
the principles of the directive.
Changes to British law and the increased regulation of the principal-
agent relationship will encourage U.S. exporters to determine carefully
the most advantageous channel of distribution, and the ensuing legal
responsibilities of all parties. Alternatives to the appointment of
self-employed commission agents include the use of distributors or the
hiring of salespersons as company employees. All forms of
representation should be carefully explored with legal counsel.
ADVERTISING AND TRADE PROMOTION (INCLUDING LISTING OF MAJOR NEWSPAPERS
AND BUSINESS JOURNALS)
It is advised that print and other advertising designed for the U.S.
market be vetted by a UK advertising agency or direct marketing house to
modify promotions for legal, cultural, and other differences between the
two countries. (See Direct Marketing, above).
Advertising in the United Kingdom is highly developed and practices are
similar to those of the United States. Several hundred advertising
agencies operate in the United Kingdom, and most of the major American
agencies have a significant UK presence. The full range of specialist
advertising and market research services is readily available.
The industry is self-regulating, with the Advertising Standards
Authority, located at Brook House, 2-16 Torrington Place, London WC1E
7HN, overseeing the practices of the advertising industry and enforcing
the provisions of the British Code of Advertising Practice (CAP).
Advertisers should become familiar with the CAP regulations.
Of the approximately $12 billion in annual advertising expenditures, 60
percent goes to press advertisements and 31 percent to commercial
The main vehicles for press advertising are the 130-odd national daily
and Sunday newspapers. Of these, there are 12 dailies and 9 Sunday
newspapers with national circulation. They are classified as either
"quality" or "popular" papers on the basis of their style and content.
With their immense circulation and deep penetration throughout the
country, these newspapers are extensively used by manufacturers to
advertise their products. Total circulation of national newspapers is
approximately 15 million on weekdays and 18 million on Sundays.
Major national 'broadsheet' newspapers include The Times, Financial
Times, Daily Telegraph, Guardian, and Independent. National 'tabloids'
include the Daily Mail, Daily Mirror, and The Sun. (see Appendices for
list of specialist publications.)
Commercial television programs are delivered on a regional basis, and
advertisements may be run either regionally or nationally. The state-
sponsored British Broadcasting Corporation (BBC) does not accept
commercial advertising on its radio or television stations. The quasi-
governmental Independent Broadcasting Authority (IBA) regulates
television advertising through its code of advertising standards and
practices. In any one hour of broadcasting, the commercial time is
limited to nine minutes. However, the average hourly time for
commercials per day cannot exceed seven minutes. Certain types of
commercials--such as cigarette and gambling ads--are prohibited.
Key U.K. food and agriculture trade journals include; The Grocer, Fresh
Produce Journal, Caterer and Hotelkeeper, Frozen & Chilled Foods, Super
marketing, Timber Trades Journal, Meat Trades Journal, Fish Trader and
Farmers' Weekly. Contact details for these publications are available
from the Foreign Agricultural Service of the U.S. Embassy in London (see
The United Kingdom represents a strongly competitive market with high
receptivity to U.S. goods. When pricing product for sale in the United
Kingdom, U.S. exporters need to be aware of some additional costs which
could reduce profit margins below those available in the United States.
A value-added tax of 17.5 percent is charged on the majority of goods
sold in the United Kingdom (with food and children's clothes the major
exceptions). In addition, imported goods may be subject to customs
duty. The costs of transportation, freight forwarding and customs
brokerage charges will further diminish margins, as will commissions to
agents and distributors.
UK retailers have tended to demand higher profit margins than those in
the United States. However, increased competition from large European
and U.S. chains, as well as the arrival of warehouse clubs, are
beginning to eliminate excessive profits.
SALES SERVICE/CUSTOMER SUPPORT
As an advanced economy, the United Kingdom offers a full array of sales
and customer support services. Advice on accessing these may be
obtained from the Foreign Commercial Service at the American Embassy.
A full array of market research services is available. In addition, the
American Embassy in London provides periodic economic and financial
country data, as well as market research reports and timely business
information bulletins. These data may be accessed on the National Trade
Data Base (NTDB), a CD-ROM which is widely available throughout the
United States in major libraries, or through subscription. For more
information, write to the U.S. Department of Commerce, Office of
Business Analysis, HCHB Room 4885, Washington, DC 20230, Tel: (202) 482-
SELLING TO THE GOVERNMENT
The UK government adheres to a general policy of "best value for money"
in public procurements. In both central and local government, there is
a strong trend towards "out-sourcing" of services previously provided
in-house. Most government departments are subject to the GATT MTN
Procurement Code. This requires that tenders for public procurement
over a specified value threshold must be advertised in a timely manner,
and that bidders from GATT signatory countries should be given non-
discriminatory treatment. Urgency or national security reasons can be
used to justify procurements outside GATT rules.
Certain industries, notably telecommunications and transport, are
exempted from the MTN Procurement Code. The 1993 US-EU agreement on
reciprocal market access in the electrical utilities sector has paved
the way for further market access liberalization.
Since Great Britain has no official journal, procurement intentions are
published in the EU Official Journal. In addition, trade publications
and specialist bulletins are used to advertise future tenders for the
procurement of equipment, works, or services that are industry-specific.
Such tender announcements supplement EU Official Journal entries, they
do not substitute for them.
The UK MoD prefers a direct commercial sales approach for its major
defense acquisition programs. Its acquisition policy calls for
competitive "firm fixed price" contracting, wherever possible. Rarely
will it fund developmental costs for a new start program. The majority
of its competitions focus on off-the-shelf equipment, which often
requires some development to meet the specifications. This approach
entails selecting a single prime contractor who will accept all program
risk (including development risks for adapting off-the-shelf technology
to meet the operational requirement). The MoD's policy is to amortize
this cost over the production run of the system. Many of their programs
call for total package procurement to include: training infrastructure,
ammunition, parts and maintenance support, development testing, and
various performance guarantees.
The MoD publishes a biweekly digest called the MoD Contracts Bulletin.
The bulletin contains information of possible future purchases,
competitive contracts awarded, single-source contracts awarded, and
prime contractor sub-contracts requirements. It is available to U.S.
contractor subscribers. The American Embassy also utilizes the Commerce
Trade Opportunities Program (TOP) to advertise pertinent information on
The growing UK health care market is dominated by the state-run National
Health Service (NHS). Procurement is the responsibility of several
Regional Health Authorities, each of which takes the lead in procuring a
range of products and services for the entire NHS.
PROTECTING YOUR PRODUCT FROM IPR INFRINGEMENT
UK intellectual property rights laws are strict, comprehensive,
rigorously enforced and conform to the harmonized approach to IPR
adopted by the EU. The UK's IPR positions in international fora, such
as the World International Patent Organization (WIPO) and GATT
negotiations, parallel those of the United States.
The UK has legislation also in effect for the protection of patents,
trademarks, and industrial designs. The British Patent Office is
responsible for the administration of the Patent Acts, the Registered
Designs Act, and for dealing with issues related to the Copyright Acts.
The United Kingdom is a member of the "Paris Union" International
Convention for the Protection of Industrial Property (1958 Revision).
Recent UK copyright law is designed to make copyrighting a more
simplified, user-friendly procedure and has permitted the United Kingdom
to join the Berne Convention.
Implementation by the United Kingdom of the 1989 EU Trademark Directive,
which will establish a unitary trademark system for the European Union,
will make it easier for UK trademark holders to obtain protection in
other countries. The UK's ratification of the Madrid Protocol on the
international registration of marks will enable trademarks to be
registered in all signatory countries with a single application. Until
the EU's Trademark Office is opened in Alicante, Spain in mid-1995, EU
trademarks will be registered on a national basis.
A Single European Patent, valid throughout the EU, does not yet exist,
since the Community Patent Convention has been ratified only by Germany
Applications for patents and for design protection in the United Kingdom
should be filed with the Comptroller, The British Patent Office (BPO),
25 Southampton Buildings, Chancery Lane, London, WC2. Trademark
applications should be filed with the Registrar, The Patent Office,
Trade Marks Registry, also at the above address.
Private professional advice is normally provided by patent or trademark
agents. The Chartered Institute of Patent Agents, located at Staple Inn
Buildings, High Holborn, London WC1V 7PZ telephone: (44-71) 405-9450,
maintains a list of patent agents. The Institute of Trade Mark Agents,
at Suite 3-5, Panther House, 38 Mount Pleasant, London WC1X 0AP
(telephone: (44-71) 833-0875), does the same for trademarks agents.
Some attorneys have a significant practice in trademark law, but it is
not a legal specialty that many handle on a regular basis. Most
attorneys will consult a trademark or patent attorney when necessary,
but it is often easier for firms to deal directly with a patent or
Under UK law, three kinds of patents are granted. These include basic
patents, patents of addition, and secret patents. Basic patents are
issued on new inventions and discoveries for a period of 4 years from
the date of application and are renewable every year for up to 20 years.
Patent applicants first file a request for the granting of a patent that
protects the patent for the first year. The protection ends unless a
"request for search" is filed. The third step is the applicant's
request for "substantive examination." The granting of patents is
usually completed in less than four years from the initial filing date.
There are prescribed fees for each step of the process and for annual
renewal of the patent. The patentee must work the invention
commercially within three years after issue of the patent; otherwise, a
compulsory license may be ordered. Compulsory licenses can be granted
to prevent abuse of a monopoly position. Special compulsory licensing
applies to the pharmaceutical sector.
Patentees may elect to grant "licenses of right" under which they permit
any interested person to work the invention upon payment of royalties.
Revocation of a patent is possible two years after issuance if it is
still not properly worked.
The United Kingdom is a signatory to the International Patent
Cooperation Treaty (IPCT). Under the IPCT, an inventor may file a
single patent application with the BPO, which will then stake a claim in
49 other countries, including 15 European nations and all the major
Thirty months after filing, if the examination report is favorable, the
inventor must file separate applications and translations in the
Industrial designs can be registered and protected for five years from
the date the application is filed. Registration is renewable for two
terms of five years each. The same design may be registered for more
than one article. Non-use of a design will not cause its registration
to be cancelled, but a compulsory license can be ordered if the design
may also be subjected to secrecy restrictions similar to those enforced
on patents for national security purposes.
The first user of a mark is entitled to its registration. Trademarks
are registered for 7 years from the date of application and are
renewable for periods of 14 years each. Applications should be filed
with the Registrar, The Patent Office, Trade Marks Registry, at the
address given earlier for the Patent Office. The Trade Marks Register
is divided into two parts (A and B). Graduated fees are charged for the
application, registration, and renewal.
To qualify for part A, which offers better protection, a trademark must
be distinctive of the goods of the proprietor so that it will
distinguish those goods from those of others. The validity of trademark
registration in part A is considered conclusive seven years after its
The purpose of part B is to permit the registration of trademarks that
are not inherently distinctive but may become so eventually after use.
The law provides for removal of a trademark if the applicant has no
intention of using it or if it has not otherwise been used continuously
for five years.
Both the United Kingdom and the United States are signatories of the
Universal Copyright Convention. This convention affords mutual
Copyrights are granted in the United Kingdom for the life of the author
and for 50 years after his death, subject in the latter period to
licensing stipulations. Any one member state is able to grant
protection which is applicable throughout the EU.
In 1986, the United Kingdom began to provide protection for service
marks, a form of trademark, where a particular product or service is
associated with a particular trading entity. Both service marks and
trademarks have to be examined for compliance with three basic
principles of trademark law: whether it is distinctive, not deceptive,
and does not conflict with another mark.
Trademark protection is available for almost any word or symbol that can
have the attribute of becoming exclusive if sufficiently used. Certain
words and marks cannot be registered simply because they are laudatory
or are used in the industry to describe goods or services. For example,
words and symbols that cannot be registered are those such as "best" for
a particular product or service, a crossed fork and knife for a
restaurant, or a money symbol for a bank.
Well-known geographical locations are not registrable even though they
may have become distinctive of a particular company's products. This
rule, though, may be differently applied to services. The "Virginia"
restaurant may be registrable, for example, while "Virginia" cookies
A mark can acquire distinctiveness after considerable use. Examples
include very common surnames which are recognized by the public in
connection with specific businesses. A rough test for distinctiveness
is whether competitors inherently would want to use the word or symbol
as part of their business.
A mark can not be deceptive and may not imply that the business is other
than what the trademark indicates. The final requirement is that the
mark not belong to another person or company. There cannot be a prior
registration for the same product or service for the same, or very
The phrase "the same goods or services" is important. In the United
Kingdom, a trademark is registered for a specific statement of goods in
one of a number of classes.
Goods and services have been classified by an international system into
over 40 classes ranging from live animals to machinery, to services such
as banking, insurance, and finance. UK registration for one class does
not prevent use in another class. If a company has far ranging
activities, each class of activity will need to be protected.
NEED FOR A LOCAL ATTORNEY
Circumstances in which an attorney would be necessary are very similar
to those in the United States. Many large U.S. law firms maintain
branches in London or work in cooperation with local British lawyers.
"SHOWCASE EUROPE" INITIATIVE
The EU's Single Internal Market:
The European Union of fifteen nations, encompassing a market of $7
trillion and 372 million consumers, is by far the largest and most
important global economic partner for the United States, and our most
important market for the remainder of the nineties. The United Kingdom
is currently the largest customer for U.S. goods and services within the
Due to the vast size of the EU market, the modest anticipated 3 percent
annual growth in the EU's GDP is equivalent to the creation of a new
market for U.S. products the size of Taiwan's every year.
The EU's Single Market objective, established in law, is to remove
internal barriers to the movement of goods, capital, labor, and
services. This has created major opportunities for American exporters
and investors, and along with them some new challenges. For example, a
significant advantage for the U.S. is that they will be able to
manufacture to a single set of product standards, whereas previously
each country had set its own product standards.
The Commercial Service of the U.S. Department of Commerce is currently
transforming its organizational structure in Europe, and attuning its
business support services, to meet the needs of American firms operating
within the Single European Market for Europe-wide assistance. Based on
a new vision for U.S.-European commercial relations, a newly-developed
commercial plan - dubbed Showcase Europe - has been designed to help
U.S. firms exploit the commercial opportunities presented by the immense
European Union market, and the emerging markets of Eastern Europe.
There is a potent opportunity for U.S. export gains in Europe by
increasing U.S. market share through aggressive export promotion
efforts. For example, U.S. firms have an 11 percent share of the UK's
import market but less than 6 percent of the rest of the EU. Consider
also that the German economy is 70 percent larger than the UK economy -
yet American firms export 40 percent more to the UK than to Germany.
Also, approximately 25 thousand American firms export to the UK and only
18 thousand to Germany and 12 thousand to France. Success in the UK
appears principally related to marketing effort. A promotion and policy
focus on other EU markets has the potential to raise U.S. market share
throughout the EU to the level now enjoyed only in the UK.
At the same time, the remarkable transformation of the countries of
Central and Eastern Europe into increasingly free market-oriented
democracies has created a wealth of opportunities for U.S. exporters and
investors. Although starting from a low base, the market in these
countries could triple by the year 2000. As trading relations between
the EU and East European countries strengthen, access to these emerging
markets by U.S. firms may most effectively be gained through West
The Showcase Europe plan aims to provide U.S. business with the support
needed to embrace these opportunities. It seeks vigorously to open up
transatlantic trade through reductions in tariffs and standards
barriers, mutual recognition of product testing and certification, full
access to government procurement opportunities and national treatment
for investors. Another goal of the plan is to accelerate the
integration of the economies of Central Europe, Russia and the Newly
Independent States into the world economy as full and open partners.
Finally it seeks to expand U.S. exports to Europe by approaching the
market on a regional basis and by encouraging existing exporters and
investors to move into additional EU or East European markets.
These changes have required that the Commercial Service modify the old
"compartmentalized" approach to supporting U.S. exports, with each
country treated as a separate market, in favor of an integrated
structure offering uniform, pan-European programs and services managed
and coordinated from centers of excellence in embassies throughout the
EU. To help U.S. firms fully realize the opportunities flowing from
Central and Eastern Europe, the Commercial Service is creating new
resources and developing new partnerships, and information on these is
being actively promoted to U.S. firms already operating in the EU. More
attention is being paid to the interests of U.S. investors, with more
counseling and information on investment opportunities, joint ventures
To accomplish the goals of Showcase Europe, the Commercial Service is
implementing three broad-based strategies. They include: adopting a
Single Market Approach to address the European market in regional or
sub-regional terms, rather than in national terms, in order to attract
U.S. companies into additional European markets; creating an American
Business Network to develop new promotion and policy initiatives with
clients and partners in the private sector in order to increase market
share in Europe; and developing a Commercial Information Infrastructure
to utilize new communication and information technologies in order to
deliver market intelligence and trade and investment opportunities more
efficiently to its U.S. clients.
The Single Market Approach:
Taking cognizance that Europe is rapidly becoming one market, and that
U.S. firms should trade and invest throughout Europe, our trade
promotion and information programs are being revamped to provide a
continent-wide support base. For example the Commercial Service is
implementing a European-wide approach to bringing foreign buyers and
decision makers to U.S. trade shows, and a regional approach to
identifying, supporting and counseling American companies interested in
expanding their activities in Europe.
Initially the Single Market Approach is focusing on four pilot industry
sectors - aerospace, power generation, information technology and
environmental technologies. Market research in these sectors is being
coordinated, and major European trade events are being promoted by all
To support investors, conferences have been arranged to inform U.S.
firms with an established presence in Europe of opportunities and
conditions in other markets within the EU and beyond, and of U.S.
government programs to assist entry to these markets. Due to the large
number of U.S. firms based in the UK, and the ease of access to
Heathrow, London has been a favorite venue for these events.
American Business Network:
We are establishing a policy reporting network to ensure that U.S.
business interests are fully reflected in embassy activities to open
markets, remove barriers, ensure international agreements are
implemented and to develop an early warning network to avert emerging
problems. In addition, industry-specific and issue-specific U.S.
business groups are being established with a Europe-wide focus.
The effort to support firms of U.S. parentage based in Europe brings
the goals of the Commercial Service into alignment with those of some
host trade promotion and investment organizations whose own resources
and networks can be mobilized.
While Europe represents the most open and transparent market for U.S.
companies, they are not always afforded equal treatment across the EU.
