Editor: Welcome back, Consul-General Lopez. Please tell us about any new developments in the UK’s economic and business environment since we spoke last year.
Lopez: Thank you very much. It’s great to speak with The Metropolitan Corporate Counsel again. 2012 was an amazing year for the UK: we celebrated Her Majesty Queen Elizabeth II’s Diamond Jubilee, the Olympic and Paralympic Games returned to London, Andy Murray won his first grand slam at the U.S. Open, and there were many other milestones. In particular, London 2012 reminded the world that Britain is forward-looking, inclusive, internationally focused, and justly proud of its achievements both at home and on the world stage. The positive images of Britain beamed around the world during July, August and September are, however, only one aspect of the bigger picture of Britain’s success and why it is a natural choice for investment, education, finance and industry.
Alongside these major – and wonderful – national events, the UK government has been engendering goodwill of its own, helping businesses save over £850 million since 2011. We are seeking to create the most competitive tax system in the G20 and make Britain the best place in Europe to start and grow a business.
Editor: What accounts for the UK’s relative prosperity during difficult economic times, as compared with the rest of the EU?
Lopez: A number of factors. First, the government has taken significant action to reduce the deficit and rebuild the economy, helping to secure stability and position the UK as a relative safe haven. Interest rates are near record lows, the deficit has been cut by a quarter, and inflation has halved since its peak in September 2011. In addition, over a million private-sector jobs have been created under the Coalition Government. Indeed, the UK’s unemployment rate is more than 3 percent below the EU average.
The London 2012 Games were also a terrific opportunity for the UK economy, both in the seven-year build-up to the Games and now as we move into the long Olympic legacy period. The Olympics had a great effect upon employment: the Olympic Park and Village employed 46,000 people, 10 percent of whom were previously unemployed, and the new Westfield Stratford Shopping Centre, the biggest in Europe, employs 10,000, around a fifth of whom were unemployed local people. The Games were also fantastic for British business: 98 percent of the 1,604 top-level contracts directly awarded by the Olympic Delivery Authority went to companies registered in the UK, and the fact that they were able to deliver London 2012 on time and under budget enhances the reputation of our businesses around the world. Moving forward, Oxford Economics has predicted an Olympic boost in tourism in the UK of £2.3 billion from 2013 to 2017.
The UK is a perennially attractive place to do business. In 2011, it attracted almost 900 new foreign direct investment (FDI) projects compared to runner-up Germany’s 551. The government’s lowering of corporation tax – to 21 percent from April 2014 – gives the UK the lowest rate in the G7. And to supercharge our thriving innovative industries, the government’s new “Patent Box,” to be introduced in April 2013, will ensure that profits from new patents are taxed at a special rate of only 10 percent.
In short, the UK is making the most of opportunities that come along but also creating new opportunities of its own. These are key steps for sustaining and boosting our prosperity.
Editor: In November 2010, the Chancellor of the Exchequer and the Secretary of State for Business, Innovation and Skills launched the Growth Review to undertake a thorough assessment of how government can help create the conditions for growth. Please discuss the components and goals of the UK Plan for Growth. What role does UK Trade & Investment play in its progress?
Lopez: The Government’s Plan for Growth comprises four symbiotic ambitions: to create the most competitive tax system in the G20; to make the UK the best place in Europe to start, finance and grow a business; to encourage investment and exports as a route to a more balanced economy; and to create a more educated workforce that is the most flexible in Europe.
To this end, Chancellor George Osborne recently announced, in his Autumn Statement, a number of measures. Among the headlines was a further reduction in the corporate tax rate, which by April 2014 will be 21 percent; the establishment of a new Business Bank and a three-year scheme to provide up to £1.5 billion in loans to finance small firms’ exports; and a boost in the annual budget of UK Trade & Investment (UKTI) of 25 percent.
UKTI, which is the foreign commercial arm of the government, has offices in many diplomatic missions around the world ensuring that companies from across the globe are given the Rolls-Royce treatment as they enter the UK market and empowering British companies and brands to expand overseas. By keeping FDI and export levels high – Britain is Europe’s most popular inward FDI destination, and continues to export £80 billion worth of goods and services annually to the U.S. alone – UKTI plays a crucial role in the Plan for Growth.
Editor: We understand that one aspect of the Plan for Growth focuses on the UK’s legal sector, including use of British courts and the application of English law for contracting. How does the British legal system meet the needs of global business?
Lopez: The UK’s legal system is among the most supportive in the world for businesses. The World Bank recently ranked the UK among the top countries globally for ease of doing business and cited key factors, including a business-friendly regulatory environment, the ability to enforce contracts, general legal protection for business and a sensible and clear approach to safeguarding intellectual property rights. The UK has a fast, open and business-friendly system to encourage the formation of new businesses. No permission is required to establish a business presence in the UK, and your business can be registered within 24 hours.
