UAE to see an influx of British businesses
Recognising the market’s potential, the British government is taking major steps to boost trade and encourage bilateral investment. Over the next few years, we can expect to see a number of British companies entering the UAE market. The UAE is also the UK’s 12th largest export market, according to Joe Hepworth, the recently appointed CEO of the British Business Centres UAE (BBCUAE).
BBCUAE is a UK government initiative, which was launched in collaboration with the UK Trade & Investment (UKTI) office and the British Business Group to start incubators in Dubai and Abu Dhabi to help British SMEs to enter the market. The Dubai programme is expected to begin at the end of March 2014, while the Abu Dhabi programme will be functional from October 2014, says Hepworth. Both centres will accommodate up to 50 companies each for a period of one to two years, and offer support, affordable facilities and incorporation assistance.
The UK government is rolling out similar initiatives in its current top 20 export markets and will expand that to another 20 countries in the future.
Dubai’s win of the World Expo has also provided an incentive for British companies to establish businesses in the UAE and the UK government is taking that into account. Speaking to AMEinfo.com’s sister publication TRENDS, Vince Cable, the UK government’s secretary of state for business, innovation and skills, says: “A few British companies are coming forward and showing interest. We have lined up a trade credit and threw in £50 million for British companies selling at the expo. We think that this is a very big opportunity.”
Referring to the applications received by BBCUAE, Hepworth says: “I haven’t had any interest particularly because of the Expo 2020, but I have had people say it is another reason why [the UAE] is such an interesting market for them.”
He adds that, so far, he has received up to 85 ‘expressions of interest’ from individuals and SMEs that want to enroll in the export growth incubator. Approximately 25 per cent of the interest is from educational and training firms, while others range from green technology and media companies to construction businesses.
As part of an agreement with Dubai’s Department of Economic Development (DED), the first BBCUAE centre will be based in the incubator of local initiative Dubai SME, located in the Business Village, with a set of hot desks allocated to the incoming British SMEs. So far, 36 licenses have been assigned for the Dubai centre, says Hepworth.
When asked about the application criteria, Hepworth explains that the incubator’s focus will primarily be on medium-sized businesses. The ideal companies would be “already engaged with the UKTI and exporting in two to four markets. They will also be familiar with the export game, but perhaps not familiar with the UAE”. One of the main criteria to be eligible for the programme is the value that companies can create. Hepworth continues: “What is the benefit for the UK of them being here? Are you going to be hiring people? Is your turnover going to go up? Are you going to invest in more systems and technology in the UK by virtue of being here? The other thing we want make sure is that they are going to be successful.”
According to Hepworth, it can cost a UK SME approximately AED200,000 to AED300,000 to establish a business in the UAE. He adds that, while the UAE is a regional hub and an attractive tax-free environment, “the cost of doing business here is not insignificant.” With the majority of the costs being upfront and the long time it takes to be incorporated, setting up a base here can be a challenging affair. Through a small annual fee, the centre aims to offer “UK companies a low-risk, friendly, low-red-tape market entry, whereas, previously, they may have just stayed on the outside and not jumped in,” he says.
The UAE government and economic development departments are also extending their support and encouraging the initiative, according to Hepworth. The DED will help incorporate British SMEs coming to the incubator, provide on-shore licenses and act as a local sponsor for them. According to legislation, it is mandatory for a foreign limited liability company (LLC) to be at least 51 per cent owned by a UAE national or nationals, while professional service companies must have a local service agent that has no ownership rights, but is paid a fee.
“One of the discussions we are still having is the shape of that [local partnership] and whether we will offer all sorts of business formation or limit it more to foreign branches and representative offices, rather than LLCs, because they are a more complex model,” Hepworth explains.
The UAE government also has some incentives to support the initiative. Apart from encouraging foreign investment, the centre can be a “catalyst for Emirati engagement in the private sector,” says Hepworth. Once the businesses exit the incubator, they can play a role in creating jobs. “Since we are going to be co-located with the Emirati incubator in the Business Village, there will naturally be a cross-fertilisation of ideas and [opportunities for partnerships]. That is something the government is very keen on,” he concludes.