In some sectors - such as electric power generation, telecommunications
and audiovisual services - barriers still exist. New product standards
and product testing /certification rules can discriminate against non-EU
firms, and American businesses can be prevented from participating on
equal terms in the coming wave of privatizations. Where such barriers
persist, the U.S. Government will advocate aggressively to ensure that
U.S. firms be allowed to compete fully throughout the integrated
"borderless" market of Europe, and that European consumers enjoy the
full benefits of genuine competition,
Recognizing the current substantial comparative advantage in the U.K.
marketplace, the London Embassy has developed a two-year trade promotion
strategy to support the key objectives of Showcase Europe. This
strategy, "the U.K./U.S. Business Partnership for Europe", features two
parts: the European Launch-Pad and Strategic Sectors.
The European Launch Pad strategy aims to build upon the current strength
of the U.S. strategic commercial position in the United Kingdom. The UK
is our fourth largest trading partner in the world and the largest in
Europe. It is the destination of 40 percent of U.S. investment in the
EU, and is the host to the regional headquarters of over 50 percent of
U.S. corporations with operations in more than one European country.
London's role as Europe's pre-eminent financial center reinforces the
UK's unique position as the most effective gateway to the EU and a
staging post for entry into Central Europe, Russia, the NIS, the Middle
East and Africa.
Integral elements of the European Launch-Pad include: the development
of a client database of U.S. firms exporting to the U.K. and nowhere
else, the design of an aggressive, systematic outreach campaign to major
U.K. business centers, the development of tools to allow us to counsel
U.S. clients interested in the U.K. or other opportunities in the larger
European marketplace, and the marketing of Commercial Service products
and services directly to U.K.-based U.S. clients seeking to enter other
European and regional markets.
Coupled with the European Launch-Pad is the London Embassy's focus on
supporting the four pan-European strategic sectors - aerospace,
electrical power generation, environmental products and services, and
information technologies - as well as three which represent exceptional
opportunities in the UK market - biotechnology and health care, consumer
products and building materials.
From the standpoint of U.S. commercial interests, Europe could well be
the most promising market for the remainder of the 1990s. The
Commercial Service is well on its way to restructuring its trade
promotion programs to take advantage of some very promising
V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
BEST PROSPECTS PRODUCTS AND SERVICES FOR U.S. EXPORTERS
Ranking based on greatest estimated 2-year growth in U.S. exports, the
best prospects in the UK's market are as follows:
1) AIRCRAFT AND PARTS (AIR)
2) INDUSTRY COMMENTS:
The UK Aerospace industry, which suffered in FY 1993 as a result of
excess capacity and declining levels of demand, has shown signs of
revival. Long-term growth prospects for the industry are very positive.
Projections for the commercial market over the next fifteen years
anticipate that European air passenger traffic will grow from 394
billion in 1990 to over one billion by the year 2010. This will
translate into the need for more than 10,000 new aircraft and an
estimated $1,000 billion in airline expenditure.
Aircraft parts suppliers will also have major opportunities to enter the
UK aerospace market as the need to service aging fleets is becoming more
pronounced. British Air, one of the industry's leading performers, has
an ambitious plan for fleet expansion. Due to the introduction of noise
control regulations, airlines such as BA will either need to upgrade or
replace older Boeing 727's and 737-200's as well as DC-9's by the
beginning of the next century.
Airlines will look to plane manufacturers to develop new high technology
products and airliners that can efficiently handle the increasing number
of travelers while maintaining a lower operating cost than aircraft
flying today. It has been speculated that new multi-million dollar
projects aimed to ease congestion at the UK's busiest airports may
include a "super jumbo" jet and a supersonic successor to the Concorde.
3) MARKET DATA (US$ millions) 1994 1995 1996
A) Total Market Size 4,973 5,105 5,513
B) Total Local Production 8,806 9,043 11,119
C) Total Exports 10,948 11,223 12,554
D) Total Imports 7,115 7,286 7,908
E) Imports from the U.S. 3,356 3,617 3,912
1 COMPUTER SOFTWARE (CSF)
2 INDUSTRY COMMENTS
The U.K. market for computer software is expected to continue to grow in
1996. The trend away from bespoke applications running on proprietary
mainframes and mini-computers should continue and more firms are
expected to adopt client/server solutions. In 1995 the fastest growing
segments of the market was software development tools which grew by 14
per cent. PC software packages running under Microsoft Windows will be
in high demand as figures for 1995 show that Windows is installed on 64
per cent of all PCs. In recent years the financial services sector has
been the biggest spender on I.T. services and software.
3 MARKET DATA (US$ millions) 1994 1995 1996
A) Total Market Size 7,388 7,937 8,373
B) Total Local Production 5,700 6,190 6,700
C) Total Exports 1,170 1,269 1,422
D) Total Imports 2,858 3,016 3,095
E) Imports from the U.S. 1,370 1,627 1,723
1) POLLUTION CONTROL EQUIPMENT (POL)
2) INDUSTRY COMMENT
Little has changed in the last year in the U.K. pollution control
equipment market. The Government is continuing to promulgate new
legislation that will drive this market, and this will continue to
create opportunities for U.S. companies. In 1995 the Government
launched its new Waste Strategy, establishing a waste hierarchy, with
waste minimization at the top, followed by reuse, recovery and finally
disposal. The Government will also enact the Environment Act, 1995,
which sets out new proposals for dealing with contaminated land. In
1996 a new U.K. Environment Agency will be established to amalgamate
several agencies and impose a more rigorous enforcement regime on
polluters. Also a tax on landfill will come into effect. All this will
stimulate demand for pollution control equipment.
The U.S. is second only to Germany in air pollution control, and in
water pollution control France has less than half the U.S. import share
of the UK market. The current value of the dollar is encouraging U.K.
buyers look towards the United States where previously they had relied
on European suppliers in these sectors. The market is expected to grow
by about 10% from 1995-96.
3) MARKET DATA
(US $ millions) 1994 1995 1996
A) Total Market Size 3,010 3,300 3,696
B) Total Local Production 2,450 2,695 3,018
C) Total Exports 520 572 640
D) Total Imports 1,070 1,177 1,318
E) Imports from the U.S. 260 312 374
The above statistics are unofficial estimates.
1) APPAREL (APP)
2) INDUSTRY COMMENTS:
Despite the on-going recession throughout many European countries, the
British economy has been enjoying a recovery since 1993. This is
reflected in the womenswear market where sales increased by 4.6 percent
in 1993. With a further growth of between 3 and 4 percent forecast each
year throughout the 1990s, this can only fuel its strength. The
clothing sector represents nearly 6 percent of the total expenses of
British households, with women's clothing accounting for 48 percent of
the whole clothing trade.
The menswear market in both the U.S. and U.K. continues to grow with an
emphasis on quality and simplicity. It has been predicted that the
menswear industry will be expanding at a larger rate than womenswear.
Due to an increase in the male population between the ages of 45 - 64,
retailers have been targeting a less fashion conscious group and
returning to classic styles. As in womenswear and childrenswear,
American designers continue to supply functional casual wear as opposed
to the impractical European looks. Ralph Lauren, Levi's and 'The Gap'
are expanding in the U.K. offering a wide range of comfortable and easy
to wear clothes.
3) MARKET DATA (US$ millions) 1994 1995 1996
A) Total Market Size 13,117 13,750 15,000
B) Total local Production 11,048 11,600 12,450
C) Total Exports 3,702 3,900 4,050
D) Total Imports 5,771 6,050 6,600
E) Imports from the U.S. 390 425 470
1 DRUGS & PHARMACEUTICALS (DRG)
2 INDUSTRY COMMENT
The UK market for all medicinal and pharmaceutical products was $8.5
billion in 1994. This breaks down as $5.6 billion through pharmacies,
$0.9 billion through medical facilities and $2.0 billion over-the-
counter (OTC) sales. The UK market is the 6th largest in the world.
The conservative prescribing habits of UK doctors means that the UK
market is barely half the size of the German or French ones, yet with a
population similar to France. The National Health Service (NHS)
accounts for 90 percent of prescription pharmaceuticals. Prescription
drug sales grew by 8 percent in 1994 and OTC products by 6.5 percent.
The primary distribution channel for pharmaceuticals in the UK is
through pharmacies. Over 80 percent of ethical drug and 70 percent of
OTC products are made through the 11,000 pharmacies in the UK.
Drugs for 3 therapeutic areas account for over 50 percent of the UK
prescribed market. They are: alimentary/metabolism, cardiovascular and
respiratory (asthma drug sales alone run at about $600 million per
year). The largest sector of the OTC market is analgesics. Sales
reached $300 million in 1994.
All the major pharmaceutical companies compete in the UK market and many
have research and production facilities here using the very strong
science base. The 1995 merger of 2 UK firms created the world's largest
pharmaceutical company - Glaxo Wellcome.
The main driver of the market is the cost of healthcare. Pharmaceutical
prices in the UK are controlled by the Pharmaceutical Price Regulation
Scheme (PPRS). The scheme doesn't regulate individual drug prices, but
rather individual company's Return on Capital (ROC). However, the
pressure on health costs also presents opportunities. Therapies that
can demonstrate savings in other areas of health will do very well - for
instance, a drug that cures faster or removes the need for hospital
care, even though it might be relatively expensive, will have a market.
In addition, cost pressure is fuelling demand for generic substitutes of
branded drugs. Currently about 50 percent of prescriptions written and
40 percent of those dispensed are for generics. Generic development in
the European Union (EU) is, however, hindered to some extent by the
system of supplementary protection for pharmaceutical products (the SPC
system). This system prevents manufacturers from starting development of
a generic until the branded protection ends. U.S. generic suppliers
that can develop products outside Europe should be able to beat their
European competitors to market.
By September 1998 all prescription medicines sold in the UK will have to
be in patient (original) packs. The UK Medicines Control Agency (MCA)
recently published details of the Patient Pack Initiative including
details of the 3 year program for pack introductions. The program has
12 phases of 6 months, each covering drugs in a number of therapeutic
areas. The first phase began on June 1, 1995 for submissions, with the
first patient packs due for introduction in December 1995.
The European Medicines Evaluation Agency (EMEA) recently opened in
London. Its remit is to oversee the implementation of European
regulations and directives for product licenses across Europe. There
are 3 procedures for seeking product licenses: centralized (required for
many biotechnology products), decentralized and national authorization
for single, domestic markets. Much of the industry believes that the
EMEA's London location will act as a draw for companies to establish
pharmaceutical research facilities, particularly biotechnological
research, in the UK to best take advantage of its proximity.
3 MARKET DATA (US$ millions) 1994 1995 1996
A) Total Market Size 8,500 9,400 9,900
B) Total Local Production 11,200 12,100 12,500
C) Total Exports 6,400 6,700 7,000
D) Total Imports 3,700 4,000 4,400
E) Imports from the U.S. 380 440 480
The above statistics are unofficial estimates.
1) BUILDING PRODUCTS (BLD)
2) INDUSTRY COMMENTS:
Activity within the U.K. construction industry has been markedly slow to
throw of the effects of recession. The economy grew strongly during
1994, driven principally by increased capital expenditure and an
improved overseas trade performance. In contrast, consumer expenditure
growth slowed in reaction to higher taxation, weak real income growth
and concerns over rising interest rates. Consumer confidence remains
persistently weak and this frailty is reflected in the sluggish housing
market. Overall, it is the repair and maintenance sector of the housing
market which is exhibiting signs of increased activity. As new home
owners continue to refurbish rather than 'trade up' or move on,
prospects for one of the building products primary subsectors, that of
the Do-It-Yourself (D-I-Y) market, will remain excellent. The
competition for U.S. exporters in most areas of the building products
market is considerable but U.S. imports are perceived, in the main, as
having superior quality particularly suited to the upper end of the
market. Good opportunities exist for suppliers of ornamental brickwork
and facings and architectural metalwork; and also for all types of
insulation products, including windows and doors, as Britain's older
housing stock is updated.
3) MARKET DATA (US$ millions) 1994 1995 1996
A) Total Market Size 16,202 17,775 18,000
B) Total local Production 16,716 18,275 18,500
C) Total Exports 2,811 2,850 2,900
D) Total Imports 2,297 2,350 2,400
E) Imports from the U.S. 355 375 400
1 MEDICAL EQUIPMENT (MED)
2 INDUSTRY COMMENT
The major purchaser of medical equipment in the UK is the National
Health Service (NHS), followed by the residential care and private
hospital sectors. Growth has been steady, if not high, due to cost
pressures within UK healthcare. Growth in sales of electro-medical
equipment has risen faster than that in the rest of the market. The
market is competitive with many UK and foreign suppliers. U.S.
companies are well represented as are the major German companies.
The sale of medical devices in the UK is governed by 3 European Union
(EU) directives. The Medical Devices Agency is the UK Competent
Authority responsible for the implementation and enforcement of the
regulations. Those products that meet the regulations are awarded the
CE mark which enables marketing of the product throughout the EU.
A common obstacle to the purchase of capital medical equipment by the
NHS is tight Department of Health (DoH) spending controls. The UK
government has, however, recently introduced the Private Finance
Initiative (PFI) which allows, within certain guidelines, private
finance to be used for the purchase and running of equipment. The NHS
then pays for access/usage, typically less than full capacity, leaving
the company free to sell the balance to other healthcare providers.
Whilst the supplier assumes the financial risk, the initiative opens the
market for the supply of capital equipment.
The tight financial controls mean that the NHS has an ongoing, though
unspecified, interest in reconditioned capital medical equipment. It
has in the past bought substantial quantities of reconditioned
equipment. At present, and as a result of the changes in the NHS, there
is an internal surplus of equipment which is reallocated as appropriate.
This surplus is not expected to last long and in any case may not
satisfy all requirements. Reconditioned medical equipment is covered by
the same regulations as new equipment. In addition, the NHS requires
suppliers of medical equipment, whether new or 2nd hand, to satisfy
their own safety, quality and legal requirements. The best
opportunities will therefore be for properly reconditioned equipment
accompanied by guarantees and service back up.
3 MARKET DATA (US$ millions) 1994 1995 1996
A) Total Market Size 2,360 2,480 2,610
B) Total Local Production 2,610 2,740 2,880
C) Total Exports 1,370 1,440 1,510
D) Total Imports 1,120 1,180 1,240
E) Imports from the U.S. 350 370 390
The above statistics are unofficial estimates.
1) SPORTING GOODS & RECREATIONAL EQUIPMENT (SPT)
2) INDUSTRY COMMENTS:
Sports activities in the U.K. have grown spectacularly over the last ten
years, driven by increased public awareness of general health and
fitness. This recently discovered 'fitness' has spawned an industry of
magazines, books and videos on the subject of aerobics, golf, tennis,
etc. Additionally, many U.S. exercise products for home use are highly
visible. Major U.K. retailer Lillywhites has reported that according to
sales, women's fitness is one of the fastest growing sports areas. In
fact, according to a recent report, predictions are that there will be a
growth in the market of up to 70 percent by the year 2000.
There are in excess of 27 million active sports participants in the U.K.
Each year it is estimated that one in four of them suffers a sports-
related injury. It is therefore not surprising that with the growth in
self-treatment and increasing consumer awareness, the market for sports
supports in the U.K. sports trade is growing at a phenomenal rate of 24
The new 'craze' in the U.K. is roller blading, or in-line skating as it
is also known. The glamour and style of the sport appeals hugely to the
younger age group making in-line skating potentially a huge money
spinner for sports retailers in the U.K., and an excellent opportunity
for U.S. manufacturers of sports related products.
3) MARKET DATA (US$ millions) 1994 1995 1996
A) Total Market Size 1,038 1,110 1,165
B) Total local Production 514 590 625
C) Total Exports 203 230 235
D) Total Imports 721 750 775
E) Imports from the U.S. 155 160 165
1) DEFENSE EQUIPMENT (DFN)
2) INDUSTRY COMMENTS:
Like most western countries, the UK defense budget is being trimmed. As
a result, a "best value for money" policy has been adopted. Competition
is key; it will be expanded by "market testing" proposals which will
allow private firms to bid for such traditional military tasks as
aircraft maintenance and certain transport roles. Due to budgetary
constraints, the acquisition process has focused increasingly on "off
the shelf" systems, and money for research and development has been
limited. While significant opportunities do exist, the competition for
contracts has intensified as more firms are bidding for fewer jobs.
Major defense projects offering opportunities for U.S. business in the
defense sector include: Aircraft and parts for the Attack Helicopter,
Airlift Modernization, Maritime Patrol Aircraft Replacement programs,
Mission Systems Integration technology for various major equipment
procurement programs (as prime contractor or sub-contractor) and major
sub-contracting opportunities in the electronic component/test equipment
and telecommunications equipment fields.
Other best prospects for U.S. firms include: aircraft, electronics
industry production and test equipment, electronic components, avionics
and ground support equipment, lasers and electro-optics, and
telecommunications equipment. Construction and engineering services and
computer and software services present the greatest defense sector
business opportunities within the service categories. Major defense
competitions during the next two years are: Conventionally Armed
Standoff Missile (CASOM); Air Launched Anti-Armor Weapon; Attack
Helicopter; Bowman Combat Radio; Tactical Reconnaissance Armored Combat
Equipment Requirement (TRACER); Maritime Patrol Aircraft Replacement;
Sea King Airborne Early Warning Helicopter Upgrade; Future Medium Range
Air-to-Air Missile; Ballistic Missile Defense Systems Studies; and
Launch Vehicle for Skynet IV Satellite.
Please note that figures on imports and exports of defense equipment are
only rough estimates as the sector is generally broken up to be included
under such categories as aircraft and parts, computer software,
(US $ millions)
1994 1995 1996
D) Total Market Size 12,232 12,142 12,142
E) Total Local Production 12,809 12,722 12,722
F) Total Exports 1,877 1,860 1,860
G) Total Imports 1,300 1,280 1,280
H) Imports from the U.S. 342 342 342
Note: The above statistics are unofficial estimates. No official
estimates were available for 1996 expenditure at time of writing.
However, no significant change is anticipated over the 1995 figures.
