Our recent research with 300 general counsels (GCs) and senior in-house legal professionals at multinational companies within the Americas, Asia Pacific, and Europe found almost half (44%) of these businesses plan to set up new subsidiaries in Europe in the year ahead.
While preferences change, the U.K. and Europe are always on the list of destinations for multinationals looking to expand their global footprints, whether for organization reasons or to tap into additional consumer economies. Companies are attracted to mature markets in both the U.K. and wider Europe because of their experienced skills bases and the ease of doing business there. Different regions in the U.K. and Europe offer particular strengths in terms of vertical sectors, providing corporations ready access to in-depth industrial knowledge, infrastructure and skills.
For example, we’ve seen corporate expansion activity recently in the pharmaceuticals and healthcare sectors in Switzerland, manufacturing in France and Germany, financial services in the U.K., and more recently, renewable energy infrastructure in the Nordics.
Focusing in on the U.K., it’s clear that despite Brexit, it’s still an important destination for multinationals. There are very low language and cultural barriers in the U.K. and an excellent air transport infrastructure for carrying goods across Europe. There is also a world-class financial infrastructure in the U.K., and a significant number of fund managers use it as the headquarters for their regional operations.
The Brexit effect on multinationals
One effect of Brexit is that multinationals, which could previously have managed their European operations from a single location in either the U.K. or mainland Europe, now need to consider having one in both because of differing regulations and U.K.’s removal from the single market. It means they may now be required to maintain one entity in the U.K. to manage all of their U.K.-based operations, and an entity within Europe to manage European operations, whether that concerns distribution, sales, import and export, or licensing.
This need for additional entity creation could explain why our research found that the U.K. was named by 45% of global respondents as the second most popular destination in which to establish a new entity for the first time, just behind 46% of respondents who named South America, and 42% who named Central America.
When U.K. and European headquartered multinationals asked where they would establish entities for the first time in the coming year, 45% named Africa and 44% said Asia Pacific. Africa, and to a lesser extent some countries in Asia Pacific, are recognized as less mature markets with fast-growing consumer markets. They provide opportunities for companies looking to expand the volume and variety of international entities that they establish and manage as part of their growth strategies.
Automation and cybersecurity: Driving global expansion
One way to reduce risk and streamline the process of expanding into additional countries in the U.K. and Europe—which have different legal and regulatory regimes—is to adopt automated processes in areas such as legal and secretarial operations.
Multinationals headquartered in the U.K., Europe, and North America are relatively advanced in their use of technology to manage legal operations, according to our research. Respondents in the U.K. and Europe said their biggest priority for managing legal operations was to increase automation. By contrast, those in Asia Pacific said they would prioritize expanding and strengthening their teams, reflecting the fact that in some countries at least, manual and semi-manual processes are still used for workflows such as reporting.
In fact, process automation and artificial intelligence (AI) are highly prevalent in our current discussions with multinationals operating in the U.K. and Europe, with every business considering how they can use it in their operations. Corporate governance is a perfect example of where companies may be looking to upgrade or implement new technologies.
Companies are aware that while AI and automation are big topics in the legal world, there are always two sides to the argument. There’s a significantly reduced need for manual inputs, but people still want human oversight and the broader contextual experience that an individual can offer. In the end, corporate governance remains a people’s business, complemented with automation and digitalization solutions.
But there is now no doubt that certain levels of automation are needed in line with the greater scrutiny placed on organizations, especially in the compliance environment. It’s changing the way that both organizations and their clients need to operate.
And as newer technologies grow in popularity, cybersecurity is also front and center of everyone’s minds. Cybersecurity was seen as one of the biggest challenges by U.K. and European respondents to our research in terms of corporate governance and secretarial operations, along with the changing regulatory landscape.
How to overcome hurdles with the right corporate service provider
While multinationals are keen to continue expanding into the U.K. and wider Europe, there are plenty of hurdles to overcome. The right global corporate service provider can provide a centralized, coordinated approach across time zones, helping multinationals navigate achieve their strategic goals.
Our teams in the U.K. and wider Europe help clients steer their way through overseas expansion, ensuring that we equip them with the knowledge and service capabilities to keep their entities in good legal standing. Companies can choose to speak directly with their local team or access a single point solution across regions.
CSC Global Subsidiary Management solutions help companies streamline the administration of larger portfolios of international entities. In addition, our Digital Brand Services solution addresses and mitigates the cybersecurity risks faced by multinationals.
CSC’s Global Subsidiary Management solution harnesses the power of CSC Entity ManagementSM, our market-leading technology platform to support centralization and the complete oversight of critical legal entity data—reducing uncertainty and risk.
Finally, CSC is the market leader in international coverage and has the ability to provide expert services in more than 140 jurisdictions worldwide.
Interested in finding out more? Download and read our latest General Counsel 2024 report.
