The Investors' Guide To The United Kingdom 2011/12

Legend Business, 2 London Wall Buildings,

London EC2M 5UU

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www.legendpress.co.uk

Contents © Legend Business, Jonathan Reuvid and Individual Contributors 2011

The right of the above authors to be identified as the authors of this work has be asserted in accordance with the Copyright, Designs and Patent Act 1988.

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ISBN 978-1-9082480-3-9

eISBN 978-1-9087755-4-2

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Contents

Foreword – Lord Green, Minister of State for Trade and Investment

List of Contributors

Part One – Investment in the United Kingdom Today

1.1 The UK Economy and Investment Environment

Jonathan Reuvid, Legend Business

1.2 Overview for UK Investors

Christina Howard, Watson, Farley & Williams LLP

1.3 Grants and Incentives Within the UK

Olaf Swanzy, PNO Consultants Ltd

Part Two – The Regulatory Environment

2.1 Competition Law and Policy in the UK

Emanuela Lecchi and Jason Logendra, Watson, Farley & Williams LLP

2.2 Regulation of Financial Services

Ravinder Sandhu, Watson, Farley & Williams LLP

2.3 Intellectual Property

Mark Tooke, Watson, Farley & Williams LLP

2.4 Company Formation – Methods and Legal Implications

Ian Saunders, Artaius Limited

2.5 UK Immigration

Angharad Harris and Devan Khagram, Watson, Farley & Williams LLP

2.6 Money Laundering Regulations

Mark Saunders, Wilder Coe LLP

Part Three – Industry sectors of opportunity

3.1 The Automotive Industry

Mark Norcliffe, The Sourcing Solutions Ltd

3.2 Aviation Manufacturing

Jonathan Reuvid, Legend Business

3.3 Life Sciences

Jonathan Reuvid, Legend Business, and Belinda Clarke

3.4 Chemical and Related Industries

Neil Harvey and Alan Eastwood, Chemical Industries Association

3.5 Clean Technology and the Low Carbon Economy

Neil Budd, Watson Farley & Williams LLP

3.6 The British Fashion Industry

Gemma Ebelis, The British Fashion Council

3.7 Hotel and Leisure Industries

Felicity Jones, Watson, Farley & Williams LLP

3.8 ICT Infrastructure

Jonathan Reuvid, Legend Business

3.9 Nanotechnology

Jonathan Reuvid, Legend Business

3.10 Renewable Energy: A UK Perspective

Neil Budd, Watson Farley & Williams LLP

Part Four – Operating a Business in the United Kingdom

4.1 Financial Reporting and Accounting: An Overview

Bee Lean Chew, Michael Bordoley and Jitendra Pattani, Wilder Coe LLP

4.2 Business Taxation

Tim Cook, Wilder Coe LLP

4.3 Value Added Tax (VAT)

Neil Warren, Artaius Ltd

4.4 Key Business Taxation Planning Pointers

Tim Cook, Wilder Coe LLP

4.5 Financial Outsourcing

Robin Berry, Artaius Ltd

4.6 Employment Law

Asha Kumar, Watson, Farley & Williams LLP

4.7 Pensions, Insured Benefits and Option Plans

Liz Buchan and Rhodri Thomas, Watson, Farley & Williams LLP

4.8 A Guide to Investment in UK Commercial Property

Gary Ritter, Watson, Farley and Williams LLP

4.9 UK Taxation for Foreign Nationals

Tim Cook, Wilder Coe LLP

Part Five – Banking and Financial Services

5.1 Commercial banking services

James Roberts, HSBC Bank Plc

5.2 Finance for companies

James Roberts, HSBC Bank Plc

5.3 The AIM Market of the London Stock Exchange

Christina Howard and Gareth Burge, Watson, Farley & Williams LLP

5.4 Roles of the nomad and the broker on AIM

Tony Rawlinson & Simon Sacerdoti, Cairn Financial Advisers LLP

5.5 Mergers & acquisitions and joint ventures

Tanvir Dhanoa, Watson, Farley & Williams LLP

Part Six – Key Investment Sectors and Locations

6.1 Issues For Investors in the UK Upstream Oil and Gas Sector: Offshore Exploration and Production

Mark Evans and Benjamin James, Watson, Farley & Williams LLP

6.2 Issues For Investors in the UK Offshore Oil and Gas Sector: LNG, Gas Storage and Access to Infrastructure

Mark Evans and Heike Trischmann, Watson, Farley & Williams LLP

6.3 Science Parks and Business Incubators

Nick Hood, Carter Jonas

6.4 London: The European Capital of Business

Andrew Cooke, London & Partners

6.5 The UK Property Market

Eleanor Jukes, EMEA Capital Markets Research, Jones Lang LaSalle, London, UK

APPENDICES

I Contributors’ Contacts

Watson, Fayley & Williams

Investing or setting up in the UK?

