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Growing number of EU companies setting up UK subsidiaries as insurance policy against Brexit

Hundreds of European businesses are setting up UK companies to make sure that they can trade on an equal footing should Brexit lead to restrictions, says Alexander Altmann, a partner and head of the German desk at leading accounting, tax and advisory practice Blick Rothenberg.

Altmann said: “Companies with no presence in the UK are looking at setting up operations in the country so that they can mitigate the potential risks of Brexit, should Britain leave the single market and the customs union and restrictions to access the UK market were imposed.”

“This is an insurance policy against Brexit.  European owned groups already trading internationally often serve customers in the UK with their own staff, but had not necessarily established a permanent entity here due to the simple access provided by the single market and customs union rules.  Brexit has led them to reconsider their position and establish more formal structures, and we are seeing more and more companies asking for help in setting up in the UK.”

He added: “The construction industry might be one of the most heavily affected by a potential exit from the customs union.  Labour and material supplies from the EU are essential for the construction industry and a restriction to access the UK market will have negative effects.  This could potentially lead to increased prices for building materials and staff shortages.”

From the influx of European businesses establishing operations in the UK, a large part appears to be coming from Germany and Austria. Since the Brexit referendum vote in June 2016, Blick Rothenberg has registered interest from over 100 German and Austrian companies to help them set up operations in the UK.

Altmann said: “The case for German investments in the UK makes sense as Britain is Germany’s largest European export market. German companies, for example, are looking at the UK’s business culture, employment laws and tax rates and see a simple environment in which to operate with a local entity.

“In the long run there could even be added benefit from trade deals the UK may negotiate with the US and other countries, which might have preferential terms compared to what the EU has with these countries.  Having an entity in the UK puts them in a position where they could have access to these preferential trade agreements.”

In the same way as European companies are securing their position in the UK, British businesses are also setting up companies in the EU.  

Altmann noticed: “At the same time, we are seeing a number of enquiries from established British companies with a large customer base in the EU who are setting up in European countries.  Germany seems to be one of the preferred locations due to its central position in Europe and stable political environment.”

Sue Wilcock