Starting a Business: Singapore versus the UK
5 minute read
Singapore – a country located in East Asia known as one of the most attractive financial hubs in the region.
This country regularly attracts foreign investments and foreign experts, while the authorities are continually looking for ways to make it as convenient as possible to set up and grow a business in Singapore.
On the other hand, the UK is one of the biggest superpowers in the world. It is ranked high when it comes to the business environment, intellectual property protection, multicultural workforce, and law and order.
Additionally, the UK is close to Europe but still well-connected to countries across the Atlantic Ocean.
If you are wondering where to start a business or you can’t decide between Singapore and the UK, you have come to the right place. Below are listed some important factors you should consider before choosing the location of your future business.
- Venture Capital
- Business language
- Infrastructures and resources
- Governance and transparency
The incorporation process in Singapore is not complicated and it does not take too much time.
However, there are a few things to keep in mind before you start the registration process:
- The first thing that should be noted is that the company name you select needs to be approved before registration.
- One resident director has to be appointed.
- It is possible to have between 1 and 50 shareholders of both locals and foreign individuals. Entire non-local shareholding is allowed.
- It is also mandatory to employ a resident company secretary within six months of registration.
- The company must have a registered physical address in the country.
On the other hand, the United Kingdom has different processes but does not lack efficiency that would make the process convenient:
- Constitutional documents governing the company consist of the Memorandum of Association and the Articles of Association.
- Company name – a UK private limited company has to choose a name while following a few rules.
- Registered office – the company has to have a physical address in the UK.
- First officers – these consist of directors and a secretary.
- Statement of capital – the report that includes details regarding the company structure and value.
- Persons with significant control – any person with substantial control must be registered upon incorporation.
It is common knowledge that Singapore is one of the countries with highly attractive tax systems. This country continues to reduce corporate income tax (0 to 17% at the moment). There are various tax incentives introduced by the government that always spark interest among foreign investments.
The best part is that Singapore has a single-tier territorial-based flat-rate corporate income tax system. Tax rates are low, and that only boosts the country’s business-friendliness.
The single-tier system means that there is no double-taxation for stakeholders. A company’s tax paid on its chargeable income is the final tax, and all dividends paid by a company to its stakeholders are exempted from taxation.
In the UK, the rate of corporate tax depends on how much profit is made. However, it is safe to say that tax rates in the UK have been slightly higher than in Singapore.
Fortunately, at Summer Budget 2015, the government announced legislation setting the corporate tax primary rate (for all profits aside from ring fence profits) at 19% for the years starting 1 April 2017, 2018, and 2019, and at 18% for the year beginning on 1 April 2020.
At Budget 2020, however, the government announced that the Corporation Tax primary rate (for all profits except ring fence profits) for the years starting 1 April 2020 and 2021 would remain at 19%.
There are many venture capitalist companies based in Singapore and many of them are only willing to invest in a business based in Singapore.
More and more foreign VC companies are no longer only focusing on businesses based in the US, China, and the most powerful EU countries. The attention is slowly being directed towards Southeast Asia.
Singapore has seen an increase in funds invested in the various VC firms in the country. This alone is a good indicator that investors are recognising and supporting the Singaporean startup scene.
The government is also doing its part by providing incentives and offering special programs to attract business owners and venture capitalists.
On the other hand, the UK takes pride in the fact that one part of London (the capital) is called Silicon Roundabout. This is where venture capitalists and entrepreneurs flock to start their new businesses and invest.
Out of all Europe, the UK and Irish based businesses account for more than 40% of the continent’s total VC investment. The UK’s investment doubles the stake in Germany and triples investment in France.
And despite Brexit’s huge impact on investments, especially in the technology sector, London is strong enough to defy the odds and the city continues to be the top place for venture capital in Europe. Around 275,000 startups are employing 1.5 million people, which translates multiple billions every year coming from venture capital.
The government of Singapore has a significant role in attracting foreign investment. There are numerous funding sources and schemes that offer monetary aid to new businesses.
- Government agencies provide various schemes, offering cash grants and equity financing to local startups.
- Then, there are startup incubators. However, only consider startup incubators that have been approved and accredited by the Singapore government.
- Angel investors can also help. These are high net worth individuals who look to invest in businesses at their seed stage. Angel investors invest in companies despite no proven success of the company’s business model.
When it comes to the UK, there are government grants that can be used for monetary aid. They come in all forms like cash help, reduced costs, or free equipment.
