London: The UK is seen as a preferred international destination for expansion by a majority of Indian businesses, according to a new analysis by business and financial adviser Grant Thornton UK released here on Wednesday. Grant Thornton’s International Business Report (IBR), which surveys the expectations of around 3,500 senior executives in 31 economies every quarter, found that 89 per cent of mid-market Indian businesses referred to the UK in their growth preferences and 61 per cent of UK businesses had a similar view of India as a market for expansion.

A proposed India-UK free trade agreement (FTA), currently in the fourteenth round of negotiations, is seen as holding out great potential to further boost this two-way business attraction.

“Businesses in both India and UK markets are setting their sights on the other as a key destination for global expansion, drawn by the two markets’ strategic advantages and strong cultural connections,” said Anuj Chande, Head of South Asia Business Group at Grant Thornton UK.

“The free trade agreement between India and the UK offers an opportunity to amplify the possibilities recognised by businesses on both sides of the UK-India corridor, positively impacting economic collaboration between the two countries. For example, greater market access and easing of visa restrictions would pave the way for further growth in trade and investment in both countries,” he said.

On the FTA, almost all (92 per cent) of the Indian businesses surveyed said an FTA with the UK would encourage them to explore opportunities in this market, with 72 per cent of UK businesses saying the same.

The majority (90 per cent) of the Indian businesses surveyed also have a good understanding of the potential provisions and implications for business from an FTA, compared to 72 per cent of UK businesses. Strong infrastructure, innovation ecosystem and digital competitiveness were among the factors highlighted as positives of the UK market among the Indian businesses surveyed. While the research generally expressed optimism around the two-way flows, it also threw up some of the challenges in the path to this growth scenario. Both sets of respondents highlighted barriers to doing business in the other country focusing on ease of doing business, regulatory compliance, and high costs.

Chande pointed to some significant recent investments, such as Bharti Global’s acquisition of a stake in the BT Group, as demonstrating the continued interest from Indian investors in UK assets.

“But the high cost of doing business here, due to high property rents and operational overheads, plus the costs that come from the reporting and compliance requirements of the UK’s regulatory system, including high legal fees and audit expenses, can be a significant challenge for any international company to address,” he noted.

“Combined with the complexity of the UK’s immigration and visa policies, which require detailed business documentation and proof of economic contribution, it’s evident that there are challenges for any business looking to invest here. Streamlining regulatory processes and simplifying compliance, could help to alleviate operational burdens for Indian businesses looking to the UK. This would help facilitate their entry into the UK market and promote a more conducive environment for business growth,” he said.

Of the 301 UK businesses surveyed, around three quarters (71 per cent) do not currently have a presence established in India but, of these, 42 per cent have plans to establish a presence in the next two years. Of those who already have a presence (29 per cent), almost all (95 per cent) plan to expand this further.

The biggest barriers for UK businesses looking to India were flagged as the ease of doing business, regulation and foreign exchange control and the country’s infrastructure.

“While our research has also identified the biggest challenges many UK businesses face when setting up in India, there is support available. The Department for Business and Trade (DBT) provides support to those seeking to trade or invest in India and the UK, while firms, such as ours, can also provide tailored support for businesses exploring new markets,” added Chande.