- What is a multinational company?
- Naturally, all the biggest and most valuable companies in the world are multinationals.
- What multinationals are UK-owned?
- Where are UK businesses looking to expand?
- Why are UK businesses expanding abroad?
- ✈️ A Scottish Multinational - Skyscanner
- 🇬🇧 Why do foreign multinationals locate in the UK?
- 🏴 More specifically, why operate in Scotland?
- The effects of multinationals on host countries
- Recent Multinational Activity in the UK
- Multinationals have also set up operations in Scotland 🏴
- Knowledge Checkpoint
What is a multinational company?
For example, the majority of products imported into the United States are made by MNC’s (National Bureau of Economic Research). This includes everyday items like clothing, electronics, and vehicles. Additionally, more than a quarter of American workers are employed by one (U.S. Bureau of Economic Analysis).
Naturally, all the biggest and most valuable companies in the world are multinationals.
What multinationals are UK-owned?
Where are UK businesses looking to expand?
Of businesses already trading internally, 87% planned to expand their global operations in 2024, with a third of these firms aiming for significant growth - a 2% increase from 2022’s ambitions.
The target areas for these UK businesses surveyed are:
UK businesses are showing increased interest in global expansion, with Europe remaining the top choice for international growth, showing a 7% rise in 2023 compared to 2022.
Also, more firms are targeting North America, with a 9% increase in focus on the US and Canada.
China has seen the most significant uptick in interest, with an 11% increase.
Why are UK businesses expanding abroad?
Market Opportunities and Growth Potential:
- By expanding abroad, companies can access new markets and increase their market share
- A report by the HSBC shows growing interest from UK companies in Europe, the US, Canada, China, and ASEAN countries
- Expansion allows firms to overcome the limitations of the domestic market (like market and size constraints) and achieve growth that might not be possible within the UK alone
- Additionally, locating closer to these markets can reduce transportation costs and improves responsiveness to local customer needs
Economics Benefits and Risk Mitigation:
- International expansion is seen as beneficial for both individual businesses and the overall UK economy, as it allows companies to diversify their revenue sources
- This reduces dependency on the domestic market and helps mitigate the risk associated with economic fluctuations in any single country
Cost Advantages and Economies of Scale:
- Many UK companies look abroad to benefit from lower costs of production, such as cheaper labour, rent, and land in certain countries
- By expanding operations abroad, businesses can also achieve economies of scale, spreading fixed costs over a larger production volume
- Furthermore, some countries offer sympathetic tax regimes, such as lower corporation tax rates, which can significantly reduce a company’s overall tax burden
Increased Competition:
- International trade can lead to increased competitiveness, as companies are forced to improve product quality and efficiency to succeed in global markets
- The HSBC report shows that 28% of companies are actively working to improve product quality in 2023, up 13% from 2022, in response to global competition
✈️ A Scottish Multinational - Skyscanner
It was founded in Edinburgh in 2003, and now has offices across Europe, Asia-Pacific and North America. Since it’s founding, the company now has hubs in Barcelona, London, Miami, Singapore, Tokyo, Shenzhen and Glasgow and around 1,500 employees. Their service also operates in over 30 languages and 70 currencies, making it a truly global business.
By expanding into different regions it allows Skyscanner to better understand and serve local markets. It also creates greater opportunities and business relationships with partnerships between Skyscanner and other travel companies.
Some of their current partners are:
- Turkish Airlines
- Emirates
- British Airways
- Booking.com
- Expedia
- Trip.com
They’re service is committed to putting travellers first, improve sustainability in collaboration with partners and prioritise accessibility for everyone.
🇬🇧 Why do foreign multinationals locate in the UK?
- UK offers a streamlined process for setting up businesses, with company registration possible within 24 hours
- It has a well-respected legal system based on English law, providing certainty and familiarity for international businesses
- All trade done in English
- The UK also offers various tax incentives and reliefs
- The current corporation tax rate is 25%, the lowest in the G7
- UK offers attractive venture capital schemes to help small and medium enterprises grow
- generous incentives for companies investing in research and development
- The UK’s geographical position and time zones make it ideal for global business operations
- It’s reasonably straightforward to have a call with New Zealand, Australia and the US on a reasonable time-zone
- It’s possible to connect with Asia and the America’s in either the morning or afternoon
- The UK has one of Europe’s largest and most diverse labour forces
- The UK workforce is more qualified than any major economy in Europe and ranks in the top 10 globally (Department for Business and Trade)
- It also has lower labour costs than Italy, France or Germany
- Despite Brexit, the UK maintains close ties with EU neighbours
- TCA agreement allows for zero tariffs and quotas on all qualifying goods trade between the UK and EU
- The UK market gives access to a mature, high-spending consumer market of over 60 million people
- UK has Europe’s largest air transport system, advanced road and rail networks, and numerous seaports
- With the country’s transition to sustainable energy, the UK is home to the world’s largest offshore windfarm
- The UK is now the most attractive clean energy investment market in Europe and is projected to become the dominant area for investment in the UK in the near future
- Shift is largely attributed to the government’s ambitious targets for wind and nuclear power expansion
- The UK has established itself as a preferred location for major global corporations to set up their European headquarters
- Google, Facebook, Amazon and Coco-Cola
- The UK has a robust entrepreneurial system, seen with the launch of approximately 590,000 new businesses in 2017 alone (Department for Business and Trade)
- The UK is home to four of the world’s top ten universities attracting businesses to the expertise available in these academic and research facilities
🏴 More specifically, why operate in Scotland?