1) FRANCHISING (FRA)
2) INDUSTRY COMMENTS
Sales of products or services through franchised outlets have grown
exponentially in the United Kingdom. The value of goods and services
sold through franchises grew by 500% from 1984 to 1993. Throughout the
United Kingdom there are 414 franchise systems in operation. An
estimated 175,900 people work in 26,400 franchise outlets, and a further
16,400 are employed by the franchise systems. Total sales by franchises
were estimated at $8.8 billion in 1994, a 10 percent increase over the
The United Kingdom is exceptionally receptive to American franchisors,
particularly in food services and retailing. The common language, and
similar cultural and business customs, has made the United Kingdom the
logical first choice in Europe for American franchisors, and an ideal
base for franchise expansion into the Continent. In a recent study by
NatWest Bank, 47 percent of the UK's franchisors plan to expand their
operations into the Continent by 1999, and 20 percent claim to be doing
There are approximately 85 non-British owned franchise systems operating
in the UK, about 60 of which are American-owned.
The expansion of U.S. franchises has often been at the expense of small
indigenous retailers unable or unwilling to match their levels of
organization and marketing, customer service, cleanliness and value. In
many cases, smaller UK firms have been slow to respond to changing
patterns in consumer lifestyles which, to a large extent, have been
similar both in the U.S. and the UK. Generally, if a franchising idea
has proved successful in the U.S., it has an excellent chance in the UK
and Northern Ireland, particularly among the young.
Factors which will continue to drive the growth of franchising in the UK
include: the expected overall improvement in the economy; increasing
consumer confidence; shifting demographics, such as the growing number
of retirees, and the increase in the number of women working outside the
There are several large UK-owned food service and hospitality
corporations which are potentially very competitive. Through their
substantial investments in the U.S., some of these are the parents of
American franchisors. For example, Grand Metropolitan owns Burger King.
However, many of these large corporations have occasionally found it
more effective to act as franchisees in the UK rather than as direct
competitors, attesting to the cache attached to a successful U.S. brand
Best franchising prospects include food services, specialty store
retailers, businesses catering to retirees and two wage-earner families,
cleaning and repair services, day care services, home renovation and
decoration, and leisure products and services.
3 MARKET DATA (US$ millions) 1994 1995 1996
A) Total Sales 8,000 8,8000 9,680
B) Domestic Sales by Local Firms 8,000 8,800 9,600
C) Foreign Sales by Local Firms n/a n/a n/a
D) Sales by Foreign-owned Firms n/a n/a n/a
E) Sales by U.S.-owned Firms n/a n/a n/a
(The above statistics are unofficial estimates. Franchisees are
considered local firms. There are no separate figures available for
sales by units of which the franchisor is non-British).
The table below shows the number of franchise systems and franchise
units operating in the United Kingdom in 1994.
SECTOR SYSTEMS UNITS
Building Services 39 925
Catering & Hotels 55 3,095
Cleaning Services 15 1,510
Commercial & Indstr'l Services 55 1,085
Distribution 51 2,910
Domestic & Personal Services 25 1,110
Employment Agencies & Training 16 530
Estate/Business Transfer Agents 16 435
Parcel and Courier Services 13 1,095
Quick Print/Design 8 635
Retail 86 4,515
Vehicle Services 28 1,555
(Source: NatWest Bank - Small Business Services)
1. AGRICULTURE - FOREST PRODUCTS (FOR)
This table includes roundwood, softwood lumber, temperate hardwood
lumber, tropical hardwood lumber, softwood veneer, temperate hardwood
veneer, tropical hardwood veneer, softwood plywood, temperate hardwood
plywood, tropical hardwood plywood, hardboard, medium density
fiberboard, insulation board, and particle board.
Temperate hardwood lumber and softwood plywood represent the sectors
with the greatest U.S. imports at 121 and 268 thousand cubic meters
respectively. Third country competitors in the temperate hardwood sector
are Canada and Germany, but the U.S. is by far the largest supplier.
Canada is also the major competitor in the softwood plywood sector of
the forest products market.
3. MARKET DATA ('000 cubic meters)
1992 1993 1994
A) Total Market Size 20,056 20,993 21,253
B) Total Local Production 10,669 11,639 11,848
C) Total Exports 397 394 335
D) Total Imports 9,784 9,748 9,740
E) Imports form U.S. 626 604 485
1. AGRICULTURE - TURKEY MEAT
Although the UK is a net exporter of turkey meat, imports of turkey
breast meat are required to fulfill consumer preference. Imports of
processed turkey meat are bound under GATT at a tariff rate of 17
percent. This binding avoids the EU sluice gate price. Under the U.S.
- EU Blair House Agreement this rate will be halved to 8.5 percent with
GATT implementation. United States processed turkey meat is presently
bought by UK retailers and further processors. France and the
Netherlands are the major competitors.
3. MARKET DATA ('000 metric tons)
1992 1993 1994
A) Total Market Size 230 249 258
B) Total Local Production 246 252 253
C) Total Exports 38 32 31
D) Total Imports 20 26 36
E) Imports from the U.S. 6 4 4
1. AGRICULTURE - SEAFOOD
U.S. Seafood is generally competitive on both price and quality,
especially in the high value seafood sectors. The most promising
subsectors within the seafood market are, and are likely to be, crab and
crab meat, and other specialty products. However, salmon remains by far
the largest single U.S. seafood export to the UK. The major third
country competitor in both farmed and seafish is Norway.
3.MARKET DATA ('000 metric tons)
1993 1994 1995
B) Total Market Size 462 464 470
C) Total Local Production 380 386 398
D) Total Exports 365 384 384
E) Total Imports 442 464 453
F) Imports form the US 25 18 22
1. AGRICULTURE - TREE NUTS
United States tree nuts continue to be competitive on quality and to a
lesser degree on price. The above table includes the four major tree
nut varieties imported to the market - almonds, pecans, pistachios and
walnuts. The most promising subsectors within the tree nut market are
almonds and pecans. Major third country competition comes from China,
India and Iran.
3. MARKET DATA ('000 metric tons)
1992 1993 1994
B) Total Market Size 21 21 22
C) Total Local Production -- -- --
D) Total Exports 4 4 4
E) Total Imports 25 25 26
F) Imports from U.S. 13 11 11
1. AGRICULTURE - PET FOODS
Local production dominates the canned "moist" pet food market but
imports are rising as demand for other types of pet food increases. The
most promising subsectors for imports are complete dry dog food, dietary
products and treats. Major third country competition comes from
Thailand with intra-EU trade also supplying the market.
3. MARKET DATA ('000metric tons)
1992 1993 1993
A) Total Market Size 1,415 1,403 1,341
B) Total Local Production 1,348 1,248 1,245
C) Total Exports 192 148 160
D) Total Imports 259 303 256
E) Imports from U.S. 18 24 29
2) INDUSTRY COMMENTS:
In 1995 the United Kingdom is again forecast to be the second largest
overseas provider of tourists to the United States.
The U.S. is the top long-haul destination for UK travelers, and the
forecast for 1995 is for nearly 3 million UK residents to visit the
United States and provide almost $7 billion in export earnings. This
represents a 2.4% growth in arrivals and a 5.9% increase in spending
There remains great potential in the UK-to-US travel market for the
continued growth over the next several years, both with first-time
visitors and with the 70% of repeat travelers exploring further afield
to lesser-known and rural destinations.
Florida bookings, which declined following the highly-publicized tourist
killings in that state more than a year ago, are showing recovery. As
British visitors become more sophisticated, they also search for new
places to visit in the U.S., beyond the typical first visit of a "stay-
put two-week holiday" at a sunshine destination. USTTA marketing
efforts in 1995 and 1996 will focus on six niche markets: golf/tennis;
soft adventure; theater/arts/culture; skiing; lesser-known state and
national parks; and shopping.
The British pound sterling buys few bargains for the British traveler in
Europe these days (even with the recent devaluations of the Spanish and
Portuguese currencies) but does buy bargains in the USA. Favorable
exchange rates should rekindle British interest in visiting America in
1995-96. This factor alone could cause an upturn in U.S. arrivals from
While most prospective travelers are aware of the potential for violence
in any city in the world, security concerns must be a priority for U.S.
destinations hoping to attract UK visitors. The British tend to regard
the U.S. as a "gun culture," an image that has been amplified by the
Oklahoma bombing and the subsequent media coverage of its link to
heavily armed militia groups in the U.S.
In addition to addressing safety issues, focusing on value-for-money and
new destination possibilities in the United States is important to
ensure continued growth of this market.
International competition for UK visitors is heating up, with new and
aggressive long-haul destinations offering inclusive holidays with
charter flights at costs comparable to the favorite UK destination,
Florida. It is now possible to fly to Australia by charter flight for
approximately the same cost as the cheapest scheduled flights to Los
Angeles and San Francisco.
The Gambia and Kenya in Africa, Sri Lanka, Goa in India, Thailand and
several Caribbean islands, as well as European and Mediterranean
destinations such as Greece, Turkey, and Israel, are investing millions
of dollars in advertising and promotion campaigns to court the UK
These and other competitor-nation tourist office investments are paying
handsome dividends for their home countries in increased tourism while
they erode US market share.
Statistics from the UK Central Statistical Office document this trend:
For the three months to December 1994, when UK outbound travel increased
by 10% over the previous year, UK visits to North America fell 5%, while
travel to Western Europe rose 7%. Spain, one of the biggest spenders in
this market , increased its UK visitor numbers 23.8% between January and
An interesting parallel is that the UK, another nation cutting back its
national tourist office budget in times of heavy competition from other
nations, is also losing market share.
In previous years the USA, like the UK, could rely on the assumption
that people "will come anyway." This assumption is still technically
true, but the hot and heavy global competition for the tourism dollar
has brought a new focus to the international tourism picture. The rules
of the global tourism game have changed, and market share is
increasingly moving to the marketers.
VI. TRADE REGULATIONS AND STANDARDS
The United Kingdom has international trading obligations under its
membership in the European Union (EU), the General Agreement on Tariffs
and Trade (GATT), the Organization for Economic Cooperation and
Development (OECD),the International Monetary Fund (IMF), and the United
Nations Conference on Trade and Development (UNCTAD).
Our relations with the United Kingdom reflect a shared commitment to an
open and expansive multilateral trade system. The UK presents no
significant impediments to trade and investment or foreign ownership of
corporate assets, nor restrictions on the free-flow of capital.
However, there are several specific sectoral barriers:
- Air Services: The bilateral air services agreement restricts
competitive opportunities for U.S. carriers between points in the United
States and Great Britain. Limits on access to Heathrow Airport are a
- Telecommunications Services: While the UK telecom services market
is the most open in Europe, regulatory and other barriers limit the
ability of U.S. operators to compete, particularly in facilities-based
- EU Directives: Implementation of EU directives, notably the
Broadcast and Utilities Directives, could create trade barriers in a
previously open market.
- Agriculture: Potential disapproval of dairy products containing
BST, EU requirement for food plant approvals, EU requirement for
hormone-free beef, efforts to change standards for seasoned turkey meat
imports, and other EU directives limit access.
- Defense: While the UK is generally open to defense competition,
economic and political commitments can advantage internal and EU
contract awards in favor of UK and other European firms.
- Product Standards, Testing and Certification: Formulation and
implementation of EU standards and procedures can constitute a barrier
to trade. Of particular current concern are EU efforts to define
standards for "environmentally-friendly" products.
- Tourism: Fear of violence in the U.S. is a concern of foreign
Bilateral trade disputes between the United States and the United
Kingdom are rare. There have been recent instances where British
authorities have been reluctant to provide expanded access to the UK
market sought by U.S. firms in telecommunications, and a larger presence
at Heathrow Airport for U.S.-flag carriers. However, most trade
barriers of concern to the U.S. are the result of EU regulations, rather
than actions by the British government or UK companies.
The ongoing EU harmonization of product standards, labelling, testing
and certification requirements will substantially simplify U.S.
exporters' ability to offer a suitable choice of products across the
Union, while reducing costs significantly. However, the potential
exists to use product standards as a means of restricting market access
to non-EU Manufacturers.
The EU's "Utilities Directive" covering purchases in the water,
transport, energy and telecommunications sectors came into effect in
January 1993. While the directive required open, objective bidding
procedures--a benefit to U.S. firms--it discriminated against non-EU
bids, except in the electric power sector, absent an international or
bilateral agreement. EU procuring utilities may exclude bids with less
than 50 percent EU value without additional justification. In addition,
accepted bids with a majority of EU content must receive a three percent
price preference over non-EU bids.
In April 1994, U.S. and EU negotiators reached an agreement under the
GATT government procurement code covering the electrical utility sector.
As a result, exports of heavy electrical equipment are no longer subject
to the discriminatory provisions of the Utilities Directive. However,
the United States and European Union were unable to reach agreement on
procurement by telecommunications utilities, but pledged to continue
negotiations. In the United Kingdom, only British Telecom and Kingston
Communications are subject to the EU directive; other UK companies are
Because of the failure to reach agreement on telecommunications
procurement, U.S. sanctions imposed under Title VII of the 1988 Trade
Act, imposed on certain EU member states, will remain in effect.
HMG's Department of National Heritage is charged with enforcing the
quota provisions of the 1989 EU Broadcast Directive. As mandated by the
directive, it requires that channel providers broadcast a majority of
European-origin programming "where practicable." HMG has generally
interpreted the "where practicable" language liberally. HMG is under
increasing pressure from the European Commission to press individual
channel providers to set mileposts for increasing their European
HMG opened the UK domestic market for competition in 1991 and continues
to pursue a policy of encouraging competition. Last fall, the U.S. and
the UK declared each other "equivalent" for purposes of international
simple resale. In December OFTEL continued to work to resolve the issue
of interconnection with British Telecommunications with the publication
of "A framework for Effective Competition." These moves went a great
deal towards reducing some of the few remaining market barriers.
Some problems remain. U.S. companies face concerns over access deficit
charges, interconnection, number portability and the unwillingness of
HMG to grant international facilities-based licenses.
Government Support for Airbus:
The Airbus consortium, of which British Aerospace is a member, has
benefitted in the past from government financial support programs. A
U.S.-EU bilateral agreement reached in July 1992 imposed limitations on
future support provided to the Airbus program by governments of the
Airbus consortium members, along with an obligation for the consortium
to repay past state aid. An effort is currently being made under GATT
auspices to extend this bilateral agreement to encompass other countries
that are currently or potentially major players in the international
There are no major barriers to U.S. contractors in the UK defense
sector, other than national security exclusions, and the industrial
participation requirements previously mentioned.
TARIFFS AND IMPORT TAXES
The United Kingdom is a member of the European Union which provides for
a common external tariff, a common agricultural policy, a joint
transportation policy, and the free movement of goods, labor, and
capital within its member nations.
Import Duty Information:
UK import duties applicable to specific products exported to the United
Kingdom (and all other EU member states) may be obtained from the Office
of European Union Affairs, International Trade Administration, Room H-
3036, U.S. Department of Commerce, Washington, D.C. 20230, telephone:
(202) 482-2905; fax: (202) 482-2155. The actual customs tariff document
can be obtained from H. M. Stationery Office, Atlantic House, Holborn
Viaduct, London EC1P 1BN.
Inquirers should be able to provide a complete product description,
including the Harmonized System nomenclature numbers, if known.
Assistance in determining the Harmonized System number can be obtained
from any Department of Commerce district office.
Most raw materials enter duty free or at low rates of duty, while rates
on most manufactured goods fall within a range of 5 to 7 percent. As an
exception, textiles are up to 15 percent; some electronic products reach
14 percent; and there are food products at comparably higher rates.
Customs charges are payable in British pounds sterling at the time the
goods are cleared through customs. However, importers can arrange with
UK Customs and Excise authorities to defer payment of certain duties and
other charges for a 30-day period, provided that adequate security is
The United Kingdom applies a valued-added tax (VAT) on most goods and
services, whether domestically produced or imported. The standard
current rate is 17.5 percent. The VAT is imposed as a flat rate and is
applied on the c.i.f. duty-paid value of the goods and services.
Certain items--such as most foods, medicines, children's clothing and
shoes, and books--are exempt from VAT. Other exemptions include the
transfer of shares and bank bonds, the transfer of businesses and of
land, commissions paid on goods exported, the forwarding of goods
abroad, property rental, banking and financial transactions, and
VAT is paid when the goods enter the country or after the expiration of
the deferral period granted to importers and forwarding agents, who must
arrange for monetary guarantees. The ultimate consumer bears the full
burden of the tax.
The VAT can be recovered on such business expenses as trade fairs and
exhibitions, conferences, hotel accommodations, subsistence meals, and
car rentals by foreign firms. A number of private companies in the
United States, for a fee, offer VAT refund services, as do a number of
Generally, duty and VAT will not be charged on bona fide personal
effects of temporary visitors to the United Kingdom. Personal articles
of persons intending to stay in the United Kingdom will be admitted free
of duty and tax if the items have been in the visitor's ownership and
use for specified periods.
Whatever the length of stay, all goods for commercial use, professional
effects, and any prohibited goods--including drugs, firearms, plants,
meat and live animals, and everything in excess of duty-free allowances-
-must be declared.
Goods for Exhibition:
Goods imported for exhibition may also be entered under bond, deposit,
or ATA Carnet.
Professional equipment may be temporarily imported into the United
Kingdom free of duty and tax under the Customs Convention on the
Temporary Importation of Professional Equipment. For this purpose a
carnet is obtained from the U.S. Council of the International Chamber of
Commerce, referred to in the section entitled "Special Customs
The UK government introduced a departure tax in their annual budget
released November 30, 1993 which added a mandatory £10 (USD 15)
departure tax to the price of all long-haul airline tickets and a £5
(USD 7.50) tax on airline tickets to EU destinations.
When goods are imported into the United Kingdom, UK Customs and Excise
is responsible for the collection of any charges, duty, value-added tax
(VAT) or other levies for which the goods are liable under UK or EU
The applicable duties are imposed on the cost, insurance, and freight
(c.i.f.) value of the shipment. Virtually all import duties are levied
on an ad valorem basis. Thus, import duties are calculated as
percentage charges levied on the landed value of the imported goods.
Briefly stated, the value is the normal price of goods at the time of
importation, negotiated under open market conditions in the United
Kingdom between buyer and seller, independent of each other.
The price includes freight, insurance, commission, and all other costs,
charges, and expenses incidental to the sale and delivery of the goods
to the buyer at the place of importation, with the exception of any
additional taxes. Under these circumstances, the invoice value may be
accepted as the basis for the normal price.