WFW is a leading international law firm with a wealth of experience in assisting businesses and individuals with their UK expansion plans.

We advise on:

> Corporate start ups

> Fund raising

> IPOs

> Acquisitions & disposals

> Employment law

> Immigration

For further information contact:

Christina Howard – Corporate

Watson, Farley & Williams – London

choward@wfw.com

+ 44 20 7814 8189

Asha Kumar – Employment/Immigration

Watson, Farley & Williams – London

akumar@wfw.com

+ 44 20 7814 8182

wfw.com

© Watson, Farley & Williams 2011. All references to ‘Watson, Farley & Williams’ and ‘the firm’ in this advertisement means Watson, Farley & Williams LLP and/or its affiliated undertakings. Any reference to a ‘partner’ means a member of Watson, Farley & Williams LLP, or a member or partner in an affiliated undertaking, or an employee or consultant with equivalent standing and qualification. This advertisement constitutes attorney advertising.

Global connections

Local opportunities

At HSBC we’re using our expertise to help international businesses set up in the UK. With our local market knowledge and extensive network of relationship managers, we can help you make the right connections.

To find out how HSBC can help you make the most of local opportunities in the UK, contact our UK Inward Investment team on +44 (0) 207 991 3707* or email inwardinvestmentuk@hsbc.com

Issued by HSBC Bank plc. *Lines are open 9am to 5pm Monday to Friday (excluding public holidays).

AC21188

TheSourcingSolutions Ltd helps European and Chinese partners successfully grow their businesses together. We specialize in the automotive, medical and high-tech engineering sectors.

Our services include:

•  Strategic advice on identifying the right partners

•  Support in supplier development

•  Project management for new product development

•  In-market quality control inspections

•  Shipping and logistics support

•  Conference and event management

•  Provision of training programmes

For more information, and a free consultation, please contact

TheSourcingSolutions Ltd

7200 The Quorum

Oxford Business Park North

Garsington Road

Oxford

OX4 2JZ

Tel +44 (0)1865487150

Email info@thesourcingsolutions.com

The Exchange; a new Business Innovation Centre under construction on Colworth Science Park a joint development by Goodman and Unilever with support from the East of England Development Agency.

Science Village a new 28,000 sq ft flexible laboratory building on Chesterford Research Park being developed by Aviva Investors and Churchmanor Estates Company.

FOREWORD

Lord Green, Minister of State for Trade and Investment

As Minister of State for Trade and Investment, I am pleased to provide this Foreword to The Investors’ Guide to the United Kingdom 2011/12.

The UK has a compelling offer to inward investors and great prospects for the future as it looks to host the London 2012 Olympic and Paralympic Games, rises to the challenge of meeting the UK’s infrastructure needs and the growth of Tech City in East London. Excellence across key sectors including finance and business services, ICT, and life sciences, puts the UK in pole position to remain Europe’s leading inward investment location.

UK leadership was independently validated when the ‘2011 World Investment Report’ produced by UNCTAD found that the UK had the highest stock of foreign direct investment (FDI) in Europe in 2010. The data showed that the stock of FDI in the UK totalled US$1.09 trillion, compared to US$1 trillion in France and US$674 billion in Germany. In addition, the UK attracted the highest number of ‘greenfield’ investment projects in Europe (899 projects), significantly higher than countries such as Germany, Spain and France.

The UK Government is continuously focused on creating the best possible environment for FDI. This is a whole of Government effort from the Prime Minister downwards. It is focused on building strategic relations with investors, and at the same time making sure Government policy making takes into account key issues and concerns. Measures such as the progressive reduction in corporation tax each year until 2014, enhanced R&D tax credits and introducing a ‘patent box’ and ‘entrepreneur visa’ will help attract the world’s leading companies and the best, most dynamic, entrepreneurs.

