Despite being a relatively small island, the United Kingdom continues to have significant economic weight: it is ranked as the sixth largest economy in the world and the second in Europe. Forbes recently ranked it as the sixth “most attractive country for startups” thanks to its skilled workforce, high employment rates, modest business taxes, and zero initial costs for startups.
However, despite these promising signs, exporting to or expanding into the United Kingdom can be challenging. Nevertheless, these challenges, when tackled effectively, can lead to highly rewarding outcomes.
According to the Portuguese Embassy in the United Kingdom, 220,000 Portuguese are registered at the London consulate, and a further 125,000 are registered at the Manchester consulate. Roughly 2/3 of Portuguese immigrants arrived before 2011 (and a large portion of these after 2001). The Portuguese are the 9th largest foreign population in the United Kingdom, and Portuguese is the 10th most commonly spoken native language.
Portugal has a place in British markets. In some London boroughs (Lambeth, for example), in Great Yarmouth (East Anglia), and in some areas of Northern Ireland, the Portuguese are the largest foreign communities.
The United Kingdom today has the 8th largest Portuguese community in the world.
“Embassy of Portugal in the United Kingdom”
Economic Sectors of the United Kingdom: Economic Diversity
But what is the best place in the UK for an international SME to establish itself? This will depend on the sector in which the SME operates. In most scenarios, London, the beating heart and center of the UK, will be a natural choice for setting up. This is especially true in the financial sector, as 93% of London’s economy is service-based, compared to the UK’s average of 80%.
However, although London’s reputation makes it an attractive place for any business, the capital is never ranked as the best for startups and SMEs for several reasons. On one hand, both commercial and residential rents are disproportionately high in London—up to twice the UK average. Additionally, expected salaries are higher in London than in the rest of the country, largely due to the cost of living. It is advised that businesses pay their employees at least £13.15 per hour; this increases the cost of employing someone by nearly 15%.
Therefore, while London offers significant opportunities, SMEs should carefully consider these factors when deciding where to establish their operations in the UK. Other regions may provide more cost-effective alternatives without sacrificing access to important markets and resources.
British and Portuguese cultures: integration and opportunities
Naturally, if you are considering starting or expanding your business abroad, it is unlikely that you would consider only one country. There are certainly good reasons to expect that the UK could offer what you need and help take Portugal to the British markets.
“On the one hand, the UK is an extremely multicultural country, and for Portuguese businesses, there are also promising signs: Portuguese nationals are the ninth largest foreign population in the country. This is diverse because Portuguese migration to the UK occurred in waves. The first wave took place in the 1960s, even before the formation of the European Economic Community (the precursor to the EU).”
The latest wave occurred between 2001 and 2011. This means that there is a spread of Portuguese culture embedded in the first-generation immigrants who moved to the UK, as well as in the second and third generations who were born there and inherited their connection as ‘dual nationality.’ As a result of this migration, there is already a deep appreciation for Portuguese culture in the UK (both among the immigrant population and the native population). The production of bakery products has played an important role here.
“Instead of focusing on London and the Southeast, the new migrants spread across the UK, with notable concentrations in rural areas such as East Anglia. One of these concentrations was in Thetford, Norfolk.”
“Almeida, J., & Corkill, D., 2022. Portuguese Migrant Workers in the UK: A Case Study of Thetford, Norfolk. Portuguese Studies, 26, pp. 27-40. https://doi.org/10.1353/port.2010.0019.
Take, for example, the Santa Nata bakery chain. This bakery sells the world-famous Portuguese custard tarts. Despite the simplicity of this business, the company has expanded and opened four stores in just five years. It was not only in London (where the Portuguese community is larger) that this business found success, but also in other locations. Portuguese bakeries, patisseries, and restaurants can be found throughout the country, regardless of the smaller Portuguese communities in those areas.
However, for those involved in other sectors, there are still good reasons to consider expansion and to communicate your business to Britain. This is due to the recent emphasis by the Portuguese government on promoting international tourism. Such a decision has led to more and more people visiting Portugal for vacations and, as a result, falling even more in love with our country and everything it has to offer. The British (14.1%) almost tied with the Spanish (15.3%) as the most frequent visitors to Portugal in 2023. Just as British tourists enjoy bathing in the Algarve seas, a proactive Portuguese company should ride the wave of growing interest in its culture and engage with the British markets.
Business After Brexit
Brexit has dramatically changed the daily operations of businesses that export to and import from the country. Part of the reason these sectors and businesses were highlighted above is indeed due to their distinct lack of need to deal with this challenge—they operate exclusively within the country’s borders. For those seeking a smoother journey to establish themselves in the UK, it is advisable to consider how to minimize the need to trade beyond the islands.
For the more ambitious company, however, there is still little reason for concern—distributing to and from the UK is not only possible, it is manageable. The British government has provided clear guidelines on how to handle both export and import within the country.
Given the recent increase in bureaucracy related to foreign trade, there has been a natural rise in business costs. While this presents an additional challenge for a Portuguese SME, there is also, within this, significant potential. The cost of living has risen, and the British are now, more than ever, counting their savings.
A Portuguese SME should not be intimidated by narrow profit margins in the UK; doing so presents potential for increased demand and new market opportunities. Starting with the Portuguese communities is, sometimes, a good option to test the market. Portuguese innovation will be necessary to succeed there, and if executed well, the SME will find growth at new levels.
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Sources:
https://www.worlddata.info/largest-economies.php#google_vignette
https://www.gov.uk/minimum-wage-different-types-work?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464
https://www.simplybusiness.co.uk/knowledge/articles/best-city-to-start-a-business/
https://www.zoopla.co.uk/discover/property-news/average-rent-london/
https://www.globalcitizensolutions.com/best-countries-for-entrepreneurs/
https://www.portugalexporta.pt/mercados-internacionais/reino-unido/brexit
https://rdpinternacional.rtp.pt/reino-unido/o-pastel-de-nata-colonizou-o-reino-unido
https://travelbi.turismodeportugal.pt/turismo-em-portugal/estimativas-rapidas-2023/