Branching out: Expanding your business into Europe
Europe offers many tantalising opportunities for UK businesses to expand their operations out to the Continent. One of the main attractions is the existence of the European Union, of which the UK is a member.
The EU is made up of 28 countries and forms a huge single market in which UK businesses can vastly improve their scope to sell goods and services. The single market has led to the removal of trade barriers, and anti-competitive practices have been eliminated. This in turn has reduced business costs for enterprises operating in Europe and led to even greater efficiency, including a reduction in paperwork, the harmonising of standards and practices and a reduction in the administration burden normally imposed on companies.
These benefits extend beyond the borders of the European Union. The Service Directive has sought to remove administrative and legal restraints for companies selling services – including financial services – within the European Economic Area. The EEA includes the EU members, also Norway, Iceland and Liechtenstein, offering British service industries even more opportunities within Europe.
A move into a much wider and open European market will also confront business with many challenges. Europe provides a greater competition for companies providing services. While this is always good for customers, the challenge also offers new opportunities for business.
To survive and prosper in the much bigger market, businesses must obviously be more efficient and able to adapt, but the far bigger customer base gives more scope for increased sales and profitability. For someone planning to open a company in the UK, the prospect of branching out and expanding into Europe – because of the harmonisation across the continent – as an extension of their activities, is a very appealing option.
Unfortunately, there are still obstacles. Each EU country is a sovereign state, and companies are incorporated and operate differently within each territory. This means before expanding into Europe, a company must look at itself and decide how it is to operate in the much wider market. Possible options may include opening an office in the country where the company is seeking to expand, registering a subsidiary or forming a joint venture with another company in that country.
Another option would be a “virtual office” covering the chosen European base. The virtual office will save on the cost of renting and equipping an actual office abroad.
Whatever format a business is likely to take, a major consideration is how to finance the expansion into the European market. One form of business finance well worth considering is private equity.
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