The vote held on the 23 June 2016 in which the UK decided to leave the European Union, commonly known as Brexit, has been described as one of the most seismic events in modern international politics. There have been many reports throughout the world’s media about how the British economy will suffer, about how the City of London will be overtaken by Frankfurt and Paris, and about how Britain is now a less open and more inward looking country.
Cassadys Solicitors has a strong presence in India and we have regularly heard concerns from our clients and business associates there that the UK is no longer the primary destination for Indian business in Europe. This article will dispel those myths and give 10 strong reasons about why the UK is still the top place for Indian individuals and companies to do business in Europe.
The English language is an official language in India and it is widely spoken by the Indian business and political classes. Good business is based on good communication and the English language is undoubtedly a major reason why Britain has been a top destination for Indian business. Brexit will mean changes, but not to the language! There are currently nearly 100 million English speakers in India, compared to the 75,000 French speakers.
India and the UK share a common history, and bonds formed over centuries are very difficult to lodge. Indian nationals fought bravely in two world wars, for which the UK will always be indebted to. Since independence India and Britain have worked positively together as equal partners on the global stage and the UK has lead calls for India to be given a permanent seat at the UN Security Council.
This shared heritage, however, is much more than just political. Indian culture and British culture have mingled to create something unique and positive. The Queen opened the UK-India year of culture in February 2017, which will be a yearlong celebration of the different ways both countries have enhanced each other’s cultures. If it is true that people do business with other people, then it is also true that people relate to each other on a cultural level. This richness of shared experience does not exist between India and other European societies.
Large Indian community in the UK
The UK is home to the largest Indian community in Europe and the community has added to British life. The Indian community is the largest diaspora in the UK and modern Britain would not be what it is without the positive impact the Indian community has made. By both size and percentage of population, the Indian community in the UK is by far the largest Indian community in Europe, which surely makes the UK an easier market to exploit in terms of selling Indian goods and services.
India’s changing export picture
According to figures from the Indian Ministry of Commerce and Industry, the UK is the largest market in Europe for Indian exports, with the only other EU country in the top 10 being Germany. Over the last few decades India’s largest export products have been petroleum products and other refined or unrefined mineral fuels. But with new sectors such as technology and services increasingly becoming important to India’s export picture, the gap between the UK and other European countries is likely to widen. For example according to a paper published in 2015, in the realm of software development the UK accounted for 10% of total exports with the rest of the EU also amounting to 10%.
Already strong investment links
Tata purchased the iconic British car-maker Jaguar in 2008 and has turned it from a struggling business into a hugely successful one. This however is just the tip of the iceberg. The UK India Business Council estimates that there are 800 Indian businesses in the UK employing more than 110,000 workers and the UK is the third largest direct investor in India, behind only Singapore and Mauritius. This means the UK is a bigger foreign direct investor into India than the US or China or the Gulf States. This is a very solid platform on which to develop a more prosperous future.
Political will for closer future relations
Since the Brexit vote the UK government has placed a strong emphasis in developing business ties with markets outside of Europe. The British government has highlighted India as a key country with which to forge stronger economic ties with, and the governments of both countries have started the dialogue necessary for a comprehensive bilateral trade deal. Though the cynics say there is more political will on the British side than on the Indian side, the fact remains the Indian government has stated they want closer economic ties, and closer ties are in a sense already forming. Furthermore the fact the political will on the British side is very strong is an encouraging sign to Indian businesses wishing to export to the UK, because the government’s policy will be to make Indian businesses welcome.
Familiarity of institutions
The Indian legal system is based on English common law and this familiarity of institutions is helpful for Indian businesses when deciding which European market to focus on. On top of that, because of the internationality renewed commercial courts and flexibility of the common law over the Napoleonic Civil Code found in other European countries, the UK is the world’s leader in international arbitration and commercial law disputes. This legal familiarity, clarity and stability, places the UK in a favourable position over other EU countries when it comes to Indian business.
Mutual Focus on tech
According to the Digital Evolution Index 2017 the UK is the leading digital economy in Europe, and in London alone there are 24,000 IT and tech companies which is more than double that of any other European city. Prime Minister Modi placed his “Digital India” policy as one of the top priorities of central government. The plan is to grow India’s digital economy into 1 trillion US dollars by 2022, but according to the Economic Times of India the actual size of India’s digital economy in 2022 will outstrip the government’s target. The economy of the 21st century will be digital, and India and the UK are a hand-in-glove fit for this future.
Brexit will actually make the UK more open to the outside world and more trade oriented
A stream of conventional wisdom states that because of Brexit, Britain will become more inward looking and less internationally focused. It is true that as an international community the European Union has achieved some considerable successes, but it is also true that outside of the European Union the UK will be free to conduct an independent trade and commerce policy. It is in fact the UK government’s stated aim to become much more internationalist after Brexit, as set out in Prime Minister Theresa May’s Lancaster House speech and in various papers published in the House of Commons.
Though leaving the EU to become more internationalist seems at first glance counter-intuitive, it is the inevitable consequence of leaving the EU in an increasingly connected and globalised economy.
The UK’s future trading relations with the EU are currently unknown
There has been a lot of doom and gloom about the UK having restricted access to the EU market after Brexit. However the trade negotiations still have years to run, and at the time of writing this article (October 2017) it seems likely there will be a transitional arrangement until 2021, meaning the UK will keep its unrestricted access to the European single market until then.
Any serious student of the European Union knows that final Treaties and agreements are highly sophisticated, complex and full of caveats and qualifications. Therefore the conventional black-and-white wisdom that once Brexit is done and dusted companies based in the UK will not have good access to the European market is too simplistic. The end result may end up surprising some on the upside, and either way the final future arrangements will not be black-and-white good or bad, it will be an art in compromise, and UK subsidiaries of Indian companies after 2021 are likely to have decent access to the European market, perhaps not as favourable as today, but not as unfavourable as many expect, and certainly not as unfavourable as Indian businesses based in India.
So hopefully you have found this article informative and you feel more optimistic about the future of Indian-UK business. If you wish to discuss your business needs then please do not hesitate to contact us using the details contained on this website.