Are you interested in starting a business in the UK with NO money? If YES, here is a complete guide to starting a business in the United Kingdom as a foreigner or an American.
Okay, having provided an in-depth analysis of the top 50 best small business ideas in the United Kingdom and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in the UK with no money. So put on your entrepreneurial hat and let’s proceed.
Starting your own business in the United Kingdom requires careful planning, research and preparation. Each year in the UK, more than 500,000 people start a business of their own. Some survive, many don’t. Some people who start a business are natural-born entrepreneurs with a fantastic idea they turn into a successful new venture. Many want to earn more money or be their own boss. Some seek greater flexibility or a more favourable work-life balance. Many simply have no alternative, perhaps after losing their job.
Starting a business can provide you with a more rewarding life, but requires careful planning in order to succeed. To get started you’ll need a good business plan. You’ll also need a brand, a name and competitor knowledge. You’ll need to understand your costs before you get going, and manage your finances once you’ve started your business.
When you’re starting a business, taking care of these key start-up tasks properly, and in the right sequence, can help boost your chances of success and get your new venture off to a great start. This is why you have to do all the due diligence to see that you have the right information about the country you choose to start- in this case, the united Kingdom.
Starting a Business in the UK as a Foreigner With No Money – A Complete Guide
- General overview
The United Kingdom has the fifth-largest national economy (and second-largest in EU) measured by nominal GDP and ninth-largest in the world (and second-largest in the EU) measured by purchasing power parity (PPP). The UK economy currently makes up 4% of world GDP.
The UK has been the fastest growing economy in the G7 for four consecutive years with 2.1% year on year growth in Q1 2016. In 2014 the UK was the ninth-largest exporter in the world and the fifth-largest importer, and had the second largest stock of inward foreign direct investment and the second-largest stock of outward foreign direct investment. The UK is one of the world’s most globalised economies. The UK economy comprises (in descending order of size) the economies of:
- Northern Ireland
The service sector dominates the UK economy, contributing around 78% of GDP; the financial services industry is particularly important and London is the world’s largest financial centre. The British aerospace industry is the second- or third-largest national aerospace industry depending on the method of measurement.
The pharmaceutical industry plays an important role in the economy and the UK has the third-highest share of global pharmaceutical R&D. The automotive industry is also a major employer and exporter. The British economy is boosted by North Sea oil and gas production; its reserves were valued at an estimated £120 billion in 2011.
There are significant regional variations in prosperity, with the South East of England and southern Scotland the richest areas per capita. The size of London’s economy makes it the largest city by GDP in Europe.
Facts and Figures of the United Kingdom That Will Interest You as an Investor/Entrepreneur
- Import and export activity is a main contributor to the economy of the UK. The UK’s trade deficit in goods and services was estimated to have been £4.8 billion in February 2016, a narrowing of £0.4 billion from the revised deficit for January 2016.
- The narrowing of the trade-in-goods deficit reflected an increase in exports of £0.3 billion to £23.2 billion; attributed to a rise in the export of chemicals. In the three months to August 2016, the total trade deficit in goods and services widened by £3.8 billion to £13.7 billion. This is the largest quarterly deficit since the three months to March 2008, when the deficit was £14.4 billion.
- In the three months, the trade-in-goods deficit widened by £3 billion to £34.6 billion. This widening reflects a £1.7 billion fall in the export of goods (of which, oil fell by £0.7 billion and other fuels by £0.4 billion).In the three months to February 2016, trade-in-goods deficit with the EU was £23.8 billion – the widest on record; reflecting a 1.3% decrease in exports and a 1.1% increase in imports.
- The deficit for the previous three months (to November 2015) was £22.8 billion – the second largest on record. Before then, the most recent record deficit with the EU occurred in the three months to February 2015 when the deficit reached £22.4 billion.
- In 2013 the UK was the leading country in Europe for inward foreign direct investment (FDI) with $26.51bn. This gave it a 19.31% market share in Europe. In contrast, the UK was second in Europe for outward FDI, with $42.59bn, giving a 17.24% share of the European market.