Where preferential price arrangements have been established between
overseas suppliers and UK importers (agents, brokers, licensees,
distributors, or concessionaires or business associates of the
supplier), UK customs reserve the right to apply an appropriate 'arms-
length' value for purposes of levying duty.
Specific duties are levied on a small number of items. These duties
involve a fixed charge per unit of imported goods, for example, per
hectoliter or 100 liters. Where goods are dutiable according to weight,
the term "gross weight" is taken to include packaging, and the term "net
weight" means the weight of the goods alone, stripped of all inner and
outer packaging. In some cases, a fixed tariff is used to arrive at a
net dutiable weight.
Only a very limited range of goods is subject to import licenses.
These include firearms and explosives, controlled drugs and controlled
The United Kingdom is a suitable destination for virtually all U.S.
exports. Exporters should be aware of both U.S. and UK export control
regulations regarding the re-export of goods from the United Kingdom.
Inquiries regarding UK export control regulations should be directed to
the UK Department of Trade and Industry's Export Control organization:
66-74 Victoria Street
London SW1E 6SW
Tel: 011 44 71 215 5000
U.S. industry officials often point to the U.S. defense export licensing
process as a critical factor in the successful bidding for and award of
UK acquisition contracts. The U.S. Embassy's Office of Defense
Cooperation (ODC) has successfully networked with Washington D.C.
license approval hierarchy in support of several U.S. contractor
applications. For assistance, U.S. industry officials should approach
ODC personnel early in the licensing process. Early orientation
regarding DoD licensing, on the specifics of programs and U.S. industry
requirements, can produce major benefits in successfully competing for
Consular documents are not required on shipments of goods to the United
Kingdom. The usual commercial documents required for shipments include
the commercial invoice, bill of lading or air waybill, packing list,
insurance documents, and, when required, special certificates (origin,
sanitation, free sale, etc.).
The commercial invoice should accompany the shipment to avoid delays in
customs clearance. No special form of invoice is required, but all
details necessary to establish the c.i.f. value of the goods should be
given. At least two copies of the invoice should be sent to the
consignees to permit them sufficient time to clear the goods through
customs. "To order" bills of lading are acceptable and protected under
Material may be imported temporarily into the United Kingdom without
payment of duties and tax if such material is to be used in the
production or manufacture of a product that is to be exported. The
importer gives security in the form of a guarantee from an acceptable
bank or insurance company in the amount of applicable duties and taxes.
Upon exportation of the finished product, the guarantee is released.
Temporary admission of goods intended for reexport in the same condition
is permissible free of import duties and taxes upon approval of an
application at the customs administration.
Temporary Imports and Re-exports:
Specific notices issued by British Commissioners of Customs and Excise
govern the conditions and procedures for temporarily entering goods duty
free and reexporting them. These notices invariably require that
importers give a security for the amount of the duty payable in the form
of either a bond or cash deposit, which is released or refunded upon re-
exportation of the goods. The time limit for re-exportation normally
ranges from 6 to 12 months from the date of importation, but extensions
of time may be obtained from the customs authorities.
Included among the categories allowed free-entry privileges are
machinery, plant, and equipment imported by lease or loan for temporary
use in maintaining production of a service in the United Kingdom. Also
included are goods imported solely for processing or repair that will
not change their form or character, or goods imported for technical
examination and standards testing.
Transit and trans-shipment goods are consignments that are brought into
the United Kingdom, other than under an international transit procedure
(TIR), during the course of a journey which begins in one country and
ends in a third. Trans-shipment goods are imported and exported within
the confines of one port or airport; transit goods are moved to a
different port or airport for exportation there.
Since the United Kingdom in these cases is merely a staging post in the
intrepid operation, the chief interest of Customs and Excise is to
ensure that what comes in also goes out. Under certain conditions, the
goods can be regrouped or repacked. All such goods must be removed from
the United Kingdom within the period allowed for their exportation, and
they must be in the same condition, any repacking aside, as when they
were actually imported.
Abandoned and Re-exported Goods:
Goods stored in bonded warehouses and unclaimed may be removed to
Queen's warehouses. Considered property of the government, such goods
are usually disposed of by sale. Privately owned goods may be stored in
Queen's warehouses if they are not entered within the time limit
authorized. These goods may be claimed by the owners, and if duty,
taxes, and certain expenses are paid, entry for home use may be made.
Re-exportation is permissible, subject to the payment of certain
expenses. If the goods are not cleared from Queen's warehouses within a
reasonable time, they may be sold. The proceeds will be used to satisfy
the amount of the duty, tax, and expenses owed, with the balance being
transferred to the former owner of the goods upon application to the
LABELING, MARKING REQUIREMENTS
Marking and Labeling:
Certificates of origin are not required for goods imported into the
United Kingdom from the United States except textiles and apparel. No
general requirements or indications of origin on imported goods are
specified in the Trade Description Act of 1968. The act provides for
the prohibition of imports of goods and parts thereof bearing infringing
trademarks, as well as any false trade description, including a false
indication of the place of their manufacture, production, processing or
Under the provisions of the Trade Description Act, a conspicuous
indication of the country of origin must be placed on certain imported
goods. It applies to imported goods bearing a UK name or mark, or any
name or mark (whether or not such a UK name or a mark exists). Excepted
are goods used, as well as containers or labels in, on, or within which
any goods are ordered or supplied.
Under EU rules, the origin of imported merchandise is established
through documentation accompanying the shipments arriving in the United
Kingdom and not through marking of products or their containers.
Certain specified commodities, however, must be marked or labeled to
show composition, and name and location of the manufacturer, in
accordance with various UK laws and regulations.
U.S. exporters should determine from their importers the metric labeling
requirements for their products. For example, the labeling of heating,
ventilating, and air conditioning equipment must include metric data
such as kilowatts or joules. The UK industry already uses System
International (S.I.) metric units.
The use of metric data in sales and technical documentation is also
required. Importers are responsible for ensuring that metric data is
provided. If necessary, they must supply locally printed sales
literature and labels with the equipment if compliant documentation is
not provided by the manufacturer.
All third country food and agriculture imports are subject to compliance
with EU/UK food and agriculture legislation.
Packaged foodstuffs must comply with EU/UK food labeling, additive,
flavoring and packaging legislation.
Basic labeling legislation requires:
1. The labeling and methods used must not:
(a) be such as could mislead the purchaser to a material degree,
(i) As to the characteristics of the foodstuff and, in particular, as
to its nature, identity, properties, composition, quantity, durability,
origin or provenance, method of manufacture or production;
(ii) By attributing to the foodstuff effects or properties which it
does not possess;
(iii) By suggesting that the foodstuff possesses special
characteristics when all similar products possess such characteristics;
(b) Subject to EU provisions applicable to natural mineral waters and
foodstuffs for particular nutritional uses, attribute any health claims
to any foodstuff.
2. Indication of the following particulars alone are compulsory on the
labeling of foodstuffs:
- the name under which the product is sold,
- the list of ingredients,in descending order of weight, as recorded at
the time of their use in the manufacture of the foodstuff,
- in the case of prepackaged foodstuff, the net quantity. Weights and
measures must be declared in metric units. In the case of liquids the
declaration liter, centiliter or milliliter must be used as appropriate;
in the case of solids the declaration must be given in kilogram or gram
- the date of minimum durability, or in the case of foodstuffs which,
from the microbiological point of view, are highly perishable, the "use
by" date. Date marking must be given in the order of day/month/year or:
'best before' and date in terms of the day and month for foods
expected to keep for three months or less, or 'best before end' and date
in terms of month and year only for foods expected to keep for more than
three months but not longer than 18 months, or 'best before end' and
date in terms of either month and year or year only for foods expected
to keep for more than 18 months,
- any special storage conditions or conditions of use,
- the name or business name and address of the manufacturer or
packager, or of a seller established within the Community,
- particulars of the place of origin or provenance in the case where
failure to give such particulars might mislead the consumer to a
material degree as to the true origin or provenance of the foodstuff,
- instructions for use when it would be impossible to make appropriate
use of the foodstuff in the absence of such instructions, with respect
to beverages containing more than 1.2% by volume of alcohol, the actual
strength by volume
- packaged foodstuffs must bear a 'lot marking' The lot shall be
determined in each case by the producer, manufacturer or packager of the
foodstuff in question, or of the first seller established within the
Community. The marking shall be proceeded by the letter 'L', except in
cases where it is clearly distinguishable from other indications on the
- nutritional labeling is compulsory where a nutritional claim appears
on the label, in presentation or in advertising, with the exclusion of
generic advertising. The only nutrition claims permitted shall be those
relating to energy values and, to the following nutrients: protein,
carbohydrate, fat, fiber, sodium and prescribed vitamins, and to
substances which belong to or which are components of, a category of the
Where a packaged foodstuff contains meat, poultry, dairy ingredients,
then those foodstuffs must also conform to EU/UK animal health
legislation, the EU Third Country Red Meat Directive and the EU/UK food
hygiene legislation. If a product is organically grown/produced and the
statement "organic" appears anywhere on the product label, then that
product must also conform to the EU Organic Food Legislation.
Fresh fruits and vegetables, foliage/plants and timber products are
subject to compliance with the EU/UK Plant Health Legislation.
UK classified program documentation has to be handled according to the
U.S./UK General Security Agreement. The U.S. Embassy's Office of
Defense Cooperation can assist U.S. industry in the data transfer
process for many major MoD acquisition programs.
There are certain products that are prohibited (as opposed to
controlled) imports, which may not be imported into the United Kingdom
under any circumstances. These include AM citizen band radios, devices
that project toxic, noxious or harmful substances, counterfeit currency
and certain types of pornography.
Firearms, explosives, defense articles, and controlled drugs are not
prohibited imports although they are subject to strict import licensing
procedures. HMG officials will provide guidance to U.S. companies for
UK defense programs that require imports from the U.S.
In the agricultural sector, all red meat products must be sourced from
EU-approved plants. In the case of beef, it must be certified hormone-
free. At the time of writing, poultry and poultry products must be from
UK-approved plants. Imports of whole, unprocessed potatoes are
prohibited. At the time of writing, imports of live cattle from the
United States are also prohibited.
Despite on-going efforts to harmonize EU standards, EU members have
widely differing standards, testing and certification procedures in
place for both industrial and consumer products. The European Union has
recognized these as barriers to the free-movement of these products
within the Union, and has undertaken to minimize technical restrictions
to the flow of goods.
New EU directives for certain products stipulate new standards to
protect the health and safety of consumers, and the environment. Based
on the concept of mutual recognition, products certified as meeting
these standards in one member state can be freely marketed in another
state. Once corresponding European standards are in place, the EU
plans to implement a harmonized approach to testing and certification,
as well as to provide for the mutual recognition of national
laboratories accredited to test and certify products covered by EU
The United States has stressed the importance of maintaining an open and
transparent EU standards development process, with the objective of
assuring equal access for U.S. exporters to the standards, testing and
The harmonization of EU national standards is one of the major goals in
its integration process. When the process is completed, equipment in a
number of key sectors manufactured in or imported into the EU will have
to comply with those standards.
In the United Kingdom, standards have been prepared by the British
Standards Institute (BSI) for virtually all manufactured goods, for
production processes and the testing of those goods, and for their
installation and operation. British standards can be identified by a
"kite" symbol and the letter "BS" followed by four digits. This number
code defines the purpose of the individual standards, the way in which
the standard must be evolved, and the presentation and drafting of the
final document. The BS designation is sometimes referred to as the
"standard for a standard." If a proposed standard duplicates an
existing common European standard, that is, one established by the
Comite Europeen des Normes (CEN), the CEN standard becomes the UK
The ISO 9000, developed by the International Standards Organization
(ISO) in 1987, is a basic quality assurance program. Equivalent to
ANSI/ASQC Q90 in the U.S., and the EN29000 in the EU, it is a generic
standard to ensure a consistent level of quality goods and services.
Over fifty countries throughout Europe, North and South America and Asia
have adopted the ISO 9000.
If ISO standards are prepared subsequent to the issuance of CEN
standards, and if they differ from the CEN standards, the ISO standards
will prevail, and the UK national standard will be modified to conform.
Products that meet the British standards are described as compliant with
or conforming to BS (number), but they cannot be described as being BS
(number) approved unless they are tested for conformity by BSI or a BSI-
approved laboratory and a certificate of conformity is issued.
Manufacturer's test data are not accepted unless the test facilities
have been approved under the National Measurement Accreditation Scheme
(NAMAS). NAMAS is the quality assurance system supervised by the
National Physical Laboratory (NPL), which is responsible for the
integrity of the national system of measurement.
Test and certification by BSI or a BSI-approved test laboratory entitles
the vendor to attach a "kite mark," or tag, to the product as evidence
of its approved status. The kite mark is an immediately recognizable
visual indication and a valuable sales incentive for domestic appliances
and consumer products, but of less relevance to industrial goods.
The end result of the standards harmonization process in the EU will be
a hierarchical system, with national standards being traceable via CEN
to ISO. This tracing to ISO standards provides the basis for mutual
recognition of national standards and may militate against acceptance of
any industry-generated (nongovernmental) standards that do not have this
As soon as a national standard is published, previously accepted
industry standards are superseded and are no longer accorded
recognition. As soon as an EU (CEN) standard is issued, the national
standards are superseded. When an ISO standard is issued, the EU or CEN
standard is superseded.
U.S. firms should be aware that Underwriters Laboratories (UL) is not
accepted as a testing or certifying body by either the British or EU
standards authorities because UL is a nongovernmental body. For the
same reason, Federal Communications Commission-approved test
laboratories in the United States have no standing in the generation or
submission of test data for UK standards approval.
However, a U.S. industry standard or UL approval is often accepted as an
assurance of product quality if no UK national standard exists.
Similarly, National Electrical Manufacturers' Association standards and
American Petroleum Institute standards are accepted in the United
Kingdom. Such acceptance, though, is invalidated when national (UK)
standards are accepted.
There are numerous mandatory and voluntary standards in existence that
define products, processes, or procedures and embrace many fields. BSI
is the recognized authority for preparation, publication, and
dissemination of standards for industrial and consumer products. BSI is
the central official source of product standards information and can be
contacted at Linford Wood, Milton Keynes, MK14 6LE, England; telephone:
011 (44-908) 221166; fax 011 (44-908) 320-856.
Additional information on British standards is available from the
Standards Information Service Center, Technology Building 228, Room B-
166, National Institute of Standards and Technology, Gaithersburg, Md.
20234; telephone: (301) 975-4037.
Another source of standards information is the American National
Standards Institute (ANSI), an agent for BSI, located at 11 West 42nd
Street, New York, N.Y. 10036; telephone: (212) 642-4900; fax (212) 302-
Standardized Packaging Units:
Europe-wide marketing strategies will have to incorporate product
standardization, and consideration must be given to standardized
packaging and instruction manuals, coordinated advertising and promotion
campaigns, as well as standards for service and warranties that extend
One recent development that incorporates such a Europe-wide tactic is
the recent "partnership" deal between independent electric goods
retailers and manufacturers. Benefits to the partners, beyond economies
of scale and expanded market shares, are expected in the form of
simplified administrative and after-sales support, the ability to trade
inventory from country to country, and the encouragement of bulk
purchasing by dealers. At the same time, independent retailers have
joined ranks to gain the cost-cutting benefits of bulk buying and
improved customer servicing.
Still, many manufacturers do not negotiate with dealers on a Europe-wide
basis. Sales and marketing operations are frequently handled by
national subsidiaries without a coordinated strategy. As a consequence,
manufacturers' prices can vary as much as 35 percent between countries,
and product guarantees are not uniform or transferable across borders,
often because of national laws. To overcome the latter hindrance, some
firms now offer product insurance that enables customers to exchange
goods bought in one country and damaged or broken in another.
Ultimately, Europe-wide marketing will be led by, and depend on, product
standardization. Certain products, such as the latest in consumer
electronics, have already advanced to as much as 95 percent
standardization of components, while other consumer durables, such as
white goods, remain bogged down by an array of choices in design and
The European Union has established standardized packaging units for
numerous products which should be consulted by U.S. exporters. Detailed
information on the European Union's metric and packaging requirements
may be obtained from: Office of European Union Affairs, Room 3036,
International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230, Tel: (202) 482-2905.
FREE TRADE ZONES/WAREHOUSES
Entry and Warehousing:
Goods subject to customs duties may be warehoused in a customs warehouse
approved by HM Customs and Excise. While the goods are in the
warehouse, no duty is payable on them. Duty is payable when the goods
are removed from the warehouse for use in the United Kingdom or other
member states of the EU. Duty is not paid if the goods are reexported
to destinations outside the EU.
Goods imported with the intention of being stored in bonded warehouses
must be cleared through customs by using a special entry form. These
warehouses are approved by customs authorities and are publicly or
privately operated for the purpose of storing goods without payment of
duty and taxes, until entry is made for domestic use.
With few exceptions, manufacturing operations are not permitted.
Normally, the only permissible activities are those involving the
preparation for sale of the goods, such as repacking and sorting of
goods, and bottling of alcoholic beverages.
In addition to bonded warehouses, there are Queen's warehouses, provided
by the government, or appointed by customs officials for the deposit of
goods for their safe custody or for the security of the duty owed.
These are principally utilized for depositing goods that have become
government property due to forfeiture, abandonment, or not being entered
with the allowable time limits.
Free Trade Areas:
There are six sites for free trade zones, called freeports in the United
Kingdom; these are in Liverpool, Southampton, Birmingham, Glasgow-
Prestwick, Humberside, and Tilbury near London (see Section VII Part E,
below for addresses).
The freeports are enclosed zones within or adjacent to a seaport or
airport. Inside the freeport, goods are treated for customs purposes as
being outside UK customs territory.
In general, customs duties are payable only when goods are consumed
within the zone or pass from the zone into the local (United Kingdom) or
other EU member state markets.
SPECIAL IMPORT PROVISIONS
Samples and Advertising Matter:
Samples having no commercial value are exempt from duties and taxes.
Samples of value, however, may be temporarily admitted duty and tax free
under certain conditions. Principally, such samples must be owned
abroad, intended for reexport, and must then be reexported within six
months from the time of importation or any additionally authorized
Also, samples of value may be imported solely to be shown or
demonstrated free of charge in the United Kingdom to prospective
customers soliciting orders for goods to be supplied from abroad. Goods
sent on sale or return conditions are not accorded duty and tax relief.
