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Country Commercial Guides
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VII. INVESTMENT CLIMATE-- Openness to foreign investment:
The U.K. Government welcomes foreign inward investment. Once established in the U.K., foreign-owned companies are treated no differently than U.K. companies. With a few exceptions, the U.K. does not discriminate between nationals and foreign individuals in the formation and operation of private companies. U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders, although at least one director of any company registered in the U.K. must be ordinarily resident in the U.K.
Market entry for U.S. firms is greatly facilitated by a common language, legal heritage and similar business institutions and practices. Long-term political, economic, and regulatory stability, coupled with relatively low rates of taxation and inflation, make the U.K. particularly attractive to foreign investors. The Blair Government inherited a legacy of economic reforms, including privatization, deregulation, and support for competition. These initiatives have been continued, with the only evidence of the Labour Party's traditional interventionism in industry being evident in its on-going support of coal versus gas for electricity generation.
The U.K. imposes few impediments to foreign ownership, and no restrictions to the free flow of capital. Within the EU, HMG is a strong defender of the rights of any British-registered company, irrespective of its nationality of ownership.
The U.K. is highly receptive to U.S. investment, largely due to the British perception of a shared cultural heritage. Indeed, the U.S. and the U.K. are the largest foreign investors in each other's country. By 1997, investment by U.S. companies in the U.K. amounted to $138.8 billion, and corresponding investment by U.K. companies in the U.S. amounted to $129.6 billion. These figures represent historical cost, not current asset value.
U.S. companies have found that establishing a base in the U.K. is an effective means of accessing the European Single Market, and the abolition of most intra-European trade barriers enables U.K.-based firms to operate with relative freedom throughout the EU. Sixty of the U.K.'s five hundred largest companies are U.S.-owned, and, according to the Invest in Britain Bureau, all of the one hundred largest U.S. companies have established operations in the U.K.
-- Right to private ownership and establishment:
Ownership and operation of private companies is governed by the Companies Act of 1985, administered by the Department of Trade and Industry. The government has powers under the Mergers and Industry Act of 1986 to prohibit the takeover of important manufacturing undertakings by non-residents, and to prevent undue concentration of market share. Protected sectors include broadcasting, air and maritime transport, fishing, and defense. The Department of Trade and Industry uses a transparent code of practice in evaluating bids and mergers for possible referral to the Monopolies and Mergers Commission. On March 1, 2000, the Competition Act of 1998 will come into force, strengthening competition law and enhancing the enforcement powers of the Office of Fair Trading. Prohibitions under the Act relate to competition-restricting agreements and abusive behavior by entities in dominant market positions.
There are only a few exceptions to national treatment. For example, foreign (non-EU or non-EFTA) ownership of U.K. airlines is limited by law to 49%. Registration of shipping vessels is limited to U.K. citizens or nationals of EU/EFTA member states resident in the U.K. HMG holds one special share in British Aerospace, Rolls-Royce, VSEL, Stena Sealink, Cable & Wireless, Devonport Royal Dockyard Ltd. and Rosyth Royal Dockyard Ltd., and for some of these companies, restrictions on foreign ownership of ordinary shares apply. Citizenship requirements for certain senior executive and n
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