This independent guide is a good place to start to gain a deeper insight into the UK investment offer. It complements UK Trade and Investment’s ‘UK Map for Investors’ viewable at www.ukti.gov.uk/invest that gives a good visual representation of UK economic strength by sector and business activity. Inward investors and prospective investors with an enquiry may also make initial contact with UKTI’s Investment Hub by telephoning +44 (0)20 733 5442 or by email to enquiries@ukti-invest.com.

UK Trade and Investment can support companies through its end-to-end service for all potential and existing investors in the UK. We mean what we say – Britain is Open for Business – and we promise that the UK is the ideal partner for innovative businesses wanting to grow.

Lord Green

Minister of State for Trade and Investment

List of Contributors

Watson, Farley and Williams LLP Corporate

Christina Howard is a partner in the International Corporate Group of Watson, Farley & Williams LLP, dealing with a wide range of corporate and commercial work including corporate finance transactions, mergers and acquisitions, joint ventures and restructurings.

Tanvir Dhanoa is an associate in the International Corporate Group of Watson, Farley & Williams LLP. Tanvir’s areas of practice include public and private mergers and acquisitions, equity capital markets and joint ventures, as well as general corporate and commercial work across a range of sectors.

Ravinder Sandhu is an associate in the International Corporate Group of Watson, Farley & Williams LLP, specialising in a broad range of domestic and international general corporate and corporate finance transactions including mergers and acquisitions, equity fundraisings, group reorganisations, joint ventures and regulatory matters.

Gareth Burge is an associate in the International Corporate Group at Watson, Farley & Williams LLP specialising in corporate and commercial transactions including corporate finance, strategic alliances (joint ventures and private equity fundraisings), mergers and acquisitions and group reorganisations.

Energy and Project

Mark Evans is a partner in the International Corporate Group of Watson, Farley & Williams LLP, specialising in a range of transactional and financing work in the natural resources and energy sectors, including energy project financing and trading. His trading and structured transaction experience encompasses gas, LNG, power, carbon, coal, freight and uranium.

Neil Budd is an associate at Watson, Farley & Williams LLP, specialising in energy and clean technology. He has worked on a number of renewable energy projects, both in the UK and internationally (including onshore and offshore windfarms, biomass and waste to energy plants and solar installations) and has advised sponsors and funders with regard to investments in the clean technology sector.

Benjamin James is an associate at Watson, Farley & Williams LLP, specialising in corporate and commercial transactions, including corporate finance, mergers and acquisitions, equity capital markets and joint ventures in the natural resources and energy sectors, in particular upstream oil and gas.

Heike Trischmann is a senior associate in the International Corporate Group of Watson, Farley & Williams LLP. She specialises in all aspects of oil and gas law but has also been involved in electricity and water projects. Heike has advised governments, national oil companies as well as junior and major oil and gas companies, banks, energy trading companies, regulators and individual investors world-wide on a broad range of international and domestic corporate, commercial, regulatory and projects work. Through her work, she has developed an in-depth knowledge of various energy regulatory regimes in the UK, Continental Europe, Latin America and Africa including in relation to upstream E&P, LNG, gas storage and various energy infrastructure projects.

Employment

Liz Buchan is a partner of Watson, Farley & Williams LLP, specialising in employment law and employee incentives. She is a former member of the Law Society’s Employment Law Committee and acknowledged by Chambers UK as a leader in the field.

Asha Kumar is a senior associate at Watson, Farley and Williams LLP specialising in employment law and advises on a range of employment law issues affecting those looking to invest in the UK.

Rhodri Thomas is an associate in the Employment Group at Watson, Farley & Williams LLP, where he advises both individuals and employers on all aspects of employment law, including appointments and dismissals, employee restructurings, TUPE transfers, executive remuneration, share schemes and discrimination matters.

Property

Gary Ritter is a partner at Watson, Farley & Williams LLP. Gary specialises in advising on a broad range of residential and commercial property matters, including development, investment and landlord and tenant. He acts for substantial companies as well as for individual investors.