Factors and Incentives Encouraging Investors to Venture into Business in the United Kingdom
The UK has a range of strong attributes that are valued by investors. Here are some of them;
- Quality of life
- Stable and predictable social climate
- Good transport and technology infrastructures
- Competitive labour markets
- Investors also identified a number of areas of improvement in the UK’s offer over the last 12 months, including several that had previously been the less well-regarded elements of the UK environment, namely labour legislation, the overall trade policy environment, corporate taxation rates, labour costs, and real estate costs and availability.
- Confidence in the UK’s attractiveness remains high.
- The UK was ranked fourth globally, behind the US, China and India, when investors were asked to name their first-choice investment destination.
- Stability and political predictability feature prominently in the list of desirable attributes mentioned by investors, and the UK has traditionally scored very well in this respect.
- The UK Government is committed to a referendum on the future of the UK’s membership of the European Union. With 72% of investors citing access to the European single market as important to the UK’s attractiveness, the referendum has the potential to change perceptions of the UK dramatically, posing a major risk to FDI.
- The UK has shown itself capable of attracting R&D investment and leading in software, but it will continually need to develop its offer to remain competitive.
- Proposals to decentralise more economic decision-making power to the UK regions are seen as positive for UK attractiveness by 48% of investors.
Starting a Business in the UK – Market Feasibility Research
The UK recovery since mid-2009 has been relatively slow by historical standards, but still faster than most other G7 economies over this period.UK GDP growth slowed a little in 2015, but consumer spending growth remains relatively strong, helped by lower oil prices. The global outlook remains mixed with a gradual pick-up in the US and the Euro zone, but a slowdown in China, continued recessions in Russia and Brazil, and increased volatility in financial markets.
In the main scenario it is expected that the UK GDP growth to average just over 2% in 2016. Consumer spending will be the main driver of UK growth this year, helped by continued low energy and food prices. Risks to growth are weighted to the downside in the short term due to international risks, particularly in relation to emerging markets, as well as uncertainties relating to the EU referendum. But there are also upside possibilities if the global environment improves and productivity growth rates accelerate in the UK.
London continues to lead the recovery with projected growth of around 3% in 2016 but all other UK regions should also register positive real growth of around 1.4-2.3% per annum this year. Inflation will remain low this year, but could rise back towards its 2% target by the end of 2017, so the MPC may start to raise interest rates gradually during the course of 2017 and beyond. But this now seems likely to be a very slow process and rates could still be only around 2% in 2020.
The Budget is likely to confirm plans for further fiscal tightening to eliminate the budget deficit before the end of this decade. This will impose some drag on the UK economy, but the private services sector should be strong enough to offset this in terms of GDP and jobs growth.
List of 10 Well Known Foreign Brands in the UK
British brands are appreciated around the world for their quality and heritage. Many of them, though, are also owned by foreigners. For some “British” brands, it’s well-known they have foreign owners. They include:
- Branston pickle
- Rolls Royce
- Newcastle brown ale
- Jaguar Land Rover
10 Most Popular Indigenous Entrepreneurs in the United Kingdom
The United Kingdom has long been a hotbed of entrepreneurial activity, and hundreds of thousands of people in Britain have achieved financial independence by way of starting their own businesses. Even amongst Britain’s many successful entrepreneurs, there’s always a small percentage of people that rise to the upper echelons of high net worth status.
- David and Simon Reuben
- Philip Green
- Sir Richard Branson
- James Dyson
- Laurence Graff
- Alan Sugar
- J.K Rowling
- Duncan Bannatyne
- Simon Cowell
- Peter Jones
List of 10 Well Known Indigenous Businesses in the UK
Almost half of Britain’s biggest City firms are owned by foreign investors but there are few indigenous people who are making the United Kingdom proud.
- Victoria Beckham
- AUDEN MCKENZIE
- AO world
- RUFFER MANAGEMENT
- Virgin group
5 Best Cities to Do Business in the United Kingdom
Economic growth is projected to continue at a robust pace over the coming years, driven by domestic demand. House prices have continued to rise, although housing supply is edging up. The unemployment rate has stabilised at around 5.5%, and recently wage growth has picked up.