The UK is home to three of the four largest law firms in the world (measured by fees) and hosts hundreds of law firms from other jurisdictions. In 2008, a record 17 UK firms were featured in The Global 100, a list of the top 100 firms compiled annually by Legal Business and The American Lawyer. UK firms are also among the largest globally, with four out of the top six places in terms of the numbers of attorneys employed. It is no surprise, then, that London is the locale of choice for unlocking commercial disputes. There is a high concentration of expertise in many areas of foreign law, thanks largely to a community that encompasses national and international firms. More international and commercial arbitrations take place in London than in any other city in the world, and about 90 percent of commercial cases handled by London law firms now involve an international party. Global business finds a natural home in a legal environment that understands its needs and can help settle its disputes.
Editor: What are the advantages for U.S. companies in handling their disputes through the London Court of International Arbitration (LCIA)?
Lopez: There are numerous advantages to addressing international disputes in the LCIA. London is a global centre of legal dispute resolution, and a provider of high-quality commercial and financial legal services. Typically, newly appointed judges in England have had 30 years of experience as practitioners, arguing cases of the kind that they will now have to resolve judicially. Also, in December of 2011, London unveiled the largest business court in the world: the new Rolls Building off Fetter Lane is one of the most significant new court building projects since the nearby Royal Courts of Justice were opened in the nineteenth century.
The Rolls Building reflects the pre-eminence of London as a first-class centre for both international and national dispute resolution. For the first time in many years, the senior specialist judges who decide high-value business, financial and property disputes are working from a single building. And yet the three jurisdictions from which they are drawn still retain the historic areas of expertise, allowing claimants to choose between: the Chancery Division; the Commercial and Admiralty Courts; and the Technology and Construction Court. Strategically positioned between legal London and the City’s financial district, the Rolls Building is a purpose-built, one-stop courthouse with no fewer than 31 courtrooms. Three of these courtrooms are flexible and spacious enough to cope with the most demanding multi-party litigation.
Editor: What strategies are you employing to encourage bilateral investment and expanded trade with the U.S.?
Lopez: UK Trade & Investment’s U.S. operations are focusing some of the sectors that we believe are the most appealing to the U.S. about the UK, including pharmaceuticals, fashion, advanced manufacturing and innovation, and engineering.
The existing bilateral relationship between our two countries is very strong and will only continue to grow; after all, the UK and the U.S. remain each other’s single largest investors. We have almost one trillion dollars ($991.6bn) invested in each other’s economies ($549.4bn of American investment in the UK; $442.2bn of British investment in the U.S.). U.S. investment in the UK is over ten times U.S. investment in China.
Part of what appeals to the U.S. about the UK, in terms of both trade and investment, is that the UK is one of the world’s friendliest locations for both. The UK government’s Plan for Growth seeks to create the most competitive tax system in the G20; make the UK the best place in Europe to start, finance and grow a business; encourage investment and exports; and create a more educated workforce that is the most flexible in Europe. The World Bank ranks the UK as the easiest major economy in Europe to set up and run a business, and for U.S. companies seeking a European base of operations, the UK has one of the world’s most flexible workforces. Our shared language, English, has become the international language of business, politics and science. There are many other compelling reasons for increased bilateral trade and investment: the government is seeking to reduce the costs of doing business in the UK; its world-class universities and research environment are closely allied to industry; its proximity to Europe makes it a natural choice to locate for investors coming from outside the EU; and it is home to the global financial hub that is London: in 2011, London alone attracted nearly half of UK FDI projects.
Editor: What UK industries are most attractive to foreign investors? Conversely, where are UK businesses having the greatest success in entering the U.S. market?
Lopez: The UK is a rich and diverse market ranging from pharmaceuticals, fashion and advanced manufacturing through to primary food production and including world-leading businesses in space technologies aerospace and automotive engineering. The U.S. economy is integrated and largely self-contained, with every major industry represented. U.S. manufacturers often source components overseas, and UK goods have traditionally enjoyed a good reputation for quality in the United States. Key sectors in the U.S. identified by UK Trade & Investment include: advanced engineering; clean technology; creative and media; energy and power; financial and professional services; homeland security; information and communication technologies (ICT); and life sciences.
Editor: Do you have any closing thoughts for our readers?
Lopez: It has been an unforgettable year for Brits at home and abroad. We now aim to capitalize on the momentum these last twelve months have generated. We have the talent, the know-how and the expertise. We also have the ambition and the hunger to succeed. 2012 was a great year. 2013 will be even greater. From energy to financial and professional services; from infrastructure to advanced engineering; and from the creative industries to technology, we have much to look forward to, and I have no doubt that British business will reach new heights in the year ahead.