Felicity Jones is a partner in the International Corporate Group at Watson, Farley & Williams LLP. Felicity is head of WFW’s Hotel and Leisure Group and specialises in sales, purchases, funding, shareholders agreements and management structures in the hotel, leisure and technology sectors.

Competition & Regulatory Law

Emanuela Lecchi is head of WFW’s Competition, Regulation and Networks Group. She focuses in particular on competition law and regulation of communications and utilities. Fluent in Italian and French, Emanuela also has a Masters in International and Comparative Business Law, a Masters in Information Technology and Telecommunications Law, and a MSc in Economic Regulation and Competition.

Jason Logendra is an associate at Watson, Farley & Williams LLP. Jason is based in London and practices in WFW’s Competition, Regulation and Networks Group, with a specific focus on communications and utilities. Jason advises companies and regulators and has complemented his experience with secondments to a FTSE 100 communications company and an overseas communications regulator.

Immigration

Angharad Harris is a partner at Watson, Farley & Williams LLP, specialising in all aspects of employment and immigration law. She is currently the Chair of the Law Society’s Employment Law Committee.

Devan Khagram is an associate at Watson, Farley and Williams LLP specialising in employment and immigration law. His immigration practice includes advising on all aspects of the Points Based Immigration System including investors, entrepreneurs and application for settlement and naturalisation.

Intellectual Property

Mark Tooke is a partner in the International Corporate Group at Watson, Farley & Williams LLP. Mark is head of WFW’s London intellectual property department, and has a particular focus on the corporate and commercial aspects of IP, including assisting clients in the communications, media and technology sectors.

Wilder Coe LLP and Artaius Ltd.

Michael Bordoley has been with Wilder Coe since 1991 and is an audit partner. In this role he is responsible for advising clients on budgetary control and forecasts. Although working across a broad sector range, Michael specializes in SMEs, family businesses, travel agencies and insurance brokers and charities. He advises clients on all aspects of furthering a business from the day-to-day running to specialist areas and dealing with legislation.

Robert Coe is senior partner at Wilder Coe with responsibility for corporate tax and corporate finance. He has acted as non-executive director for numerous public companies. Robert has also been a non-executive director of Dowgate Capital Advisers, a corporate adviser and Nomad, and now advises Cairn Financial Advisers, also Nomad.

Bee Lean Chew has been a partner at Wilder Coe since 2005. Her main areas of expertise lie in the corporate arena where she focuses on financial reporting, auditing, internal controls and valuation work. Bee is also a non-executive director of Bromley NHS Trust.

Mark Saunders is a partner at Wilder Coe Chartered Accountants. Mark works chiefly in the corporate sector and performs audit and assurance assignments, as well as providing pro-active tax advice. He is the firm’s Money Laundering Reporting officer and lectures on the subject. Mark is also chairman of Integra International.

Robin Berry is Managing Director of Artaius Ltd. Artaius specialises in helping businesses set up in the UK. In particular, Artaius’ comprehensive service includes accounting and tailored financial management reporting. Artaius also provides VAT and payroll services. Artaius are fully accredited by SAGE.

Jitendra Pattani is an experienced General Practice Partner at Wilder Coe. He has a varied portfolio of corporate and personal tax clients covering many business sectors. Jitendra has particular expertise in the hotel and retail fashion sectors. He also has technical expertise in corporate finance transactions work, including due diligence assignments for clients, and carried out Reporting Accountants work for a main market flotation of a client in the health and fitness sector. In addition, Jitendra has co-responsibility for monitoring the firm’s compliance with audit regulations and ensuring that work is carried out to the highest professional standards.

Neil Warren is a specialist VAT consultant. He is also a lecturer and author, and was the winner of the 2008 Taxation Awards Tax Writer of the Year competition. He worked for HM Customs and Excise for 14 years and is also the author of Tolley’s annual VAT Planning book.

Ian Saunders is a Chartered Secretary and a director of Artaius Ltd. He helps clients to maintain statutory records for Companies House and the Stock Market. He performs registrar work, and is a company formation agent and nominee. He also advises on corporate restructuring.

Tim Cook joined Wilder Coe in 1996 and heads the firm’s tax department. Tim handles tax returns, capital gains tax, trusts, inheritance tax and HM Revenue and Customs investigations. His areas of expertise include tax planning, pensions, emigration and trusts. He works primarily with entrepreneurs and families.