But the most common grant is the direct grant. This is money given to your new business to cover startup essentials such as training, investment in equipment, or reaching new markets.
Most grants will expect your business to provide 50% of the grant’s value. Funds of up to £0.5m are available depending on your business sector.
If this does not suit your needs, some alternatives include equity finance and soft loans. Equity finance schemes mean that you sell a share of your business in return for funding.
Soft loans are similar to grants but are actually loans with lower interest rates and more generous terms that can be found via other lending sources.
Singapore offers a special visa for entrepreneurs looking to start their new business in the country. This visa is called the Entrepreneur Pass (EntrePass) and it is applicable to foreign entrepreneurs that want to launch their startup in Singapore and relocate to the country to run it.
EntrePass is valid for up to two years. However, to be eligible, one has to meet requirements laid down by the Ministry of Manpower in Singapore:
- The applicant has to set up a private company in Singapore. If the company is already registered, it must not be more than 6 months old (from the date of registration).
- The applicant must hold at least 30% of the share capital of the company.
On the other hand, a similar visa is called the Startup visa in the UK.
- One can apply if they are looking to set up a business in the UK, are from outside the European Economic Area and Switzerland, and meet the other eligibility criteria.
- However, to successfully acquire a UK startup visa, an entrepreneur has to be endorsed by an authorized body. This body is usually a UK higher education institution or a business group with a history of supporting UK entrepreneurs.
- Applicants also have to present their ideas. It is not possible to join or invest in a business idea that is already trading. Significant levels of innovation and feasibility are required.
When it comes to the quality of the local workforce, both Singapore and the UK have a lot to offer.
Singapore is ranked fifth out of 100 countries/regions according to the EF English Proficiency Index. Citizens of Singapore are highly proficient in English and they record a score of 66.82. This makes Singapore the top country in all of Asia regarding the proficiency of their workforce.
The local workforce has a good education and they are quite familiar with modern business methods and tools. Their language proficiency indicates that no entrepreneur will have any trouble employing them.
On the other hand, English is the native language in the UK. Hence, there is no doubt that the island has a slight advantage when it comes to language proficiency.
Singaporeans are often bilingual. If that is something you can take advantage of, Singapore is the place to invest.
There are four official languages in Singapore:
English, fortunately, is the language of business and administration. Translation and interpreting services are available and come at affordable prices.
Logically, English is the official and predominantly spoken language in the UK. Unfortunately, it is highly unlikely that the British will speak other languages.
So, if your English proficiency is not advanced, you may face some difficulties when communicating.
Infrastructure and resources
When it comes to infrastructure and resources, both countries are more than attractive. However, since the UK is larger and has more citizens, its economy is heftier, and resources are richer.
Singapore’s largest industry is the manufacturing industry, accounting for 20% to 25% of the country’s annual GDP. Key segments in this industry include electronics, chemicals, biomedical sciences, logistics, and transport engineering.
The second key industry in Singapore is the financial services sector. It has enjoyed stable growth due to the great business environment and political stability. Singapore is home to over 200 banks and a regional hub of choice for many global financial services firms.
When it comes to the UK, the economic landscape is a bit different.
The services sector is the largest sector in the UK, accounting for more than three-quarters of the GDP. The service industry in the UK comprises many industries, including finance and business services, consumer-focused industries, such as retail, food & beverage, and entertainment.
Manufacturing and production contribute less than 21% of the GDP, and agriculture contributes about 0.60%.
Governance and transparency
Fortunately, the global pandemic did not harm Singapore’s stability. Singapore-listed companies charted a new record in governance and transparency this year.
The SGTI 2020 surged to a grand total of 67.9 points. Compare that to the 59.3 last year and you can see substantial growth.
Companies fare better in corporate governance disclosure, and this is measured according to base scores, bonuses, and penalties. There is little to no corruption, and the justice system is transparent and efficient.
On the other hand, the UK also records good numbers. The UK is twelfth out of 180 countries when it comes to the Corruption Perceptions Index. In 2019, the UK recorded 77 out of 100 points.
The courts in the country are efficient and transparent, and corruption is rare and unknown to most people and businesses.
Interested in incorporating a company in Singapore?
It is reasonable to say that both Singapore and the UK are great for new business endeavours. Singapore, however, takes the edge due to a more attractive business environment that stimulates and nourishes new ideas and entrepreneurs, both local and foreign.
Contact us and we will be happy to help you start your business journey in Singapore.