For more updates follow Grant Thornton Bharat on WhatsApp
Indian businesses seek to expand beyond their borders, and the UK emerges as a preferred destination for 89% of mid-market firms. This is according to data from the latest International Business Report (IBR), the world’s leading survey of mid-market companies, which surveys the expectations of around 100,000 businesses in 28 countries.
India and the UK share a dynamic relationship that reflects a long history of cooperation and shared economic interests. The partnership between the two countries has evolved to encompass a wide array of sectors, fostering innovation, trade, and investment.
Indian mid-market businesses view the UK as a key market for their business expansion due to linguistic and political ties, a favourable business environment, and a diaspora embedded in the local culture. The successful conclusion of negotiations on a Free Trade Agreement (FTA) between India and the UK could possibly increase bilateral trade to over USD 100 billion by 2030, thereby creating new employment opportunities.
Grant Thornton has operated in the India-UK corridor for nearly three decades to identify growth opportunities for companies in both countries. Our annual India meets Britain Tracker measures the growing scale of Indian investment in the UK and monitors the fastest-growing Indian-owned companies and largest employers. The 11th edition, published in 2024, saw a host of records being broken by Indian-owned businesses in the UK, from the size of their workforce to their combined turnover and the number growing at 10% or more a year.
This interest in the other market is reflected by UK businesses as well. About 61% of UK businesses recognised India as a key market for their business expansion, and 72% of UK businesses understand the potential provisions and implications of the FTA.
Our annual Britain Meets India Report identifies the top UK companies in India in terms of revenue, growth and employment. The third edition of the report, published in 2023, recorded that 635 UK-owned businesses are operating in India, of which 147 had an average growth rate of 46%. Technology was the top sector for all companies, while business services dominated the BMI Growth Tracker. The results for 2024 will be unveiled in the fourth edition of the report in September 2024.
Expanding into the UK presents a range of strategic advantages for Indian businesses, including access to a large population of highly skilled workers, access to regional and European markets, and ease of doing business. The country’s robust infrastructure, characterised by advanced logistics and efficient transportation networks, is appealing to most businesses, with many respondents citing it as a key benefit to establishing a presence in the UK. Its innovation ecosystem is another significant draw due to its world-class intellectual property regime, tax breaks on research and development (R&D) expenditure incurred, and renowned academic centres of excellence.
As a digital hub, the UK boasts advanced data management systems, stringent cybersecurity measures, and a favourable regulatory environment for technological advancements. Key government initiatives, such as the Digital Development Strategy 2024-30, aim to achieve digital transformation and build a more inclusive, competitive, and innovative digital economy. These attributes make the UK’s digital competitiveness a major advantage for many surveyed businesses seeking to extend their footprint into the country.
While most Indian businesses are optimistic about the growth and market expansion opportunities available in the UK, they also recognise there are notable barriers to establishing operations there. These barriers include market competition, a complex tax system, and labour shortages. The biggest barrier to expanding into the UK is the high cost of doing business, which can be ascribed to factors such as high property rents and substantial operational overheads, including utility expenses and labour costs. The UK's regulatory environment also poses significant challenges, with detailed reporting requirements and exacting compliance measures to navigate, which result in high legal fees, audit expenses, and staff training expenditures.
The complexity of the UK’s immigration policies and visa procuring process for professionals is another significant challenge, which stems from stringent visa requirements, such as the need for detailed business documentation and proof of economic contribution, coupled with lengthy processing times.
An FTA between India and the UK could help address these issues and promote a more conducive environment for business growth, with unique opportunities for all sectors. Streamlining regulatory processes and simplifying compliance could alleviate operational burdens for Indian businesses. This would facilitate their entry into the UK market, strengthen economic ties between the two nations, and support broader business expansion efforts.
While mid-market firms seek opportunities in the UK, 69% of respondents are optimistic about India’s economic growth, pegging the growth rate for FY 25 at 7-10%. The Economic Survey 2024, however, has projected the growth rate a lot more conservatively at 6.5-7%, driven by various factors, including sustained government capital expenditure, private investments, and recent success in exports. Of the sectors expected to witness the maximum growth rate, respondents are positive about the growth of technology, media, telecom (TMT), financial services, and industrial products sectors, anticipating them to grow at 40%, 36%, and 25%, respectively.
To further support their market expansion activities, mid-market firms recognise the importance of government focus on key initiatives, including support for skill development training, infrastructure development assistance in rural areas, and incentives for technology adoption and innovation.
The International Business Report (IBR) is the world’s leading survey of mid-market companies. Launched in 1992, the IBR now provides insights into the views and expectations of around 10,000 businesses across 28 economies. The research takes place twice a year and involves interviews with chief executive officers, managing directors, chairpersons, or other senior executives from all industry sectors. Questionnaires are translated into local languages, and fieldwork is undertaken through both online and telephone interviews. The IBR data is referenced extensively in thought leadership by the Grant Thornton network and serves as the basis for our Global Business Pulse, the first index to track the health of mid-sized companies at global, regional, country, and sector levels.