HSBC Bank Plc

James Roberts has been working for HSBC for 13 years and has undertaken a variety of roles, most recently being a Senior Commercial Manager in London.

Other Contributors

Richard Binning is a Director of Savills. Savills are International Property Consultants covering the full range of property matters. Richard heads the Farm and Estate Agency team for Central England. Savills sell more than any other Agent in the UK and are the recognized market leaders. Properties which have been dealt with by the team in the last year range from bare blocks of farmland to large agricultural and sporting Estates and specialist equestrian training yards.

Andrew Cooke is Chief Operating Officer of London & Partners. His responsibilities include leading the organisation’s strategy and planning, financial management and research and intelligence functions. He is also responsible for relationships with the agency’s primary public and private sector partners, as well as London & Partners’ quality management systems including ISO9000. Andrew spent over 10 years at Think London, the official foreign direct investment agency for London before it s remit was transferred to London & Partners. Previously, in 10 years with the Department of Trade and Industry, his roles were focused on trade promotion and inward investment, including 4 years with the Invest in Britain Bureau (now UK Trade & Investment) managing North American investment and a posting to the British Consulate General in New Zealand as Consul Commercial.

Belinda Clarke is Director of External Relations at ideaSpace, the enterprise accelerator linked to the University of Cambridge. She is a member of the BBSRC Bioscience for Industry Strategy Committee, also the regional NHS Innovation Council and was Chair of the UK Life Sciences Network from 2009-2011. Previously, Belinda was the Regional International Trade Adviser for Biotechnology and Pharmaceuticals and then Life Sciences Manager for the East of England. She has a first degree in Natural Sciences from the University of Cambridge and a PhD from the John Innes Centre in Norwich.

Alan Eastwood spent most of his career with ICI, first in the Paints Division and then as a member of the Planning and Economics team at head office in London. At the beginning of 2000 he was seconded to the Chemicals Unit of the Department of Trade and Industry. Since 2005, he has been with the Chemical Industries Association (CIA) and has been involved with a wide range of economic and commercial issues affecting the industry. He is also the chairman of the Economic Outlook group at CEFIC, the European chemical industry association.

Gemma Ebelis is PR Manager at the British Fashion Council

Neil Harvey has been Head of International Trade at the UK Chemical Industries Association (CIA) for nearly 8 years. He joined the CIA in 1998 after 24 years in the Department of Trade and Industry, covering UK trade relations with Central and Eastern Europe in the early 1990s and Government’s relationship with the UK chemicals industry in the mid-1990s. The mission of the CIA is to represent the interests of the UK chemical and allied industries sector in regulatory, economic and social affairs. Neil oversees international trade promotion activities and trade policy issues. He also manages the group of experts within the European chemicals association, Cefic, which advises on trade regulations relating to the precursor chemicals that have the potential for illicit use. The CIA has produced a Code of Conduct for companies dealing with chemicals that are subject to UK, EU and International trade controls, including a chapter covering CWC precursor chemical.

Nick Hood is a Partner within Carter Jonas, a Director of St. John’s Innovation Centre Ltd, The City of Cambridge Education Foundation, and is a Chartered Surveyor. Nick leads the the Carter Jonas Technology Team which specializes in the development and marketing of Science Parks and Innovation Centres. Carter Jonas is one of the leading property consultants in the Science Park sector. The Technology Team offers a broad spectrum of services to both public and private sector clients including feasibility studies, demands and needs studies, development agreements, marketing strategy reports, lettings and acquisitions of incubators, laboratory and/or R&D buildings.

Eleanor Jukes joined Jones Lang LaSalle in 2010, working in the EMEA Capital Markets Research team. The team specializes in providing a connecting role between on-the-ground sector research and investors by producing bespoke strategy reports and analyses, alongside supporting the wider business lines. Jones Lang LaSalle is a finance and professional services firm specializing in real estate services and investment management.

Mark Littlewood is the founder of the BLN, the UK’s leading forum for CEOs, founders and investors in high growth businesses. Before that, he was a founder at Library House, an investment research business serving the global venture capital and banking communities. He led the business development activities for the organisation, created and managed a network of angels, early stage, venture and corporate investors. Previously, Mark worked with university spin outs; rn a 40 person consultancy business and founded a web portal for the CAD community. He has also worked in the publishing and information sectors and attended Trinity College, Cambridge.