Travelers may bring samples along with their baggage. An importer may
authorize an agent to enter or clear the samples on the importer's
behalf or import directly.
As security for import duties and applicable taxes on samples directly
imported, the importer must post either a deposit or bond at the time of
importation. If a bond security is given, the principal and surety to
the bond must be resident persons or limited companies registered in the
Importers resident in the United Kingdom must provide the bond. Upon
re-exportation, the deposit will be refunded or the bond canceled.
The United Kingdom is a member of the ATA Carnet System. This system
permits U.S. commercial and professional travelers to take commercial
samples and professional equipment into member countries for
demonstration or exhibition purposes for up to one year without paying
customs duty and taxes.
Customs authorities in participating countries accept carnets as a
guarantee that all customs duties and taxes will be paid if any of the
carnet-covered items are not re-exported within the time period allowed.
Applications for carnets can be obtained from the U.S. Council for
International Business, 1212 Avenue of the Americas, New York, N.Y.
10036, telephone: (212) 354-4480; fax: (212) 575-0327. Applications
also are obtainable from any U.S. Council Regional Issuing Offices
located in most major U.S. cities.
The basic carnet fee is determined by the total shipment value of the
goods to be covered. The carnet enables the temporary exporter to make
customs arrangements for multiple countries in advance, at a
predetermined cost, using a single document.
With a few exceptions, practically all goods originating in the United
States can be imported without import licenses and free of quantitative
restrictions. There are, however, monitoring measures applying to
imports of certain sensitive products. The most important of these
measures is the automatic import license for textiles. This license is
granted to UK importers when they provide the requisite forms.
Senate Concurrent Resolution 40, adopted July 30, 1953, invites U.S.
exporters to inscribe, insofar as practicable, on the external shipping
containers in indelible print of a suitable size: "United States of
America." Although such marking is not compulsory under our laws, U.S.
shippers are urged to cooperate in thus publicizing American-made goods.
Inland Clearance Depots, Inland Rail Depots and Inter-Port Removals
Goods may be removed from the places of importation for entry and
clearance at approved depots inland or at certain other ports or
airports. In general, the arrangements apply only to goods in
containers, rail freight cars, or road vehicles that can be sealed, but
certain types of unit load which cannot be sealed also qualify.
MEMBERSHIP IN FREE TRADE ARRANGEMENTS
British imports from, and exports to, other member countries of the EU
are duty free. Also duty free are most British industrial goods exports
to, and imports from Norway, Switzerland and Iceland, which together
with the EU form the 18-nation European Economic Area. In addition, the
UK participates in the limited free trade arrangements negotiated by the
EU with a number of countries in Central and Eastern Europe and the
As an EU member, the United Kingdom can no longer accord Commonwealth
Preferential duty treatment to Canada, South Africa, New Zealand, and
Australia. There continues to be very high receptivity to import goods
from Commonwealth countries. The UK offers tariff-free entry to certain
goods from developing countries under the EU's Generalized System of
The United Kingdom is a member of the General Agreement on Tariffs and
Trade (GATT) and the World Trade Organization (WTO).
VII. INVESTMENT CLIMATE
Political stability, low rates of direct taxation, assured property
rights, a flexible labor market, first-class financial markets and a
geographic location on the west of the huge European market have helped
to make the United Kingdom an attractive destination for foreign
investment. Entry into the market by U.S. firms is greatly facilitated
by a common language, legal heritage and similar business institutions
and practices. There are no impediments to foreign ownership nor
restrictions on the free-flow of capital. Inflation is relatively low
and industrial relations have improved dramatically over recent years.
The importance of foreign investment in the United Kingdom is growing.
Of the US$ 330 billion invested in the last five years, US$ 60 billion
came from overseas. The percentage of foreign-owned assets in
manufacturing industry has increased from 13 percent five years ago to
20 percent today. Foreign-owned companies provide 16 percent of the
country's manufacturing jobs, 22 percent of its net output and 27
percent of its net capital expenditure. Both the United States and
Japan, the biggest external investors in European industry, have
invested more in the United Kingdom than in any other EU country.
The United States is by far the largest foreign investor in the United
Kingdom. There are 3,500 branches, subsidiaries, and affiliates of US
firms resident, compared to 1,000 from Germany and approximately 250
from Japan. In general, U.S. companies that have invested in the United
Kingdom tend to be the faster growing, export-oriented industries that
are in the technologically advanced sectors of the economy. In 1993,
U.S. direct investment in the United Kingdom represented over 40 percent
of all U.S. investment in the European Union.
To U.S. firms eager to establish a foothold within Europe the United
Kingdom is seen as a particularly receptive economy, particularly for
small to medium sized U.S. firms for whom it represents the easiest, and
often the most cost-effective point of entry.
A1. OPENNESS TO FOREIGN INVESTMENT
The United Kingdom does not discriminate between nationals and
foreigners in the formation and operation of British companies. A U.S.
corporation establishing a British subsidiary encounters no special
national requirements on directors and shareholders.
There are no restrictions on the repatriation of earnings, and foreign
companies are treated the same as companies for tax purposes. Non-
resident companies carrying on a business in the United Kingdom are
taxed only on profits of the subsidiary or branch.
There are no requirements for technology transfer. Foreign owned firms
have access the programs of the Export Credit Guarantee Department
(ECGD), which provides export credit and insurance for the sales of
British-manufactured goods overseas. There are no requirements for
joint ventures or local management participation or control.
The Government has powers under the Mergers and Industry Act of 1986 to
prohibit the take-over of important manufacturing undertakings by non-
residents. Since 1968, the conduct of most takeovers has been subject
to a code of practice. This seeks to achieve a fair balance between the
differing interests of parties in a takeover. The code is administered
by a panel composed of representatives of numerous financial bodies.
There are no investment screening mechanisms. Foreign investors receive
national treatment, and foreign-owned companies are eligible for the
same benefits as British companies.
Major Investment Barriers:
The UK Government welcomes investment from overseas, and such foreign-
owned companies are treated no differently than UK companies. Persons
resident outside of the country are generally able to invest in the
United Kingdom on the same terms as those available to residents, and
there are no exchange controls on the transfer of funds into or out of
the United Kingdom. Restrictions to which investments might be subject
are general ones, such as whether a particular acquisition would give
rise to monopoly considerations.
The UK Secretary of State for Trade and Industry, who is also the
President of the Board of Trade, has powers under:
The Mergers and Industry Act 1986, to prohibit the takeover by non-
residents of certain manufacturing operations which might be deemed
vital to national interests. Assets or shares of such entities,
threatened from takeover by non-residents, may be compulsorily acquired
by the Secretary of State for Trade and Industry.
The Financial Services Act 1986 outlines UK policy with respect to other
countries' treatment of UK financial institutions. It permits the
application of the principle of reciprocity, rather than that of
national treatment. The Act confers sweeping powers on HMG's officials
in responding to cases where UK persons are deemed not to have received
reciprocal treatment overseas in their conduct of investment, insurance
and banking business.
The United Kingdom does not operate any investment screening mechanisms.
A2. CONVERSION AND TRANSFER POLICIES
There are no exchange controls restricting the transfer of funds
associated with an investment. All exchange controls were removed in
1979 and the enabling legislation for the controls was repealed in 1987.
As the United Kingdom has a large foreign exchange market and there are
no restrictions on the amount of foreign currency which is available,
queuing for foreign exchange is unnecessary.
In general, there are no controls on any type of capital movement into,
or out of, the United Kingdom.
A3. EXPROPRIATION AND COMPENSATION
As expropriation is alien to United Kingdom tradition, there is no
established practice relating to the grant of compensation.
Nationalization of an industry or service would require an act of
parliament. The present Conservative Party administration, expected to
remain in office until 1997, is committed to transferring most remaining
government-owned industries and services from the public to the private
A4. DISPUTE SETTLEMENT
Disputes over shareholding are resolved through the Queen's Bench
Division of the High Court. Efforts to resolve disputes in a takeover
bid are made by the Panel on Takeovers and Mergers, which is
headquartered in the London Stock Exchange. There is a further right of
appeal to its appeals committee. Under a merger resolution accepted in
September 1990, the European Union has jurisdiction over "concentrations
with a community dimension". Disputes involving larger companies will,
therefore, also fall under EU jurisdiction.
Property and contractual rights can be effectively enforced through the
law courts. The Invest in Britain Bureau advises that, since 1990,
there have been no disputes in which a U.S. investor has been in
contention with the government.
The Government accepts binding international arbitration of investment
disputes between foreign investors and the state. The United Kingdom is
a member of the International Center For Settlement of Investment
Disputes and of the New York Convention of 1958 on the Recognition and
Enforcement of Foreign Arbitral Awards.
A5. PERFORMANCE REQUIREMENTS/INCENTIVES
An appropriate entry clearance, obtained before arrival, must be held by
all persons who come to the United Kingdom in order to establish
themselves in business. Such an individual applying for entry clearance
who is not a EU national will need to show that at least £200,000
(approximately US$ 300,000) is available to invest in the business and
that the investment will create new paid full-time employment. The
£200,000 minimum applies only where a person subject to immigration
control wishes to establish himself and start a business. The
immigration rules do not affect those who wish merely to invest money in
the United Kingdom nor do they prevent people from visiting the United
Kingdom to transact business.
Investment Incentives: Attracting inward investment into the United
Kingdom is the responsibility at the national level of the Invest in
Britain Bureau, an arm of the Department of Trade and Industry, which
maintains offices in major cities throughout the U.S.
Financial assistance to a maximum of 25 percent of eligible costs may be
granted for exceptional projects which meet certain criteria. Such
assistance is available for projects in all parts of the United Kingdom
and is operated under Section 8 of the Industrial and Development Act
1982. Special incentives are available for investment in "assisted
areas" which are considered to be in need of new industry to revitalize
their economies. The incentives are: Regional Selective Assistance
(RSA) for both manufacturing and service industry projects (total awards
for 1991/92 equalling US$ 315 million); Regional Enterprise Grants (REG)
for firms with fewer than 25 employees; and Central Government
Subsidized Rent or Purchase Cost of Commercial or Industrial Premises,
with the possibility of rent free periods.
The following bodies have been established on a localized basis:
1) Enterprise Zones: Companies in these zones receive: exemption from
local property taxes on industrial or commercial property; 100 percent
capital cost allowances for expenditures on the construction; extension
or improvement of industrial or commercial buildings; and reduced "red
tape". Such assistance is given for ten years from the date of the
zone's designation. At the beginning of 1994 there were ten areas in
the United Kingdom that still had enterprise status. Three new
enterprise zones are expected to be established by the end of 1994 in
Nottinghamshire, South Yorkshire and Durham County.
2) Urban Development Areas: Under the Inner Urban Areas Act of 1978,
corporations provide grants and loans for a variety of purposes and
assist with the initial renting of newly acquired premises in designated
development areas. Twelve such zones exist in urban areas of England
3) New Towns: These are areas designed to take pressure away from
congested cities and bring economic recovery to areas in the country.
They offer a variety of industrial units available for lease; serviced
sites for development with space for expansion; and readily available
housing for employees.
4) Simplified Planning Zones: These are designated areas where the
conventional planning process has been streamlined. At the beginning of
1994 six zones had been set up: three in England and three in Wales.
Local authorities in England and Wales have specific power under part 3
of the Local Government and Housing Act of 1989 to promote the economic
development of their areas. Assistance under this power may include:
providing grants, loans or loan guarantees; investing in an undertaking
by acquiring share or loan capital; providing property, services or
other financial benefit.
The European Union, under its structural program's Regional Development
Fund, provides financing for the development of economically depressed
regions within member countries. The funds are matched by grants from
the recipient country's government, which also administers
disbursements. In 1992/93, the EU provided 1.26 billion ECUs in funds
(USD 1.5 billion, rate on 2/24/93).
The present government policy is to channel new industrial development
away from the congested areas to localities where industrial sites and
surplus manpower are available. Aside from special assistance available
to any firm locating in industrial development areas, there are no
specific subsidies or benefits extended by the government to foreign
For nearly 60 years, successive governments have attempted to channel
investment towards certain geographic areas, recognizing the decline
there in traditional industries. Such areas are divided into two
categories: Development Areas and Intermediate Areas. Known
collectively as "Assisted Areas", they cover parts of the United Kingdom
in which 35 percent of the working population lives and are concentrated
in Scotland, Wales, Northern Ireland, and the north of England.
To attract investment to the Development Areas where new industries and
additional employment are needed, the government has programs providing
special graduated benefits, such as grants towards capital expenditures
on new premises and on capital equipment, tax allowances, training
assistance, and special wage premiums. These are available to both UK-
owned and foreign firms.
In the United States, the British Trade and Investment Office (located
at: 845 Third Avenue, New York, N.Y. 10022; tel: 202- 745-0495) seeks
out potential US investors and supplies relevant information to firms
interested in investing in the United Kingdom. In addition, Scotland,
Wales, and Northern Ireland maintain offices in the United States to
perform essentially the same functions.
A6. RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
Foreign and domestic private entities do have established rights.
Competitive equality is the standard applied to private firms in
competition with public enterprises. This is especially marked in the
arrangements for compulsory competitive tendering of services for which
local authorities have responsibility and which have previously been
undertaken exclusively by local authorities. Foreign nationals are
permitted to buy shares in privatized companies on the same basis as
A7. PROTECTION OF PROPERTY RIGHTS
The legal system protects and facilitates the acquisition and disposal
of all intellectual property rights, and the government adheres to key
Under the Patents Act of 1977, in order for an invention to be granted a
patent it must be new, involve an innovative step and be capable of
industrial application. A patent cannot be granted for: an invention
which would lead to offensive, immoral or anti-social behavior; or for
any variety of animal or plant or for any essentially biological process
for their production which is not a micro-biological process or the
product of such a process.
Section 48 of the act concerns compulsory licenses. An application for
a license under the patent may be made after three years from the date
of the patent on the grounds that the patented invention is not being
commercially worked or for other commercial reasons.
Under section 25 of the act, the term of a patent is twenty years.
In accordance with section 16 of the Copyright Designs and Patents Act
of 1988, the owner of the copyright in a work has the exclusive right
to: copy the work; issue copies of the work to the public; perform, show
or play the work in public; broadcast the work or include it in a cable
program service; make an adaptation (including a translation) of the
work. Under section 21 of the act, an adaptation in relation to a
computer program is considered to include a version of the program which
has been converted into another computer language or code. Section 18
of the act specifies that restrictions concerning the issue of copies of
sound recordings, films and computer programs to the public. Semi-
conductor chip layout designs are regarded as a protectable asset and is
subject to the Copyright Designs and Patents Act of 1988.
It is an offence under the Trademarks Act of 1938 to seek financial gain
by applying a mark identical to, or nearly resembling, a registered
trade mark to goods or to material for use in labeling, packaging or
advertizing goods. Section 26 of the act specifies that a registered
trademark may be removed from the register on the grounds that a
continuous period of at least five years had elapsed during which there
was no bona fide use of the trademark in relation to the goods in
question by any proprietor.
In accordance with Section 22 of the act, the same trademark may be
registered within more than one class. In such an instance, the
individual registrations have to be associated (or linked). The same
trademark may not be registered by more than one company, irrespective
of the number of classes in which it is registered.
Commercially valuable information is, in itself, not subject to legal
protection. However, theft of information from business premises is
subject to criminal law. Action under employment law may also be taken
against an employee who, by disclosing information, breaches a contract
with his/her employer.
A8. REGULATORY SYSTEM: LAWS AND PROCEDURES
The whole tenor of government legislative and regulatory policy since
1979 has been related to the inducement of greater business competition.
The government aims consistently to reduce its burdens on companies
through reducing red tape and avoiding other unnecessary
responsibilities. Whenever the government considers asking companies to
undertake additional administrative tasks, an official estimate is made
first as to how much it would cost the companies to implement such a
The United Kingdom offers an attractive tax system, with a maximum
corporation tax rate of 33 percent, and a range of tax incentives
relating to industrial investment. A series of tax treaties protects a
foreign national against double taxation. The United Kingdom has a
simple system of personal income tax, and one of the lowest top rates
(40 percent on incomes in excess of 23,700 pounds sterling) of any E.U.
country. There is generous tax relief for travel expenses for non-
domiciled employees during their first five years of employment in the
The Health and Safety At Work Act of 1974 requires the Health and Safety
Commission (HSC) to develop workable proposals to update earlier
legislation. The old law has been largely replaced by modern legal
provisions, supported by codes of practice and other guidance material.
The Health and Safety Executive (HSE) has day-to-day responsibility for
enforcing health and safety law.
A.9 EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENTS
Government policies are intended to facilitate the free flow of
financial resources and to support the flow of resources in the product
and factor markets. The City of London houses one of the largest and
most comprehensive financial centers in the world.
Foreign investors are able to obtain credit in the local market at
normal market terms; a wide range of credit instruments are available.
The principles involved in legal, regulatory and accounting systems are
transparent. They are also consistent with such international standards
as exist and with the nature of the markets. In all cases, regulations
have been published and are applied on a non-discriminatory basis.
The regulation of investment business is conducted under the Financial
Services Act (FSA) of 1986. The act determines that all investment
business must be conducted by authorized and regulated firms.
Regulatory power over investment business lies with Her Majesty's
Treasury, which in turn delegates most of its powers to the Securities
and Investment Board (SIB), 2 Bunhill Row, London EC1Y 8SR. tel: 44 1
71 247 3215. The SIB regulates fewer than 100 firms directly, but
oversees the system of "practitioner-based regulation" whereby
investment businesses are authorized through membership of the
appropriate Self Regulating Organization (SRO).
The SRO's are: Securities and Futures Authority (SFA); Financial
Intermediary Managers and Brokers Regulatory Authority (FIMBRA);
Investment Management Regulatory Organization (IMRO); Life Assurance and
Unit Trust Regulatory Organization (LAUTRO). The latter two are in the
process of being replaced by the Private Investment Authority (PIA).
A.10 POLITICAL VIOLENCE
Since the declaration of ceasefires in Northern Ireland in late 1994,
there has been virtually no political violence emanating from domestic
UK origins. Like all west European capitals, London is the scene of
rare terrorist action by militant foreign political groups. However,
the number of such incidents has declined dramatically over the last
The Northern Ireland ceasefires have held remarkably well, and the
possibility of a reversion to large-scale violence is fading. Tensions
persist, however, and there have been some public disturbances, as well
as some isolated incidents of attacks against property by disaffected
individual members of paramilitary groups acting on their own.
