Dubai Perfect Destination for UK Businesses After Brexit: Survey

Published March 26th, 2018 - 12:00 GMT
UAE free zones offer attractive options for UK firms looking to relocate businesses. (Shutterstock)
UAE free zones offer attractive options for UK firms looking to relocate businesses. (Shutterstock)

Businesses in the UK are keen to explore new markets and talent pools in the wake of Brexit and they consider Dubai as one of the best options to expand their operations in the region, according to a report.

The Dubai Multi-Commodities Centre (DMCC), one of the world's leading free zones for commodities trade and enterprise, in its latest report said 27 per cent of British firms have a greater appetite for international business expansion during the post-Brexit period.

Referring to a survey with British business leaders and CEOs, the DMCC report said about 66.5 per cent of the firms, following UK Prime Minister Theresa May's speech on March 2, said they were actively looking at Dubai as a business destination due to its geographical location, business-friendly regime, growing marketplace for commodities, financial services, and an increasing range of specialist industries.

In another recent survey of more than 500 businesses, the London Chamber of Commerce and Industry also found that 22 per cent are considering moving out or have already moved out owing to Brexit.

Last week, Britain and the European Union reached a landmark deal on a transition phase that will last for nearly 2 years after the historic Brexit divorce next year. The transition will begin on Brexit day - March 29, 2019 - and it will last until December 31, 2020.

The UAE has positioned itself as an attractive investment destination and has developed 45 free zones with a host of benefits including full foreign ownership, 100 per cent repatriation and zero import-export taxes. Analysts said free zones present an attractive option for companies looking to relocate outside their primary jurisdiction.

"Companies tend to use free zones in places like the UAE or Singapore or those in Latin America, when they want a logistics hub for a particular region," said Tim Sarson, value chain management partner at KPMG.

"Brexit has been the trigger for discussion about where companies should locate shared services, where their headquarters should be, and what their international supply chain looks like," he said.

More than 4,000 UK firms have a presence in Dubai, which is home to more than 120,000 British expats. Although British companies are unlikely to move their complete operations to Dubai, many companies are taking advantage of the city's strategic location to trade with markets in Middle East, Asia and Africa.

Richard Clarke, partner and head of deal advisory at KPMG in the Lower Gulf, said there has always been a close relationship between the UAE and the UK, which dates back almost 100 years. "Businesses not only view the UAE as a key trading hub for the GCC and the wider Middle East but increasingly as a gateway to Africa," Clarke told Khaleej Times.

"Many of the FTSE250 companies as well as significant private enterprises already have a presence in the UAE, particularly in Dubai. The number of these businesses is only seen increasing in the coming years not only due to the uncertainties around Brexit but also due to the overall opportunities in the UAE and the region," he said. 

Opportunities in Dubai

Simon Hudson, British CEO of Brndstr, a digital branding company based at DMCC, believed the opportunities in Dubai, for any UK company looking to move overseas, are enormous.

"Dubai really is the centre of the world for entrepreneurs. Setting up at DMCC was a great move for us. I would say to anyone seeking to leave Britain because of Brexit, it is much better to be a leader rather than a follower. Make the first move," he said.

Since the announcement of Brexit up until February 2018, DMCC saw UK-based companies setting up in its free zone increase by 29 per cent, exceeding the growth rate of other European-based companies. The UK's interest in setting up a business in Dubai through DMCC's website, measured by monthly average volume, increased by 192 per cent between 2015 to date.

"British business understands Dubai, and the opportunities it presents, and the DMCC Free Zone creates the right environment in which British businesses looking to access the African, Middle Eastern, Central and South Asian markets can set up and thrive," said Gautam Sashittal, chief executive, DMCC.

With over 1,350 British companies in its free zone, DMCC currently hosts 27 per cent of SMEs.

"We chose DMCC because we felt that it offered the most flexibility as far as starting up a business," Anis Harb, general manager at Deliveroo for Mena region. The London-based food delivery company wanted to expand into the Middle East and it picked Dubai. 

A leading business hub

The UK has identified £30 billion worth of new opportunities annually for British businesses across sectors in the GCC region by 2021. Improved business infrastructure in the Gulf as part of the regional governments' efforts to bolster non-oil revenues has reinforced the GCC's position as a leading business hub, and in particular the UAE.

"If a UK business's priority is to maintain a presence in the European Union, then the UAE will not be a suitable choice for them. However, if Brexit results in the UK being less attractive than it was, for example being subject to regulations over which it has no control, then the UAE will be an attractive alternative place in which to re-establish itself," Jeremy Cape, partner at international law firm Squire Patton Boggs, told Khaleej Times.

Elaborating, he said, low tax rates, 'ease of doing business', proximity to emerging markets, clear strategy and vision, liberal immigration laws and better climate are some of the advantages to UK businesses, if they relocate to the UAE.

Atik Munshi, senior partner at Crowe Horwath UAE, said the emirate is an ideal destination for the UK businesses even without a Brexit scenario.

"Even prior to Brexit, the UAE has been a favouraed place for UK entrepreneurs, and during the post-Brexit scenario, UAE's position will be further strengthened," Munshi told Khaleej Times.

To a question, he said it is difficult to predict how many companies or groups from UK will decide to invest or migrate to the UAE in the wake of Brexit, however considering an attractive investment environment and connectivity offered by the UAE, a good number can be expected.

"UAE offers zero rate of corporate tax for most sectors and the quality of lifestyle is amazing here. These factors are strong attractions. The incredible infrastructure and political stability are other contributors," Munshi concluded.

5% VAT not an issue

The introduction of value-added tax at standard 5 per cent rate is unlikely to deter UK businesses' plan to expand their operations to the UAE, experts have said.

Jeremy Cape, partner at international law firm Squire Patton Boggs, said introduction of VAT will not impact the UK firms planning to move UAE.

"Not at all. The standard 5 per cent VAT is a low rate and the cost should not generally fall on businesses, whether located in the UAE or outside. VAT is a good opportunity for the UAE to demonstrate its commitment to the rule of law and fairness," he said.

Atik Munshi, senior partner at Crowe Horwath UAE, said UK businesses are familiar with taxes and considering the low rate of VAT the emirates in fact became an attraction compared to other developed countries.

Richard Clarke, partner and head of deal advisory at KPMG in the Lower Gulf, said the introduction of VAT is a positive move, it demonstrates that the economy in the UAE and wider GCC is maturing.

"Companies will gain comfort from this and will view the UAE as a long-term investment destination," he said.

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