Mark Norcliffe has been closely involved, for over 15 years, in promoting business partnerships between British and overseas automotive companies – formerly as Head of International Services at the Society of Motor Manufacturers and Traders and latterly as a specialist adviser to UK Trade & Investment. He is now Managing Director at TheSourcingSolutions Ltd.

Tony Rawlinson is a Chartered Accountant who has around 25 years experience advising quoted companies on a broad range of transactions. Tony was a founder of Dowgate Capital plc, a specialist AIM Market Nominated Adviser and Broker. He was appointed Chief Executive on 2004 and led the successful development of the Group until its sale in Summer 2009. Since then, Tony and his team from Dowgate have successfully established Cairn Financial Advisers LLP, an AIM Nominated Adviser, Plus Adviser and Takeover Code specialist. Tony is a member of the AIM Advisory Group of the London Stock Exchange.

Jonathan Reuvid is an editor and author of business books and a partner in Legend Business. He has edited all four edition of ‘The Investors’ Guide to the United Kingdom’ and has more than 30 titles to his name as editor and part-author including ‘The Handbook of International Trade’, ‘The Handbook of World Trade’, ‘Managing Business Risk’ and business guides to China, the 10 countries that joined the EU in 2004 and, more recently, Morocco. Before taking up a second career in business publishing Jonathan was Director of European Operations of the manufacturing subsidiaries of a Fortune 500 multinational. From 1984 to 2005 he engaged in joint venture development and start-ups in China.

Simon Sacerdoti is a Chartered Accountant. He has worked in the transaction support team of BDO Stoy Hayward where he advised on a number of corporate transactions on AIM and the Official List, later joining the Entrepreneurial Services team and Ernst & Young where he led a number of capital market transactions both in the UK and overseas. Simon joined Dowgate in 2007 and was involved in IPOs, reverse takeovers, fundraisings and acquisitions. Following the sale of Dowgate, Simon helped establish Cairn Financial Advisers LLP where he is a partner.

Olaf Swanzy is the PNO Group UK sector specialist for innovation with close working relationships with all principal funding bodies in this sector. He joined the PNO Group in 2004 to help establish the UK operation with an initial focus on technology development within the Environmental Sector. Over the past 7 years Olaf has worked with an extensive range of SMEs and large companies across all industry sectors and academia to advance research and innovation activities through the procurement of government funding from national and EU sources. Since 2008, he has been involved in the delivery of training to SMEs in the areas of government funding for innovation investment activities. In 2009 alone he secured in excess of £15 million of grant support for clients.

Part One

1.1 THE UK ECONOMY AND INVESTMENT ENVIRONMENT

Jonathan Reuvid

Legend Business

In common with fellow members of the EU and the United States, the UK continues to recover more slowly than projected a year ago from the 2009 recession and the lingering after-shocks of the 2008 global financial crisis. However, the coalition government has maintained the robust deficit reduction policy that the Chancellor introduced shortly after it took office in May 2010 and the UK economy has remained stable, retaining its triple A credit rating, in a Europe where weaker Eurozone members have required substantial financial support from the ECB and stronger members to avoid insolvency.

THE 2011-2012 INVESTMENT CLIMATE

There is consensus among economists and the government itself that recovery will take longer and be harder than expected, as the Chancellor indicated in his statement to Parliament on 12 August 2011. At the same time, he referred to the joint assessment of the Bank of England, the Financial Services Authority (FSA) and the Treasury that British banks are now sufficiently well capitalised and holding enough liquidity to be able to cope with current market turbulence.

Regulation of the financial sector has been strengthened with complete responsibility for the monitoring and control functions of the day-to-day banking system, previously dispersed between the Bank of England, the Financial Services Authority (FSA) and the Treasury, transferred to the Bank. A new body, the Financial Conduct Authority, will be responsible for policing financial institutions and protecting consumers.

The government’s firm actions to rebalance the economy, endorsed by the IMF, resonate within the EU where other large economies are introducing cutbacks, however unpopular domestically.