Foreigners have not been the target of any of these incidents.
B. BILATERAL INVESTMENT AGREEMENTS
The United Kingdom has bilateral agreements with about 80 developing
countries and economies in transition. There is no bi-lateral
investment treaty with the U.S.; investment relations are governed by
the 1815 Convention on Commerce and by commitments made by both
countries in the Organization for Economic Cooperation and Development.
Both the U.S. and the UK are participating in OECD negotiations for a
Multilateral Agreement in Investment.
Following is a list of the UK's bilateral investment promotion and
COUNTRY DATE OF ENTRY INTO FORCE
Albania Not yet
Antigua & Barbuda 12 June 1987
Argentina 19 February 1993
Armenia Not yet
Bahrain 30 October 1991
Banglad 19 June 1980
Barbados 7 April 1993
Belarus 28 December 1994
Belize 30 April 1982
Benin 27 November 1987
Bolivia 16 February 1990
Brazil Not yet
Burundi 13 September 1990
Cameroon 7 June 1985
China 15 May 1986
Colombia Not yet
Congo 9 November 1990
Costa Rica Not yet
Cote d'Ivoire Not yet
Cuba 11 May 1995
Czechoslovakia 26 October 1992
Dominica 23 January 1987
Ecuador Not yet
Egypt 24 February 1976
Estonia 16 December 1994
Georgia 15 February 1995
Ghana 25 October 1991
Grenada 25 February 1988
Guyana 11 April 1990
Haiti 27 March 1995
Honduras 8 March 1995
India 06 January 1995
Indonesia 24 March 1977
Jamaica 14 May 1987
Jordan 24 April 1980
Korea 4 March 1976
Kyrgz Republic Not yet
Laos 1 June 1995
Latvia 15 February 1995
Lesotho 18 February 1981
Lithuania 21 September 1993
Malaysia 21 October 1988
Malta 4 October 1986
Mauritius 13 October 1986
Mongolia 4 October 1991
Morocco Provisionally in force
Nepal 2 March 1993
Nigeria 11 December 1990
Pakistan 30 November 1994
Panama 7 November 1983
Papua New Guinea 22 December 1981
Paraguay 23 April 1992
Peru 21 April 1994
Phillippines 2 January 1981
Poland 14 April 1988
Romania 22 November 1976
Senegal 9 February 1984
Sierra Leone Not yet
Singapore 22 July 1975
South Africa Not yet
Soviet Union 3 July 1991
Sri Lanka 18 December 1980
St. Lucia 18 January 1983
Swaziland 5 May 1995
Tanzania Not yet
Thailand 11 August 1979
Trinidad & Tobago 8 October 1993
Tunisia 4 January 1990
Turkey Not yet
Turkmenistan 9 February 1995
Ukraine 10 February 1993
United Arab Emirates 13 December 1993
Uruguay Not yet
Uzbekistan 24 November 1993
Venezuela Not yet
Yemen Arab Rep. 11 November 1983
Zimbabwe Not yet
C. OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
The U.S.-Anglo-Irish Agreement Support Act of 1986 authorized U.S.
Overseas Private Investment Corporation (OPIC) programs to operate in
Northern Ireland and in areas of the Republic of Ireland affected by
civil disturbance. The United Kingdom is a member of the Multilateral
Investment Guarantee Agency (MIGA) through its membership in the World
The population of the United Kingdom was 58.3 million in 1994, an
increase of only 2.4 percent since the mid-1970's. In Q1-1995 the work
force was 27.888 million of whom 25.586 million were employed.
While the work force has grown modestly since the 1960's, the number
employed has fallen. The resulting unemployment peaked in 1986 at 3.29
million, a rate of 11.8 percent. During a period of economic expansion
in the late 1980's, unemployment declined steadily until mid-year 1990
when it bottomed at 1.56, million or 5.5 percent.
During the 1990-92 recession, unemployment rose at a rapid rate,
reaching a seasonally adjusted 2.99 million (10.6 percent) in January
1993, before falling back steadily to 2.22 million (8.3 percent) in May
1995. Unemployment declined 1.1 percentage points in the last year, but
the rate of decline has been slowing recently.
During the recession job losses were across the board, with large
companies shedding jobs at a faster rate than their smaller
counterparts. Output initially fell but has since begun to rise,
implying that productivity gains have allowed firms to operate with
reduced staffing levels. The country thus emerged from recession with
leaner, more competitive industries.
A recent survey indicated a closing of the gap between wage rates in the
three major global markets. In 1994 Japanese workers earned $21.42 per
hour compared to the United States at $17.10. Within the EU, the United
Kingdom's hourly average wage rate of US $13.62 was over 50% below that
of Germany at $27.31, and well below that of France at $18.89. The
average cost of industrial labor is lower in Northern Ireland than in
Great Britain and is currently at 86% of the Great Britain level.
Labor relations in the UK have improved very dramatically over the last
two decades. Currently only one half of one percent of the work force
is involved in any form of work stoppage. Moreover, most disputes have
been in the public sector, which accounts for approximately 5 million
persons, and have resulted primarily from protests over job losses. It
is with considerable justification that the United Kingdom claims to
have one of the best, if not the best, strike records in Europe.
A significant factor in the dramatic fall in the use of strike action
has been modifications to the Employment Acts of 1980, 1982 and 1984.
The main provisions of those acts are:
* To hold secret ballots in choosing union officials for fixed terms,
and to decide on industrial action.
* To restrict the unions' immunity from civil action only to action
taken relating to a lawful trade dispute.
* To restrict lawful picketing to the pickets' own place of work.
* To remove statutory protection for "the closed shop", i.e. a work
force composed exclusively of union members.
Under the Employment Protection Act of 1978, each full-time employee
must receive a written contract from his/her employer. The act
specifies practices relating to termination of employment, redundancy
payments and appeals against unfair dismissal.
In line with the policies of the current government, there has been a
shift in employment towards the private sector. The proportion of the
work force engaged in the private sector was 76 percent in 1992, almost
the same level as in 1961 but well above the 1976 rate of 70 percent.
The number of people employed in manufacturing industries is up slightly
over the last year, but the long-term decline has been dramatic. During
the first quarter of 1995, there were only 4.39 million persons, 20
percent of all the industries and services work force, employed in this
sector, down from 25 percent in 1985. Service sector employment
increased from 66 to 73 percent over the same period.
The composition of the work force is changing. The 6.6 percent growth
in the total work force throughout the 1980's was entirely due to
increases in female employment. The last recession also produced large-
scale unemployment among white-collar staff, especially middle managers.
Many of these positions will never
be replaced as enterprises find ways to adjust to reduced levels
Commonly expressed concerns in the United Kingdom over the direction and
quality of education parallel attitudes in the United States. HMG is
responding with an elaborate program aimed at raising the educational
and technical skills of the work force. The teaching of basic skills
and technology is being reinforced through a national curriculum and the
adoption of uniform testing standards. A national system of vocational
qualifications has been developed, and employers are being encouraged to
provide more training to their staff.
The country's universities are ranked among the best in the world, and
successfully attract a high proportion of overseas students. U.S. and
other multinational corporations generally find the UK work force to be
well-educated, skilled and productive.
Technological innovation is generally well received in the work place,
as employees have tended to benefit from increased earnings, enhanced
skills, and more interesting and responsible jobs.
E. FOREIGN TRADE ZONES/FREE PORTS
Six free zones are now operating in the United Kingdom. Within each
free zone, goods are treated for customs duty purposes and the
application of some quantitative restrictions as being outside the
customs territory of the country. Since August 1, 1991, the supply of
imported goods in a free zone has been "zero rated" for the purposes of
value-added-tax, on condition that the recipient clears the goods for
removal from the free zone to home use. Free zones offer the following
* Cash-flow benefit resulting from exemption of duty, unless and until
goods are exported or released into free circulation.
* Greater flexibility in determining final destinations for goods,
subject to quota restrictions.
* Simplified customs procedures
The Free Zones in the United Kingdom are:
Southampton: Seaport located on the south coast, with airport, serving
routes to and from North America, the Middle East and the Far East.
Free zone covers 10 acres with plans for expansion, and has 200,000 sq
ft of covered warehouse space. Land available for development.
Southampton Free Trade Zone
Southampton SO15 1HJ
Tel: 011 44 1703 335 995; Fax: 011 44 1703 335 997
Prestwick: Located on 100 acres, adjacent to Scotlands's principal
international airport. Good rail connections to Glasgow. Federal
Express is a big user.
Freeport Scotland Ltd.
c/o Barr Ltd,
Heathfield, Ayr KA8 9SL
Tel: 011 44 1292 281 311
Humberside: Seaport located in the city of Hull on the northeast coast
of England. The free zone covers just over ten acres with additional
land for development, and comprises 200,000 sq ft of covered storage
West Carr Lane
Stoneferry, Hull, HU7 0BS
Tel: 011 44 482 839 839; Fax: 011 44 482 839 565
Birmingham: Inland location on 3 1/2 acres, eight miles from Birmingham
city centre and linked to Birmingham International Airport, the free
zone is home to about ten foreign companies.
West Midlands Freeport
Birmingham B26 3QD
Tel: 011 44 121 782 0100; Fax: 011 44 121 782 0119
Tilbury: London's main port, located 25 miles east of the city, handles
6 million tons of cargo per year, mostly containers, forest products,
general, ro-ro and bulk cargo.
Port of Tillbury
Tillbury, Essex, RM18 7EH
Tel: 011 44 1375 852 428; Fax: 011 44 1375 855 106
Liverpool: Seaport located on the northwest coast of England, covering
800 acres, UK's largest free zone, port facilities and internal
railhead. Designated as a future Channel Tunnel rail freight terminal.
Small international airport ten miles away.
Port of Liverpool L21 1LA
Tel: 011 44 151 949 6000; Fax: 011-44-151 949 6020
F. CAPITAL OUTFLOW POLICY
There is no formal government policy regulating capital outflows
currently enforced. Capital may move freely into and out of the United
G. FOREIGN DIRECT INVESTMENT STATISTICS
(All amounts below are calculated at the exchange rate of US$1.6 to the
The cumulative total of overseas direct investment in the United Kingdom
at the end of 1993 was US$191.896 billion. This compares with a figure
of US$183.054 billion at the end of 1992.
Direct investment into the UK in 1993 amounted to US$14.754 billion, an
increase of US$648 million over the 1992 amount, but still a substantial
reduction on the 1989 and 1990 figures. North America accounted for 47
percent of the investment into the United Kingdom in 1993.
Inward direct investment in the UK comprises mainly net investment by
overseas companies in their affiliates, including the re-investment of
Note: In the tables below the exchange rate used is that of June 1995,
i.e. 1 pound = US$1.60. Average exchange rates for the year's
indicated were as follows: 1991 -1 BPS = $1.77; 1992 - 1 BPS = $1.77;
1993 - 1 BPS = $1.50.
Table 1: UK Inward Investment Stock by Geographical Source: (in US$
million, 1 pound = US$1.6)
1991 1992 1993
USA 71,094 73,602 77,691
Canada 7,083 6,504 6,675
EU 55,219 57,386 59,614
France 14,400 13,998 12,835
Germany 7,355 9,003 9,464
Netherlands 26,331 26,744 29,168
EFTA 16,902 17,582 16,006
Switzerland 10,200 10,651 10,394
Sweden 4,893 5,238 3,920
Other Western Europe 133 166 344
Other Asian 22,680 22,837 24,779
Australia 12,248 12,933 13,733
Japan 8,554 7,886 8,707
WORLD TOTAL 178,197 183,054 191,896
(Source: The British Central Statistic Office)
Table 2: Inward Investment Flows by Geographical Source: (in US$
million, 1 pound = US$1.6)
1991 1992 1993
USA 3,006 5,997 6,968
Canada 424 (74) 85
EU 7,286 5,272 2,624
France 2,133 1,283 (45)
Germany 396 2,018 1,066
Netherlands 2,335 1,816 1,922
EFTA - 1,299 774
Switzerland 638 1,136 776
Sweden - 206 (32)
Other Western Europe - 27 24
Other Developed Asian 2,250 616 2,299
Australia 1,499 544 1,586
Japan 77 (35) 621
WORLD TOTAL 13,469 14,106 14,754
(Source: The British Central Statistic Office)
Table 3: UK Inward Investment Stock by Industry Sector:
(listed in US$, 1 pound = US$1.6)
Total Manuf. 64,408
Financial Services 37,154
(Source: The British Central Statistic Office)
Table 4: Inward Investment Flows (FDI) by Industry Sector:
(listed in US$, 1 pound = US$1.6)
1991 1992 1993
Total Manufacture 4,826 4,720 4,946
Agriculture 11 72 3
Energy 2,114 4,077 1,918
Construction (62) (21) 18
Distribution 2,142 973 1,491
Transport 30 938 672
Financial Services 842 2,187 5,232
Other 2,334 1,160 477
TOTAL 13,469 14,106 14,754
(Source: The British Central Statistic Office)
British Investment Overseas:
The level of the UK's direct investment overseas increased by $29.6
billion during 1993 to reach $264.266 billion. Direct investment assets
in the United States accounted for 34.7 percent of the total overseas
assets; the EU 31.6 percent, at $83.6 billion.
Table 5: UK Cumulative Outward Direct Investment by Geographical
Destination: (in US$ million, 1 pound = US$1.6)
1991 1992 1993
USA 72,587 87,501 91,872
Canada 10,005 10,826 11,291
EC 52,843 62,696 83,645
France 11,664 12,869 13,421
Germany 6,397 6,086 9,450
Netherlands 13,390 19,168 37,835
EFTA 6,128 7,045 7,221
Other Western Europe 520 774 826
Australia 14,491 15,368 16,350
Japan 2,678 3,197 3,054
South Africa 3,582 3,698 4,341
Carib & C/S America 18,112 21,462 19,546
Hong Kong 3,032 4,405 5,747
Singapore 4,306 5,626 5,923
Bermuda 7,405 8,611 7,792
TOTAL 198,549 234,581 264,266
(Source: The British Central Statistic Office)
Table 6: UK Outward Direct Investment Flows by Geographical
Destination: (in US$ million, 1 pound = US$1.6)
1991 1992 1993
USA 3,576 2,114 6,960
Canada: 509 (171) 16
EC 5,974 6,946 10,554
France 778 1,005 934
Germany 248 858 2,222
Netherlands 1,576 2,536 4,829
EFTA 229 696 (142)
Other Western Europe 138 170 86
Australia 1,742 1,582 1,014
Japan (8) 21 (125)
South Africa 242 115 504
Carib & C/S America 120 2,309 1,312
Hong Kong (394) (30) 715
Singapore 371 910 845
Bermuda (702) 810 968
TOTAL 14,886 16,171 27,235
(Source: The British Central Statistic Office)
H. MAJOR FOREIGN INVESTORS
Major foreign investments in the United Kingdom announced during 1994-
- Fujitsu is investing US$504 million in a new semiconductor
plant in County Durham.
- NEC is investing $848 million in an addition to its existing
semiconductor plant in Scotland.
- Toyota has increased to $1.36 billion its investment in a
vehicle assembly plant in Derbyshire.
- Samsung Electronics is investing $960 million in a 5-factory
complex in Northeast England, the biggest Korean investment in
Europe. Samsung is also moving its European headquarters from
Germany to the United Kingdom.
The ten largest subsidiaries of foreign companies within the United
Kingdom ranked in order of their recorded turnover, are shown below.
1. Shell Netherlands/UK
2. Mitsui Japan
3. Sumitomo Corporation (UK) Japan
4. Unilever Netherlands/UK
5. Ford Motor Company USA
6. Gallaher Ltd. (American Brands) USA
7. Mitsubishi Corp. Japan
8. Esso (Exxon) Plc. USA
9. I.B.M. USA
10.Texaco Ltd. USA
(Source: The Times 1000, 1994/95)
I. OPPORTUNITIES IN NORTHERN IRELAND
The end to violence and terrorism in Northern Ireland in late 1994 has
presented the United States with the opportunity to assist in building a
lasting peace founded on economic development and prosperity.
The dramatically improved business opportunities in Northern Ireland and
the border counties of the Republic of Ireland present American
companies with a new commercial potential: to be in on the ground floor
of an attractive means of reaching not just the emerging markets in
Northern Ireland and the border counties, not just the islands of
Ireland and Britain, but also the entire 15-nation European Union.
Doing business in Northern Ireland and the border counties will not only
assist Irish peace and reconciliation, but also will be good for
American business in Europe.
As the most important single source of foreign investment for Northern
Ireland, the United States accounts for a substantial proportion of
Northern Ireland's manufacturing and tradeable service sectors. About
40 U.S. companies are already operating in Northern Ireland. They have
accounted for $850 million invested in the past 5 years and provide
almost 9,000 jobs. These companies include Dupont, Ford Motor Company,
United Technologies, Fruit of the Loom, Federal Express, 3M, and
Membership in the European Union, direct travel and communications
links with London and other EU capitals, highly skilled labor and
extremely competitive wages are attractive inducements for foreign firms
seeking to invest in Northern Ireland or the border counties. In
addition, U.S. investors are qualified to receive various incentives and
financial supports from the host governments and the EU for
manufacturing or R&D operations (see below).
Specific investment opportunities exist in manufacturing in the
following sectors; automotive components, electronics, computers and
telecommunications, transportation, medical equipment and textiles.
Investment opportunities services include: tourism, teleservices,
vocational training, and franchising.
Northern Ireland Investment Incentives:
Due to the special difficulties generated by the "troubles", Northern
Ireland has benefitted from some special incentive programs financed by
the UK government. These incentives, administered by Northern Ireland's
Industrial Development Board can account for up to 50% of capital costs.
In addition, Northern Ireland has been accorded the Objective 1 priority
in the allocation of EU reformed structural funds aimed at reducing
regional imbalances within the EU. These grants cover such areas as
industrial and agricultural development, transportation, human resources
and training, and tourism.
