London: London is wooing Gulf-based retailers to set up operations there. Speaking to reporters in London yesterday, Sir Edward Lister, London deputy mayor of policy and planning, said that the city has advantages over other international markets for Gulf retailers who want to expand there.

“London is the natural gateway to Europe. You have the English language and the rule of law — English law is very straightforward and simple. It’s the right time zone both for the Gulf on one side and the Americas on another that you can operate quite well here between the two,” he said.

He added that establishing a business in the UK is quick and easy. “You can get a company registered in this country in a matter of days.”

While Lister acknowledged that costs were high, he added that city’s retail potential would cover for this.

“The costs are high but so is the population,” he said. The potential purchases are so much higher. This is a city of 8.6 million people.”

Echoing Lister’s views, Elizabetta Camilleri, founder and chief executive of SalesGossip, a digital marketing service that connects consumers to 1,300 brands, said that setting up a business in the UK was easy.

“What UK has different from most other countries is that everyone at one point has come here. It is super easy to open a business here and it is very transparent. You get all the support you need, [be it] from private organisations or government organisations,” she said.

Some Gulf companies have found success in the UK and they include Saudi Arabia’s Bateel and the UAE’s Just Falafel.

Bateel, a gourmet date firm, has stores in London’s Mayfair and at Harrods, the luxury department store Harrods, according to its website. Similarly, Just Falafel, which sells falafel sandwiches, entered the UK market in 2013 with a London store in Covent Garden.

However, high set-up costs and rents are issues which retailers would have to consider.

High set-up, rent costs

“Costs for businesses are high in London, including high rents and set-up costs, as well as rising premiums in key locations,” Rebecca Guzman, associate director for Central London Retail at real estate consultancy CBRE, said in an emailed statement.

She added that Central London’s set-up costs are higher than in Dubai.

“What makes London relatively expensive when compared to other cities are business rates [tax]. When you strip that out, our rents are substantially lower than say New York or Hong Kong, that is, we believe there is still room for rents to grow,” she said.

Business rates and other associated taxes are high and it can add another 50 per cent of the rent in London, she added.

“Stamp duty is high too, if you are paying a premium to secure a space it can be up to 4 per cent of the premium [if the value is over £500,000] and is a significant amount,” Guzman said.

“We expect projected retail rent adjusted growth rates for prime Central London is 3.22 per cent for 2015,” she added.

Colin Beaton, managing director of retail consultancy Limelight Creative Services, said by phone that taxes and high labour costs are the main issues faced by retailers in the region looking to expand into the UK.

“The cost model is likely going to be higher [than in the UAE]. Rent could be higher, labour costs could be higher, and then there are taxes which they don’t have to pay here,” he said.

Beaton said retailers will need to invest in a new warehouse, create a new logistics and distribution system, seek approval of imported food products, as well as create a marketing campaign.

“Here, they already have trucks, warehousing and people. In the UK, they will have to figure everything out — who is going to do it? How much is it going to cost? What is the effective means of operationalising the business?” he said.

Another concern for Gulf retailers is competition from brands with better covenants, CBRE’s Guzman said.

To attract Gulf entrepreneurs interested in setting up in London, the UK’s Trade and Investment agency has instituted the ‘Great Business Award’, in which it will select a winner who will attend customised three-day mentoring and consultancy sessions in London, with the ultimate objective of eventually setting up shop there.

Candidates will be assessed against the level of information provided about their existing companies in the Gulf, as well as the quality of their business plans for expansion into the UK.

The competition will run until March 31.