Projected increases in labour productivity should underpin real wage growth. The trade deficit has remained contained, but weak global trade and past currency appreciation are holding back exports. Inflation is expected to increase towards the 2% inflation target as pressures on capacity emerge.
This projection assumes the Bank of England will begin to raise its policy rate, and then raise it gradually through in the years to come to ward off excess demand pressures. The pace of fiscal consolidation has appropriately been smoothed to around 1% of GDP per year and now involves smaller reductions in spending on public services than earlier planned. However, the decision to significantly lift the minimum wage will increase labour costs, possibly lowering the contribution of employment to GDP growth.
The United Kingdom has made significant progress in its climate-change mitigation efforts. It has established a long-term framework with a unilateral commitment to reduce greenhouse gas emissions to 80% of their 1990 level by 2050, delivered through five-yearly reduction targets. To help reach this ambitious objective at low cost, carbon emissions could be taxed more uniformly by increasing the low implicit rates now faced by some sectors.
Possible Challenges and Threats of Starting a Business in the United Kingdom
The UK is one of the world’s leading business locations and the number one destination for inward investment in Europe, but growing businesses still face several hurdles when expanding in the country.
It takes an average of 13 days to start a business, with the lion’s share of that time spent dealing with Her Majesty’s Revenue and Customs (HMRC) and registering for a withholding tax on incomes called PAYE (pay-as-you-earn). Although little or no fee is charged, the number of procedures can make the process quite laborious for businesses. Challenges may include
- Dealing with Construction Permits
- Getting electricity
- Registering property
- Getting credit
- Protecting investors
- Paying taxes
- Trading across borders
- Enforcing Contracts and resolving Insolvency
- Cultural barriers
Starting a Business in the UK – Legal Aspect
- License and Permits needed to do Business in the United Kingdom
When setting up a business in the UK, you may need to apply for a licence, depending on what your business is. Popular licences may include;
- Temporary Events Notice – A Temporary Event Notice is for carrying out a ‘licensable activity’ on unlicensed premises.
- Occasional licence – In the United Kingdom you need an occasional licence if you want to sell alcohol from unlicensed premises.
- Food business registration – Food business registration if carrying out ‘food operations’ in a food business.
- Business license – You will need this to operate any business at all.
The Best Legal Entity for a Business in the United Kingdom
When setting up a business in the United Kingdom, You must choose a structure for your business. This structure will define your legal responsibilities, like:
- the paperwork you must fill in to get started
- the taxes you’ll have to manage and pay
- how you can personally take the profit your business makes
- your personal responsibilities if your business makes a loss
You can change your business structure after you’ve started up if you find a new structure suits you better. Business structures that you can choose from include;
- Sole Trader
If you start working for yourself, you’re classed as a self-employed sole trader – even if you’ve not yet told HM Revenue and Customs (HMRC).As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them. You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone. You’re personally responsible for any losses your business makes.
- Limited Liability Company
A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances. Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.
- Ordinary’ Business Partnership
In a business partnership, you and your business partner (or partners) personally share responsibility for your business. You can share all your business’s profits between the partners. Each partner pays tax on their share of the profits. Partnerships in Scotland (known as ‘firms’) are different, and have a ‘legal personality’ separate from the individual partners.
List of Legal Documents Needed to Run a Business in the United Kingdom
- Business Plan
- Confidentiality Agreement
- Directors’ Resolution
- Joint Venture Agreement
- Non-Disclosure Agreement
- Partnership Agreement
- Purchase of Business Agreement
Agencies and Parastatals in Charge of Registering Business in the United Kingdom
The agency in charge of registering business and licensing business in the United Kingdom is the company house. Companies House is the United Kingdom’s registrar of companies and is an executive agency and trading fund of Her Majesty’s Government. It falls under the remit of the Department for Business, Innovation and Skills (BIS) and is also a member of the Public Data Group.
All forms of companies (as permitted by the United Kingdom Companies Act) are incorporated and registered with Companies House and file specific details as required by the current Companies Act 2006. All registered limited companies, including subsidiary, small and inactive companies, must file annual financial statements in addition to annual company returns, which are all public records. Only some registered unlimited companies (meeting certain conditions) are exempt from this requirement.