Overseas investment is vital to economic development in Northern
Ireland. In the past 8 years industrial investment has totalled more
than $2.4 billion in Northern Ireland with 180 overseas companies,
employing 46,500, operating in the Province. Included among these are
40 U.S. companies employing almost 9,000 people, or almost 10% of the
total manufacturing workforce. These firms have made the U.S. the
single most important source of internationally mobile investment for
Capital investment has been heavily subsidized in Northern Ireland for
over 30 years. While Northern Ireland has shared the structure of
financial assistance to industry common to all assisted areas in the UK,
it also benefits from numerous additional incentives for inward
investment specific to Northern Ireland.
Capital: Businesses that set up internationally mobile projects in
high unemployment areas can receive up to 50% cash grants for buildings,
machinery, and equipment.
Revenue: Businesses can receive employment grants related to the
number of newly-created jobs when incurring start-up costs. This
incentive is designed to provide new projects with inflow of revenue
during the build-up period.
Other Incentives Include:
- Interest relief grants which reduce interest on loans from non-
government sources are available for up to 7 years (3 years at a broadly
commercial rate followed by 4 years at 3%).
- Factory rent grants of up to 100% of rental costs for up to 5 years.
- Company development program grants of up to 50% of total net training
and development costs, including wage costs, fees, and travel.
- Grants to attract top quality management.
- Product and Process Development grants of up to 50% towards labor and
material costs, with a maximum total single project grant of 250,000
British pounds sterling. Certain consultancy and design costs may also
- Marketing Development grants of 40% of approved costs up to a maximum
of 60,000 pounds per year. These awards help companies develop a
strategic approach to market planning and implementation.
- Strategic Development Planning Grants are available for the
consultancy costs incurred by companies in analyzing their competitive
position and preparing a strategic plan.
Tax: Depreciation allowances on capital expenditures including the
total value of IDB grant received (up to 45%). Expenditures can be
written off at a rate of 25% per year (declining balance) for machinery
and equipment, and 4% per year (straight line) for buildings. Also
available are industrial de-rating incentives of 100% for manufacturing
plants (i.e. no property taxes).
Finance: The provision of government loans may be considered in
certain circumstances. Such loans will have regard to the total capital
cost of the project, including working capital, and can include an
interest-free period. Adequate security is required.
Share Capital incentives are also available for particular projects.
International Fund for Ireland:
The International Fund for Ireland works with a range of local public
and private sector groups on funding community development projects,
with programs focused on both urban and rural renewal.
The objectives of the Fund are:
- to promote economic and social advance; and
- to encourage contact, dialogue and reconciliation between
nationalists and unionists throughout Ireland.
The U.S. has contributed approximately $20 million per year since 1986
when the U.S. established a trilateral agreement with the Irish and
British Governments to support the Fund, a tangible expression of the
U.S. policy favoring peace and reconciliation through economic progress
in Northern Ireland. Other contributors include the European Union,
Canada, New Zealand and Australia. The total resources available to the
Fund to date amount to 250 million British pounds (approx. U.S.$400
million). Since its inception, Fund projects have created an estimated
29,000 permanent jobs and 25,000 person years of temporary employment in
the most disadvantaged areas in Northern Ireland.
VIII. TRADE AND PROJECT FINANCING
BRIEF DESCRIPTION OF BANKING SYSTEM
The banking environment is open and competitive. More than 500 foreign
banks have a UK presence. Banks can operate nationally and retail
banking is dominated by five large, "clearing banks," which tend to be
relatively conservative. These and other banks market a full range of
services, including mutual fund investment vehicles called unit trusts.
Building Societies (similar to American Savings and Loans) have
traditionally made the majority of residential real estate loans and
have attracted long term savers with attractive rates. Originally small
regional institutions, these building societies have grown in size
through mergers and acquisitions and are increasingly able to match the
banks in their number of branches and range of products and services.
The distinction between banks and building societies are breaking down
and some of the larger societies have converted to banking licenses.
The deposit insurance program insures deposits up to 75% of the first
20,000 pounds. However, the program will be revised in the near-term to
comply with the EU deposit insurance directive. Debit cards are far
more widely used than credit cards, but all major cards are in use.
Since the departure of the pound sterling from the ERM in September
1992, HMG has phased in greater autonomy for the Bank of England in the
conduct of monetary policy. However, it still does not have the same
degree of independence as, for example, the Federal Reserve in the U.S.
or the Bundesbank in Germany.
FOREIGN EXCHANGE CONTROLS AFFECTING TRADING
There are no exchange controls restricting the transfer of funds into
and out of the United Kingdom. Since the United Kingdom has a large
foreign exchange market, there are no restrictions on the amount of
foreign currency which is available.
GENERAL FINANCING AVAILABILITY
The United Kingdom provides one of the foremost international financial
centers. As befits a market which grew historically in close
association with the far-flung enterprises of the British Empire, the
City of London is home to a vast number of banks and other institutions
with departments specialized in foreign trade. The London financial
markets are rightfully seen as transparent and flexible, and the
HOW TO FINANCE EXPORTS/METHODS OF PAYMENT
Differences in business customs extend clearly into export financing.
Therefore it is strongly advised that exporters discuss the best methods
and transaction details with an experienced international banking
There are several basic methods of receiving payment for products sold
abroad, the choice of which is determined by the degree of trust in the
buyer's ability to pay. Once the foreign buyer is established as
credit-worthy, moderately-sized sales are generally made on an open
account basis. Financing alternatives U.S. exporters might consider, in
order of the most- to the least-secure include: 1) cash in advance, 2)
letter of credit, 3) documentary drafts for collection, 4) open account,
and 5) consignment sales. Being paid in full in a timely manner is
always a major concern of any exporter, as well as relative commercial
Open account is the most attractive but most risky financing method. It
entails an in-depth assessment of the customer's credit-worthiness and,
in some cases, an export insurance policy from a reputable insurer or a
The latter arrangement calls for the importer to pay a factoring firm
directly. The factor in turn will often advance up to 80 percent of the
invoice value immediately, if requested by the exporter. The balance,
minus the factoring charges, is paid when the overseas customer pays.
The UK factor will provide credit advice on new and existing overseas
customers and provide bad debt protection. Export factoring services
usually are available to businesses of a certain export volume. The
charges range between 1.5 and 3 percent of the value of the invoices.
Prepayment financing of up to 80 percent of the invoice will evoke
another finance charge. The factoring process enables an exporter to
take advantage of open account financing, while reducing the attendant
Although exporting can be riskier than domestic selling, there are
methods of reducing risk. These methods include selecting a safe method
of payment (for example, irrevocable letter of credit), obtaining credit
risk insurance, and securing detailed credit information on the
potential foreign buyer. It is always advisable to check a buyer's
credit even if one of these financing methods is used.
The Department of Commerce offers a World Traders' Data Report (WTDR)
service, which provides U.S. exporters with credit information on
potential overseas trading partners. This includes financial data,
trade references and other information useful in assessing the credit-
worthiness of the overseas contact. Banks are often able to provide
credit reports on foreign companies through their foreign branches or
correspondent banks. In addition, there are a number of private firms
that provide international financial credit check services.
The U.S. Export-Import Bank (Eximbank) and Small Business Administration
(SBA) provide trade finance assistance to U.S. exporters. Eximbank and
the SBA work together, using each other's resources to meet the special
needs of small companies. Small business exporters can use separately
the programs of the Eximbank and SBA, or a combined program by the two
Using these resources, smaller U.S. businesses successfully enter
foreign markets. The programs enable exporters to advance competitive
financing terms to the prospective customers and to obtain insurance to
safeguard against non-payment of export receivables. The U.S.
Government operates these programs on a self-sustaining basis and may
require personal guarantees, or pledges of inventory or receivables, as
collateral for loans or guarantees.
For the U.S. exporter, the United Kingdom is one of the least daunting
of foreign markets when it comes to the question of how and when one
will get paid:
-The pound sterling is freely convertible, and most U.S. banks will
readily quote pound rates, both spot and forward.
-There are no foreign exchange limits or regulations governing the
-Common international payment mechanisms such as commercial letters of
credit (L/C's) are widely used.
-Credit information on public companies is widely available, both from
public filings and from commercial credit agencies.
-This is a thoroughly "monetized" economy, and there are virtually no
countertrade requirements (although companies bidding on Ministry of
Defence procurements may find that "offset" arrangements are standard).
It can be difficult to obtain information on private companies. While a
Public Limited Company (plc) must file audited annual statements,
relatively little is available on firms registered in offshore areas
such as the Channel Islands or Gibraltar. Standard sources of credit
information include Companies House (the national corporate registry),
commercial credit information agencies, and the World Traders' Data
U.S. firms should seriously consider selling to UK customers on the
basis of an irrevocable letter of credit issued by a prime bank, at
least until a satisfactory trading record has been established. During
the recent recession, UK firms had to "stretch" their accounts payable
to an average of eighty-five days (compared to average invoice terms of
thirty days). Use of L/C's will safeguard U.S. sellers from being
overly affected by late payment problems.
TYPES OF AVAILABLE EXPORT FINANCING AND INSURANCE
One of the most widely used Eximbank trade finance programs is
administered by the Foreign Credit Insurance Administration (FCIA)
Management Company, Inc. There are particular Eximbank insurance
programs designed for manufacturers and service companies, and for
either new exporters or experienced exporters. These policies cover
either short or medium-term repayment schedules.
In addition to extending working capital guarantees and providing
insurance, Eximbank extends and guarantees loans to foreign buyers of
U.S. exports, including firms located in Western Europe.
The SBA's three main loan guarantee programs for U.S. exporters include
the Export Revolving Line of Credit (ERLC), the International Trade
Loan, and the regular 7A loan guarantee program. The ERLC guarantees
loans to U.S. firms to help bridge the working capital gap between the
time inventory and production costs are disbursed and when payment is
received from the foreign buyer.
SBA guarantees 85 percent of the ERLC, subject to a US$750,000 guarantee
limit. The ERLC is granted on the likelihood of a company
satisfactorily completing its export transaction. The guarantee covers
default by the exporter, but does not cover default by a foreign buyer.
Failure on the buyer's side is expected to be covered by letters of
credit or export credit insurance. Small businesses that have worked
with the SBA can combine its ERLC with Eximbank's Working Capital
Program to support larger transactions.
Eximbank's Working Capital Guarantee Program offers pre-export financing
support for purposes similar to the ERLC, including production,
inventory and marketing, and with no financial limit imposed. Under the
SBA/Eximbank Co-Guarantee Program, the two agencies share the risk on
loans of US$200,000 to US$1 million per borrower.
SBA International Trade Loans (ITLs) are designed to finance up to $1
million in fixed assets, such as machinery, plus US$250,000 in working
capital. Repayment terms extend to seven years. The SBA's regular 7A
loan guarantee is also available for exporters to finance plant and
equipment. These loans also involve long-term repayment schedules.
Information on Eximbank programs can be obtained from the marketing
department at (202) 566-8860. Eximbank also has a toll free number --
(800) 424-5201--that provides information on its overall programs. SBA
has district offices throughout the country that provide information on
its financing programs. The SBA Office of International Trade in
Washington, D.C. can be reached on (202) 205-7266.
The UK's Export Credit Guarantee Department (ECDG), which is responsible
to the Department of Trade and Industry supplies loan guarantees to
civilian lending institutions for various UK industry exports. The ECDG
is located at 2 Exchange Tower, Harbour Exchange Square, London E14 9GS,
Even with credit checks and the use of the least risky financing
methods, exporters can encounter problems with buyers who default on
payments. Many small firms in the United Kingdom have experienced
increased financial problems resulting in late payment and bad debts.
Collecting payment can be both expensive and time consuming, even when
the exporter has insurance to cover commercial credit risk. The
exporter must exhaust all reasonable means of obtaining payment before
an insurance claim will be honored, and possibly encounter a significant
delay before the insurance payment is received.
The least expensive solution for a payment problem is to contact the
customer and negotiate directly. The exporter is more likely to be able
to retain valuable export customers in such cases.
When and if attempts to resolve disputes in this manner do fail, and the
amount in question warrants continued effort, the exporter should
consult its bank, legal counsel, and other qualified experts. At this
stage, arbitration may be a remedy that is both less costly and less
time-consuming than taking legal action.
The International Chamber of Commerce handles the majority of
international arbitrations. This organization is usually an arbitrator
acceptable to foreign companies since it has no national affiliation.
For information, U.S. companies should contact the Vice President for
Arbitration, U.S. Council of the International Chamber of Commerce;
telephone: (212) 354-4480. The American Arbitrations Association also
handles international disputes. This organization can be contacted in
the United States at (212) 484-4000 for information on its services.
PROJECT FINANCING AVAILABLE
The vast majority of projects are financed by public and private sector
lenders at commercial rates.
As a member of the European Union, the United Kingdom has access to EU-
funded programs which provide a wide range of support in the form of
grants, loans and co-financing for training, feasibility studies,
infrastructure projects in the environmental, transportation, energy and
other key sectors. EU initiatives are designed to support projects
within its Member States and the EU-wide "economic integration" projects
that cross over borders.
EU Structural Funds are available to assist economically depressed
regions that require industrial restructuring and agricultural
reconversion. Certain regions of the United Kingdom have benefited from
these funds with projects co-financed by the national government.
Tenders for such projects are subject to EU public procurement
legislation, provided that the tender meets the EU threshold
requirements. There are no overt prohibitions against the participation
of U.S. firms. From a commercial perspective, these initiatives create
significant market opportunities for European firms of American
LIST OF BANKS WITH CORRESPONDENT U.S. BANKING ARRANGEMENT
The United Kingdom boasts many varieties of financial institutions,
including merchant banks, leasing companies, factoring houses, and
forfeiting specialists. However, UK buyers seeking trade finance
normally need not go beyond the commercial banking system. There are
hundreds of banks with offices in London, and many have large foreign
exchange and trade finance departments. The four main UK "clearing
banks" (Lloyds Bank, National Westminster Bank, Midland Bank, and
Barclays Bank) are relative "giants" on the international financial
scene. There is also a host of other major UK institutions such as
Standard Chartered Bank, the Bank of Scotland, and the Royal Bank of
Scotland, in addition to branches of the leading banks from all over the
world. Debt ratings for major UK banks are readily available, and prime
UK bank L/C's should generally be accepted for confirmation or
discounting by major U.S. banks.
Conversely, most U.S. banks have correspondent relationships with one or
more major British banks, and UK correspondents will be able to provide
a wide variety of services and information on the UK market. An
additional source of help is the more than 37 U.S. banks which have
branches in London.
IX. BUSINESS TRAVEL
The traditional rigidity of the British social class structure has been
diminished by social and economic developments over the last two
decades. Government grants have permitted universal access to higher
education and have thus enhanced social mobility. Increased
liberalization of the marketplace and the greater competition induced
have rewarded enterprise, and a new generation of professionals schooled
in U.S. management, marketing and finance techniques are increasingly
taking the helm of British business.
The significance of being "British" has evolved in recent decades as
immigration progressively altered the ethnic mix. Minorities, which now
constitute over five percent of the population, are growing. British
business contacts might well be individuals who are ethnically Indian,
Pakistani, Arab, African or other descent; they bring a welcome vitality
to the business culture.
U.S. exporters should be aware that the relative ease of communication
with British clients may disguise the fact that there are some
fundamental cultural differences. While variances in pace and style
will be most noticeable, exporters should avoid making quick assumptions
concerning business relationships until on-the-ground experience has
been gained. As in most overseas markets, there is no substitute for
sustained personal contact with potential business partners.
The most important characteristics of British business etiquette are
punctuality and courtesy. Prompt acknowledgement of the receipt of
letters is expected, for example. Delivery terms, as well as
appointment schedules, are expected to be maintained.
Titles, when known, should be used in all correspondence. For
expeditious handling of correspondence, airmail or fax should be used.
It is advisable to address commercial solicitations to the firm, rather
British company executives will communicate more often by writing
letters, telexes, and fax messages than do most U.S. executives, who
tend to rely more on the telephone. British executives are far less
likely to seek legal advice and guidance than their U.S. counterparts.
Only as a last resort will the UK executive consult a solicitor, while
the American may use an attorney as a business advisor.
"Working" breakfasts are far less common in the United Kingdom than in
the United States. Luncheons are more appropriate as a form of business
Developing relationships with UK executives that extend beyond business
matters into social affairs will take time and is not guaranteed. Only
after appropriate familiarization would a UK business executive expect
to be invited to a dinner or social function in an American's home, or
invite a U.S. executive to a similar function in his own residence.
Under such circumstances, the business aspects of the relationship would
be completely subordinated to the social elements. Gift giving or
exchanging is not a normal business custom.
Business hours in the United Kingdom correspond closely to those in the
United States. Banking hours are generally 9:30 a.m. to 3 p.m., Monday
through Friday, except on Thursday when banks stay open later. Offices
are open from 9 a.m. until 5 p.m., while stores are open from 9 a.m. to
5:30 p.m. In the vacation months of July and August, many British
executives are not available except by advance appointment.
Standard and Daylight Savings Time:
The United Kingdom is on Greenwich Mean Time (GMT). London changes to
daylight savings time on the last Sunday of March and reverts back to
standard time on the last Sunday of October. London is five hours ahead
of Eastern Standard Time. Scotland, Wales, and Northern Ireland are on
the same schedule.
TRAVEL ADVISORY AND VISAS
Every U.S. citizen entering the United Kingdom must have a valid
American passport. No visas, entry permits, or vaccinations are
required of U.S. citizens entering the United Kingdom, except for non-
tourist stays of more than three months. If a longer stay is
contemplated, visitors should check with the nearest British consulate
in advance of travel.
Three months after their arrival--unless the immigration officer has
endorsed their passports upon arrival--U.S. citizens over 16 years of
age should register with the local British police, except in the
Metropolitan District of London, where they register at the Aliens
Registration Office, 10 Lamb's Conduit Street, London WC1.
U.S. citizens planning to visit the United Kingdom may obtain passports
on application through the clerk of any U.S. federal or state court
authorized by law to naturalize aliens. Current regulations governing
the admission of visitors will be modified soon, and proposed changes
may restrict the ability of some foreign nationals, including American
citizens, to reside in the United Kingdom. The headquarters of the
State Department's Passport Office is:
U.S. Department of State
Passport Services Correspondence Branch
CA/PPT/PS/PC, Suite 510
1111 19th Street, NW
Washington, DC 20522-1705
Americans interested in being employed in the United Kingdom should
consult the British Consulate in New York to inquire about a work
permit. The employment of aliens in the United Kingdom is controlled by
the Home Office and the Department of Employment.