The impact on public services and disposable incomes during the next few years of necessary austerity are inevitably painful. However, there is nothing in the coalition government’s programmes to deter foreign investors. Indeed, the enhanced focus on the private sectors of manufacturing industry and services where further stimulus is foreshadowed should encourage foreign investors already active in the UK to extend their commitments, and incoming investors to develop a business base in this leading global economy which continues to offer an environment that is both stable and open.

More generally the lowering of the corporation tax rate by 1 per cent progressively each year up to 2014 is a major incentive to inward investors. The enhancement of R&D tax credits and the introduction of a Patent Box will reduce corporate tax further for innovative companies. The UK is very much open to inward investment.

BASICS OF THE UK ECONOMY

Population

The population of the UK stands at an estimated 62.3 million, with a labour force of 31.4 million, ranking it 18 in the world. Of the total population 67 % are of working age with 16.5% under 15 and 16.4% over 64. Male life expectancy is 76.7 years and female life expectancy 81.8 years.

Of the indigenous population, 83.6% are English, 5.6% Scottish, 4.9% Welsh and 2.9 % Northern Irish. According to the 2001 census, 2% of the population were black, 1.8% Indian, 1.3% Pakistani with a further 2.8% of mixed and other nationalities. Immigration rose sharply in the first decade of the millennium, but will now be capped for non-EU entrants.

Macro-Economic Indicators

Forecasts for 2011/2012

Table 1.1.1 highlights 2011 and 2012 forecasts for the basics of the UK economy. Independent averages, and the range of forecasts, are based on forecasts made in the last three months (October: 16 institutions; September: 10 institutions; August: 3 institutions). Averages of new forecasts are calculated from forecasts for the comparison received in October.

Table 1.1.1 Macro-economic indicators

Source: Macroeconomic Prospects Team, HM Treasury, No. 292

The 22 most recent forecasters include 11 banks and investment firms, 10 research institutions and the Confederation of British Industry (CBI).

UK INWARD INVESTMENT

In the World Investment Report 2011 by the UN Conference on Trade and Development (UNCTAD), the UK stock of inward foreign investment is quantified at US$1.1 trillion, nearly two and a half times the level of $438 billion reported for 2000. More recently, the Ernst & Young European Attractiveness Survey 2011 reported that the UK continued to attract the most foreign direct investment (FDI) projects (19%) in Europe which is rated the most attractive regional location for investors globally after China. Similarly, the World Bank has named the UK as the best place in Europe and the G8 to do business.

In 2010 when global FDI inflows decreased by 15% to $807 billion, UK inflows were only $24 billion, but still well above the $14 billion registered for Germany (the second destination for FDI by value in the EU), compared to $48 billion in 2009 (Germany $20 billion). The sources of investment over the past three years are detailed in Table 1.1.2.

Table 1.1.2 Country sources of investment 2008/09 and 2009/10

Source: UK Inward Investment Reports 2008/2009, 2009/2010 and 2010/2011 UKTI

The total number of inward investment projects in the year to March 2011 at 1,434 was rather less than the 2009/2010 total of 1,619 projects. However, while the number of new jobs generated was nearly 42,000, a decrease of 21% on 2009/2010, inward investment activity also secured 52,000 jobs, 28% more than in the previous year.

Of the 54 countries that invested in the UK in 2010/2011, as in 2009/2010, the USA remains by far the biggest source of investment projects, accounting for 27% of all investment and almost 40% of created or safeguarded jobs. Project numbers were down for all EU fellow members, China and, marginally, Japan. Associated jobs increased for the majority of the leading investment economies.

Composition of investment projects

Inward investment by category

The 2010/2011 proportions of completely new investments, expansions of previous investments and mergers and acquisition (M&As) including joint ventures (JVs) are compared with the 2008/2009 and 2009/2010 proportions in Table 1.1.3.

Table 1.1.3 UK inward investment by category

Source: UK Inward Investment Reports 2008/2009,2009/2010 and 2010/2011, UKTI

This analysis reveals that 46% of the overall reduction in the number of investment projects was due to the continuing fall in M&A activity, a worldwide phenomenon in cross-border transactions over the period. The balance of the reduction was attributable to the fall in new investments, while the number of expansions held steady.

The proportion of FDI through the expansion of the existing investment base has continued to grow and now represents 38% of total