Let’s have a look at some of these reasons:
- Scotland offers lower operating costs compared to many other European cities, with expenses up to 40% less than London
- Lower property costs, competitive labour costs and lower cost of living
- Scotland boasts a highly skilled workforce, with over 50% of the working population having further education qualifications (Scottish Development International)
- Four Scottish Universities make the top 250 in the world rankings according to the 2024 Times Higher Education World University Rankings
- Scotland excels in diverse fields from thermal imaging to renewable energy such as offshore wind
- Since 2011, the Universities of Edinburgh, Glasgow and Strathclyde have consistently appeared in the UK top 10 for the total number of spinouts created
- Spinouts are private companies created by one or more academics or research staff with the aim of commercialising research carried out at the university
- Same with the rest of the UK, Scotland geographical location provides a strategic time zone advantage for global business communications
- The country is well equipped with air routes, road and rail networks and ports
- Scotland provides a familiar English speaking environment with close ties to the EU
- Over £20 billion invested in transport links including roads, rail, airports, and seaports
- Scotland’s commitment to a net-zero economy by 2045 is driving further investments in green technologies and sustainable infrastructure
- Scotland boasts a rich cultural heritage, natural landscapes and vibrant cities
- Lower living costs compared to many other European cities
- Progressive approach to flexible working and emphasis on work life balance aligns well with corporate values
The effects of multinationals on host countries
- Employment: MNC’s often create significant job opportunities in host countries, not just in quantity but also quality. They often offer comprehensive training programs, enhancing the skills of the local workforce beyond what might be available in domestic firms.
- Extended choice: MNC’s typically bring a wider range of products and services to the host country.
- Tax revenues: Profitable MNC’s can be a significant source of tax income for host countries, including corporate taxes on profits as well as indirect contributions through employee income taxes and various sale-related taxes.
- Increase in GDP: By engaging with local suppliers and making capital investments, MNC’s contribute directly to the host country’s GDP.
- Competitiveness: MNC’s often spur domestic companies to innovate and improve their efficiency to remain competitive, making them more productive and efficient.
- Too competitive: MNC’s often have significant financial and technological advantages, which can lead to uneven competition and push domestic firms out the market.
- Culturally insensitive: As MNC’s bring over their corporate culture and products, this can overshadow local traditions and practices.
- No reinvestment in host: MNC’s may choose to send profits back to their home country rather than reinvesting in the host country.
- Tax avoidance: MNC’s sometimes use strategies to reduce their tax payments in host countries by shifting profits to countries with lower tax rates. While often still legal, it significantly reduces the tax revenue that host governments receive.
- Environmental: MNC’s can prioritise profits over sustainable environmental practices. Recent data from Carbon Majors shows that a 57 multinationals were to blame for 80% of global carbon emissions between 2016 and 2022.
Recent Multinational Activity in the UK
The project is the first Google-owned and designed building outside the US. London major Sadiq Khan said “this project represents a real vote of confidence in London, in our communities and in our flourishing tech sector”. Once finished, it will have roughly 4,000 staff. Google employs about 6,400 people in the UK and has set itself of reaching 10,000.
Google’s strong presence in London reinforces it’s position as a major tech hub and can draw in skilled professionals. Other large tech companies might follow in Google’s footsteps and set up operations in London.
Multinationals have also set up operations in Scotland 🏴
Dunfermline distribution centre
When the distribution centre opened in 2011, it created more than 1,000 jobs and now up to 1,200 workers and an additional 1,000 seasonal workers who help out during the festive period.
Amazon also has a development centre and customer service centre in Edinburgh, delivery stations in Motherwell, Edinburgh and Dundee, and Prime Now distribution sites in Glasgow and Edinburgh. Amazon has employed more than 2,500 people and has over 200 apprentices in Scotland.
Since 2010, Amazon has invested over £3.1 billion in Scotland, which has led to the production of goods and services that contributed an estimated £2.9 billion to Scotland’s GDP since 2010 (Amazon). In partnership with the charity Magic Breakfast, Amazon has delivered more than 460,000 healthy breakfasts to vulnerable children and schools across Scotland (Amazon).
To explore the impact Amazon has on the rest of the UK, check out this page ⬇️
