How are regional UK businesses embracing emerging markets?

Wednesday, October 20, 2010 | Posted by: Fiona Cullinan
Categories: India | Tags: tax, India, growth, M&A, UK, South Asia Group, deals, South Asia, planning, manufacturing, trade, sectors, expansion, outsourcing, networks, succession, culture, Midlands, JV

Many regional UK businesses are looking to India and other Asian countries for new growth opportunities; meanwhile, a new wave of Asian entrepreneurs is considering expanding into the UK. We asked Suneel Gupta, the new head of Grant Thornton’s South Asia team in Birmingham, about the opportunities and issues involved, and what help companies need to do it.

What is your advice to a UK-based company seeking to take its first steps into South Asia?

Three things:
• Make sure that you spend time understanding the market place, the culture and the key risks
• Take advice from the right advisors and at an early stage
• Be flexible and patient – for example, things in India do not always go to plan but the rewards can be enormous.

You’ve recently been appointed to lead Grant Thornton’s South Asia team in the Midlands. What will this involve?

I am here to help regional businesses that are keen to exploit opportunities in the South Asian region, particularly in India, and to assist Asian entrepreneurs who are already in the Midlands or want to build businesses in the region and across the UK.

My role is often to listen to their issues, provide them with professional and commercial advice and to make sure that they are introduced to the right experts when required. This will often require me to work closely with specialists in other lines of service and with our firm in India, which is one of India’s oldest accountancy and advisory firms, with more than 1,000 staff and a strong foothold in all major economic centres in the country.

Are regional UK cities making the most of the opportunities currently offered by emerging markets, or could they be doing more?

Some of the larger and more established organisations probably are, or historically have been, successful in this respect; for the SME market, things have, however, been a little slower. This may be due to the limited resources they have available to invest in a new emerging market. SMEs are now seeing the opportunities and are being very active in this market.

The opportunities for all types of businesses are vast. They range from outsourcing manufacturing (in order to be more competitive) to selling their products and brands to a massive new market and customer base.

Is it predominantly regional UK businesses with family or cultural connections that are seeking growth in South Asia?

Those with family connections back into India have been more confident in expanding into the region as they already have a good understanding of the local culture and working practices, and often already have a good network in the region. To be successful in the Indian market you need local knowledge and local networks.

But there are also a growing number of other businesses that have invested in, or are looking at, South Asia – predominantly India – in order to remain competitive and grow.. From my experience, these businesses often require more assistance as they have not worked in India before. This is where our local knowledge and Indian firm can add significant value.

Which territory is seeing the most activity in South Asia? And in which sectors?

India is probably the largest in the South Asia region in terms of cross-border opportunities for the Midlands.

In terms of sectors, the manufacturing sector for the Midlands market is key. UK manufacturing businesses need to be looking at new and cheaper ways of working. We are also seeing a number of entities (for example, automotive component manufacturers) whose key customers (ie, the main car manufacturers) are moving more of their operations to India. These businesses need to look at India so that they are closer to their key customers.

The India market also offers businesses in all sectors the opportunity to look at a massive new market to sell their products.

What general issues do UK businesses face in trading with their international counterparts?

Key issues typically revolve around:

How do we enter the market, ie, do we need to find a joint venture (JV) partner and, if so, how do we do this? The regulatory framework for going into India can also be quite complex: local regulations, legal matters, tax issues and foreign currency controls all need to be considered.

Cultural issues once they are operating in India. I have often seen things go wrong, for example where JV partners have fallen out and there is a need to help resolve local conflicts. It is vital that businesses choose the right partner to work with and have the right ‘local’ senior management team in place.

What kinds of services do they need from Grant Thornton?

If we are talking about UK Asian-owned businesses, the issues mainly relate to tax planning, both corporate and personal. Having built up successful businesses, the owners want to ensure they minimise their tax liability.

A number are also looking at M&A opportunities – a number of businesses have the resources and appetite to make acquisitions, but they want help in getting good ‘deals’ and executing these.

Succession planning is another big issue. This includes tax planning but also softer issues, such as: how do they pass the reins on to the next generation; what if the next generation is not interested in taking over the business; what happens where there are a number of members of the extended family who all want to run the business? Over time, this may also lead to further exit planning and family constitution advice.

Are you also involved in advising Asia-based clients on building businesses here in the UK?

This is probably one of the biggest opportunities for us. There are an increasing number of Indian corporates looking to become global. They are often looking for good quality businesses, good brands and good technology and know-how to invest in. There are a number of businesses in the Midlands market that fit these criteria. One of our key challenges, I believe, is to promote the Midlands region out in India so that Indian companies understand the opportunities that there are in the Midlands market.

Suneel Gupta is Head of the South Asia Group, Midlands, and can be contacted at suneel.gupta@uk.gt.com or on +44 (0)121 232 5309. For further information on our South Asia Group services, please visit our South Asia Group page which has further contact details for other offices.

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