U.S. citizens wishing to extend the length of stay to obtain employment,
paid or unpaid, or to set up any business or profession, must obtain
permission from the Under Secretary, Home Office, Immigration and
Nationality Department, Princeton House, 371 High Holborn Street, London
Directors and employees of British subsidiaries of U.S. firms have, in
general, encountered little difficulty in obtaining permission to enter
and remain in the United Kingdom. In the case of technical employees,
it is necessary to establish that British subjects with the necessary
qualifications are not available.
Work permits are usually readily issued for key personnel. Bringing
technical personnel required to set up and operate the plant or business
generally poses no problem.
The British Government has modified regulations governing the admission
of visitors for business purposes and economic immigration to the United
Kingdom. The changes, outlined below, limit the ability of some foreign
nationals, including American citizens, to reside in the United Kingdom.
The categories of employees under the new immigration rules which will
directly affect the business community are: businessmen and self-
employed persons; retired persons of independent means; investors; and
(short-term) business visitors.
According to the modified regulations, persons establishing a new
business must be investing at least US$300,000 of their own money in the
company, or, alternatively, they can invest a similar amount in an
ongoing concern. In either instance, the person must be occupied full-
time in running the business. Simple property investment will not
necessarily suffice to obtain resident status (indefinite leave to
remain status) in the United Kingdom.
Retired persons of independent means will have to be at least 60 years
of age, and have control of at least US$375,000 or an annual income of
at least US$37,500. Engaging in business or professional activity is
The new investor category requires a US$1.5 million investment of which
three-fourths must be in an active, trading UK registered company (and
not simply property investment).
The business visitor category is more sharply defined. Under the new
regulations, entry may be denied to those who will perform 'productive
service.' Thus, a consultant coming to the United Kingdom to do
research for a UK firm and who will be paid by the firm qualifies as a
business visitor only if the 'productive' portion of his work (i.e.,
writing the report itself) is done outside the United Kingdom. Writing
the final report here would subject the person to the work permit
regime. The determination of who may be admitted as a consultant is
decided on a case by case basis at ports of entry.
The legal profession has been among the most active U.S. professional
services sector in the United Kingdom. Its members actively travel in
and out of the country for short-term business purposes. Lawyers coming
to consult on foreign laws currently fall under an exemption to the
normal work permit rules. Those travelling for specific short-term
consultation will normally be admitted as business visitors. Those
desiring to practice law or work as salaried employees in private
practice, commerce, or industry must obtain entry clearance (similar to
a visa) based on an exemption letter issued by the Law Society of
England stating that the Society has no objection to the persons
providing legal services. Additionally, the lawyer must demonstrate an
ability to live in the United Kingdom without recourse to public funds.
There is nothing in the proposed regulations which would alter this
current exemption from the work permit scheme.
The American Citizen Services (ACS) section at the Embassy in London
provides many services for U.S. citizens, including passport issuance,
absentee voter registration and notarial services. The Passport Unit
supplies travel advisory information on visa requirements, health
concerns and political violence in countries around the world. For
information on these and other issues, Americans should call the Embassy
on (071)499 9000, or visit at 21-24 Upper Grosvenor Square in Mayfair.
The Passport Unit is open 9:00-12:00 and 2:00-4:00 Monday through
Friday, with the exception of Tuesday afternoon. Notarial services is
provided 9:00-12:00 Monday through Friday and 2:00-4:00 on Wednesdays.
The Embassy is closed for all American and British holidays.
The following major holidays are observed by most businesses in the
England and Wales:
New Year's Day January 1
Bank Holiday-Jan First Monday
Good Friday Variable
Easter Monday Variable
May Day First Monday
Spring Holiday-May Last Monday
Summer Bank Holiday-Aug Last Monday
Christmas Day December 25
Boxing Day Variable, first weekday
Scotland observes the above except Easter Monday, Spring Holiday, and
Summer Bank Holiday, and the following:
Bank Holiday First Monday, January
Spring Holiday First Monday, April
Victoria Day Third Monday, May
Bank Holiday First Monday, August
Autumn Holiday Third Monday, Sep.
In addition to the U.K.-listed holidays, the following are observed:
St. Patrick's Day March 17
Easter Tuesday Variable
Orangeman's Day July 12, 13
Some expressions and words have different meaning than those accepted in
the United States; therefore, for clarity of meaning in correspondence,
care should be given to use the appropriate terms.
APPENDIX A. COUNTRY DATA
At its maximum dimensions, the United Kingdom is 600 miles long and 300
miles wide. It has a total area of 94,000 square miles, approximately
the size of the state of Oregon. With nearly 58 million people and one
of the world's highest population densities (580 persons per square
mile), the United Kingdom represents a compact market for U.S. products.
Four out of five inhabitants in England live in urban (and suburban)
areas. In Scotland and Wales, the number of city dwellers is not as
high, while in Northern Ireland the numbers of people living in cities
and rural areas are almost equal.
England's population is 48 million (83 % of the U.K.'s total),
Scotland's is 5.2 million (9%), Wales's is 3 million (5%), and Northern
Ireland's is 1.6 million (3%).
- POPULATION - 58.3 million
- POPULATION GROWTH RATE - 0.3 Percent
- RELIGION - Church of England (official); other
Christian denominations; Islam; Jewish
- GOVERNMENT SYSTEM - Constitutional Monarchy
- LANGUAGES - English
- WORK WEEK - Monday-Friday, 08:30-17:30
APPENDIX B. DOMESTIC ECONOMY
Figures expressed in US$ billions except where noted.
1994 1995 1996
GDP (nominal) 1,024.1 1,125.9 1,195.0
GDP Real Growth rate (%) 3.8 2.7 2.6
GDP per capita in US$ 17,572 19,259 20,382
Government spending as a
percent of GDP 41.5 40.8 39.6
Inflation (%) 2.5 3.6 3.4
Unemployment (%) 9.4 8.3 7.9
Foreign Exchange Reserves 43.9 n/a n/a
Avg. exchange rate per $1.00 0.65 0.63 0.63
Foreign debt. n/a n/a n/a
Debt Service Ratio. n/a n/a n/a
Note: The UK MoD does not receive financial military assistance from the
U.S. Government. U.S. Government military assistance is rendered through
the Foreign Military Sales (FMS) process and granting of licenses and
technology transfer requests for U.S. industry in direct commercial sale
arrangements. The UK pays for this assistance through its own defense
APPENDIX C. TRADE
Figures expressed in US$ billions except where noted.
1994 1995 1996
-Total UK Exports 203.0 239.2 263.1
-Total UK Imports 219.0 252.0 277.0
-U.S. Exports to UK 26.8 27.2 29.9
-U.S. Imports from UK 25.1 26.0 28.6
-U.S. Share of UK's
imports (%) 12.2 13.2 13.1
Imports of Agricultural Goods.
1994 1995 1996
- Total from World 19.60 19.70 19.80
- Total from U.S. 0.90 0.92 0.95
- U.S. share of ag. imports (%) 4.6 4.7 4.8
- Agricultural goods trade
balance with the U.S. **0.592 **0.600 **0.683
** Excluding fish and wood products.
Trade Flows (with U.S.): Imports of agricultural products in 1994
totalled US$19.6 billion (US$0.9 billion) and agricultural exports,
US$10.0 billion (US$0.3 billion).
Trade Balance with 3 leading partners (Tariff section 0 only - food &
live animals): 1994
Country Imports Exports Balance
EU 11,997 7,280 (4,717)
U.S. 883 291 (592)
Canada 218 140 (78)
Principal U.S. agricultural exports to UK - 1994
Fruits & Vegetables 318,658
Corn Gluten Feed 115,093
Wine & Beer 44,749
Principal U.S. imports from UK - 1994
Sugar Confectionery 72,570
Cocoa & Products 45,717
Agriculture and Food:
o accounts for 14 percent of UK's GDP (agriculture 1.4%)
o employs 9 percent of the UK's workforce (agriculture 2.1%)
o livestock and livestock products are responsible for 62% of total
agricultural output; cereals for 16%; other crops for 7% and
o food accounts for 11 percent of total consumer expenditure
o alcohol and tobacco accounts for a further 9 percent of total
o the UK is 56 percent self-sufficient in food - 73 percent self-
sufficient in temperate products
APPENDIX D. INVESTMENT STATISTICS
Investment (US$ billions, except as noted, at US$1.60 per British pound)
Tot. foreign dir. investment 183.0 191.9
U.S. direct investment 73.6 77.7
U.S. direct investment (pct.) 40.2 40.5
Principal foreign investors: U.S., Germany, France
(Sources: UK Central Statistical Office)
APPENDIX E. U.S. AND U.K. CONTACTS
COUNTRY GOVERNMENT AGENCIES
British Overseas Trade Board
Department of Trade & Industry
66-74 Victoria Street
London SW1E 6SN
Invest in Britain Bureau
Department of Trade and Industry
19 Old Court Place
London W8 4PF
-Invest in Britain Bureau USA.
Atlanta Tel: (404) 524-8823
Boston Tel: (617) 248-9555
Chicago Tel: (312) 346-1810
Cleveland Tel: (216) 621-7674
Dallas Tel: (214) 637-3600
Houston Tel: (713) 659-6275
Los Angeles Tel: (310) 477-3322
New York Tel: (212) 745-0495
Seattle Tel: (206) 622-9255
Wash'ton D.C. Tel: (202) 462-1340
Embassy of Great Britain
3100 Massachusetts Avenue
Washington, D.C. 20008, USA
Tel: (202) 462-1340
Fax: (202) 898 4255
The European Union
Office of European Affairs (Washington D.C.)
Tel: (202) 482-2905 - Duty rates, tariffs on U.S. exports,
or (202) 482-5823 - European market issues.
Department of Trade and Industry
123 Victoria Street
London SW1H 0NN
- General Enquiries
Consumer Affairs Division 1A
Department of Trade and Industry
10-18 Victoria Street
London SW1H ONN
- Packaging and Labelling Requirements
Her Majesty's Board of Customs and Excise
- Customs and Rules/Regulations for the U.K.
Her Majesty's Stationary Office
London WC1V 6HB
The equivalent of the U.S. Government Printing Office.
Kraus-Thompson Publishers (HMSO's U.S. representative)
Tel: (914) 762-2200
Central Office of Information
London SE1 7DU
Central Statistical Office
Great George Street
London SW1P 3AQ
Department of Employment
12 Tothill Street
London SW1H 9NA
- Work Permits, Consular Matters
Department of the Environment
2 Marsham Street
London SW1P 3EB
Tel: 011-44-171-276-0900 or 276-3000
- Environmental Regulations
Department of Health
- Medicinal Licences and Regulations
Patent and Trademarks Office
45 Southhampton Buildings
London WC2A 1AR
- UK Patents
Bank of England
London EC2V 8DQ
- Central Bank
Securities and Investments Board
2 Bunhill Row
London EC1Y 8SR
- Securities industry regulator.
The House of Commons
Houses of Parliament
London SW1A 0AA
COUNTRY TRADE ASSOCIATIONS/CHAMBERS OF COMMERCE
As a large, sophisticated economy, the UK has a wide range of trade
associations too numerous to mention here. Some notable, multi-sectoral
business associations are listed below:
American Chamber of Commerce in the U.K.
75 Brook Street
London W1Y 2EB, U.K.
Association of British Chambers of Commerce
9 Tufton Street
London SW1P 3QB
British American Chamber of Commerce
8 Staple Inn, Holborn
London WC1V 7QH
International Chamber of Commerce
14-15 Belgrave Square
London SW1X 8PS
British Standards Institution
Buckinghamshire MK14 6LE
- Technical Help to Exporters
Confederation of British Industry
103 New Oxford Street
London WC1A 1DU
COUNTRY MARKET RESEARCH FIRMS
There are a large number of service providers in the UK. A directory of
these is available upon request from US&FCS at the London Embassy.
COUNTRY COMMERCIAL BANKS
The 4 major "high-street" banks, full service and retail bankers, are
Barclay's, National Westminster, Lloyds and Midland. However, as
perhaps the world's premier financial center, London is host to
virtually every major bank, and an exceptionally large number of
financial services firms.
U.S. EMBASSY TRADE PERSONNEL
24/31 Grosvenor Square
London, WIA 1AE England
Address for U.S. mail:
American Embassy (London)
Box 27 (for Economic Section) or
Box 33 (for Commercial Section) or
Box 48 (for Agriculture) or
Box 54 (for Defense)
FPO AE 09498-4033
The Office of Agricultural Affairs
Office of General Economic Policy
Office of Defense Cooperation
US Travel and Tourism Administration
International Marketing Center (IMC)
The European Bank For Reconstruction & Development
U.S. Representative's Office
The International Marketing Center (IMC) in the Embassy in London offers
marketing support for U.S. companies. Space is available for
exhibitions, private meetings and luncheons.
The Commercial Service staff of London Embassy provides a wide range of
services for U.S. business. Four American commercial officers and seven
trade specialists, who monitor key industry sectors, are available for
consultations by appointment and can provide valuable inside
information, arrange for market research, and arrange appointments with
prime contacts in both the private and public sectors. They will also
provide names of potential UK agents and distributors, responsible
joint-venture candidates, and prospective UK customers. The first step
for a U.S. company which would like assistance from the commercial staff
of the London embassy should be to contact the nearest District Office
of the Commerce Department in the United States. The District Office
staff is in the best position to assess the needs of U.S. firms, to
provide export counseling when necessary, and to work jointly with the
London Embassy staff to provide the most relevant and responsive
The U.S. Travel and Tourism Administration staff of the London Embassy
are available to assist new-to-market U.S. tourism providers in
establishing a presence in the UK market. They offer counseling and a
variety of materials, including names of key media, tour operators,
market representatives in-country, and guides to the UK market.
WASHINGTON-BASED USG COUNTRY CONTACTS
U.S. Department of Commerce
UK Country Desk Officer:
Washington, D.C. 20230
Tel: (202) 482-3748
Fax: (202) 482-2897
Multilateral Development Bank Office
Brenda Ebeling - Director
Tel: (202) 482 3399
Fax: (202) 482 5179
US&FCS Regional Director (Europe):
Tel: (202) 482-1599
Fax: (202) 482-3159
Bureau of Export Administration
Tel: (202) 482-8547
Tel: (202) 647-8027
- Political relations
Agriculture Department - exporting foods
Foreign Agriculture Service
European Area Officer
Tel: (202) 720-2144
Tel: (202) 622-0166
- Financial matters
American National Standards Institute
Tel: (212) 642-4900
Fax: (212) 302-1286
- Information on UK standards
National Institute for Standards and Technology (Washington D.C.)
Tel: (301) 975-3058
U.S.-BASED MULTIPLIERS RELEVANT FOR COUNTRY
British American Chamber of Commerce in the U.S.
275 Madison Ave.
New York, NY 10016
Tel: (212) 661-4060 Fax: (212) 661-4074
APPENDIX F. MARKET RESEARCH
- LIST OF AVAILABLE AND UPCOMING DOC/ISAS AND IMIS
The following market research reports produced in 1994/5, as well as all
those from prior years, are available from the U.S. Dept. of Commerce
through its District Offices, or via the National Trade Data Bank.
Industry Subsector Analyses:
Office Furniture 12/94
Civil Engineering Services 11/94
Shower & Shower Accessories 5/95
Virtual Private Networks 6/95
Waste Management Technologies 7/95
Builders' Carpentry & Joinery 7/95
Selling to the Telecommunications Operating
Companies in the U.K. 7/95
Medical Devices 7/95
Airport Construction/Infrastructure 8/95
Multimedia Software 8/95
Remediation (Environmental) Technologies 8/95
Electrical Generating Equipment: Turbines 8/95
Airport & Ground Support Equipment 9/95
Healthcare in the UK 9/95
Unix Softwear 9/95
Recycling Equipment 9/95
LIST OF USDA/FAS/COMMODITY REPORTS AND MARKET BRIEFS
Information on the UK Agricultural/Food Market can be obtained from the
Office of Agricultural Affairs, of the Embassy in London, which has also
prepared the following Market Briefs:
USA Exporter Guide to legislation on the Marketing and Sale of packaged
Foodstuffs in the European Union. Also available are Commodity and
Marketing Reports for the UK covering Dairy, Horticultural & Tropical
Products, Livestock, Poultry, Grains, Oilseeds, Tobacco and Wood
Products. (see above for addresses and telephone numbers).
APPENDIX G. TRADE EVENT SCHEDULE
Location: NEC, Birmingham
Sector: Electronic Components
Date: March 19-21, 96
Event: Network 96
Location: NEC, Birmingham
Sector: Computer Network
Date: June 23-25, 1996
Event: Environmental Technology Show 96
Location: NEC, Birmingham
Sector: Pollution Control
Date: April 16-18, 1996
Event: Offshore Europe '95
Location: Aberdeen Exhibition and Conference Centre
Sector: Oil and Gas Equipment
Date: September 5-8, 1995
Event: Pow Wow Europe
Location: CNIT, Paris, France
Date: September 20-22, 1995
Event: Interbuild 95
Location: NEC, Birmingham
Sector: Construction Trades
Date: November 19-21, 1995
Event: World Travel Mart
Location: Earl's Court, London
Date: November 13-16, 1995
Event: Destinations '96
Location: National Hall, Olympia, London
Date: February, 1996
Event: British Ski Show 1995
Location: National Exhibition Centre, Birmingham
Sector: Tourism/Sporting Goods
Date: October 12-15, 1995
Event: UK Discover America Road Show
Location: Mobile to London, Manchester, Birmingham, Glasgow
Date: October 16-19, 1995
Event: Daily Mail International Ski Show
Location: Olympia, London
Sector: Tourism/Sporting Goods
Date: October 28-November 5, 1995
Event: Farnborough Air Show '94
Location: Farnborough, Hampshire, U.K.
Sector: Aircraft and Aircraft Components
Date: September 2-8, 1996
Event: Telecommunications Managers Association Conference:
Location: Metropole Hotel, Brighton.
Date: November 27-29, 1995
Location: NEC, Birmingham
Date: June 10-14, 1996
Information on the key food and beverage trade shows scheduled in the UK
are available from the AgExport Services Division, USDA/Foreign
Agricultural Service at the Embassy in London (see above for address).
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