LONDON, May 29, 2024(GBCI).
The comprehensive report analyses 79 jurisdictions, which account for 93% of world GDP and 88% of net global FDI flows. It compares 292 annually tracked indicators, offering data on key aspects of doing business such as incorporation timelines, payroll and benefits, rules, regulations and tax rates.
These indicators matter both to firms investing in a country and to local firms and entrepreneurs trying to build businesses. There is a correlation across countries between low business complexity and wealth per capita - while that is shaped by many factors, the bureaucratic burden placed on business is a significant contributor.
The Netherlands, Denmark, the UK, Hong Kong and Cayman Islands retain their places among the ten least complex jurisdictions in which to operate typically due to factors such as a simple, stable tax system, adherence to international financial standards and a stable regulatory environment.
As far as the UK is concerned, it is still seen as a jurisdiction relatively easy to operate in. The country exhibits low complexity in its accountancy & tax and entity management systems due to its simple, stable tax system and adherence to international financial standards. The regulatory environment is also stable, adding to predictability for businesses. However, the challenges posed by Brexit and Covid-19 are becoming more demanding especially under the Human Resources and staff retention points of view: workers are expecting competitive benefits packages and better work-life balance. Furthermore, post-Brexit, some businesses have re-located their headquarters out of the UK due to high costs and complex hiring requirements, adding more complexity.
The United States places outside of the ten least complex jurisdictions for the second year running. The reason behind its placement can be attributed to the introduction of the Corporate Transparency Act, which is ambiguous in its application and unclear about the responsibilities of service providers, with the US currently lacking substantial UBO legislation. Furthermore, the upcoming presidential elections and the recent introduction of foreign tariffs represent a factor of uncertainty for foreign investors as they would feel unsure about the economic outlook of the country. However, in a globalised economy the US remains an attractive jurisdiction for foreign investors, thanks to its skilled workforce and clear global reach.
When it comes to complex jurisdictions, Greece takes the top spot in this year's report, climbing from 6th in 2022 and 2nd in 2023. While Greece has consistently been considered complex - particularly within accounting and tax - its HR and payroll (HRP) rules have also increased in complexity in 2024. Furthermore, digitalisation has become an additional challenge to consider.
TMF Group CEO Mark Weil said: "There have been several studies pointing to more complex pathways that firms are now establishing to derisk their supply chains and routes to market. Some of those pathways take firms through complex countries to do business. So our clients will be dealing with a double dose of complexity from needing to be present in more countries, many of which will be more difficult to do business in. That is a problem that TMF Group is here to solve as a single, trusted partner helping our clients invest and operate safely across all such locations".
GBCI 2024 also identifies the key themes shaping the global business landscape and regulatory environment:
The impact of global regulatory compliance on foreign investments
This year's edition of the GBCI highlights that most jurisdictions expressed confidence in legislation stability across the next five years, representing a continued upward trajectory on previous years. In 2020, for example, just 35% of jurisdictions predicted it to be likely that there would be no significant change in legislation. Year on year, the sense that no significant change will occur has increased, reaching 58% of jurisdictions in 2024.
The report suggests that rather than the amount or complexity of legislation posing a challenge, it is instead the speed with which regulatory changes are introduced where the true difficulty lies.
Geopolitical factors and bridge economies
Geopolitical instability is evidently impacting the flow of trade and investment choices globally. Whilst energy prices remain high, disruption of supply chains and trade barriers also pose a considerable challenge for global players. As a result, many companies are reviewing their potential growth plans and expansion goals for the longer term.
However, whilst geopolitical issues may disrupt supply chains or create trade barriers for some jurisdictions, other jurisdictions are finding themselves benefitting from a global shift. Due to their neutrality on global issues, countries known as 'bridge countries' are able to benefit from moves away from established power blocs. For these 'bridge countries', their newly established position in the global supply chain has become a key way for multi-national businesses looking to manage their risk in a period of international instability.
Uncertain times and strategies for success - technology and staff retention
Although jurisdictions named a variety of factors that impact growth, IT and technology topped the rankings as most influential. Technology offers growth in multiple ways as it can provide growth opportunities where countries possess technological manufacturing expertise and can increase their market share through production. Using technology to boost productivity was also identified in relation to workforce streamlining. Multiple jurisdictions, including New Zealand and Hong Kong, SAR, were seeing companies automating back-office, entry level and part-time jobs using generative AI to keep workforce numbers low and focus on higher value tasks.
At the same time, a large majority of jurisdictions are finding it challenging to attract and retain talent (78%) - with this number even higher for EMEA (90%) and APAC (79%) regions.
The ability to effectively respond to demand is largely dependent on two dynamics: local labour laws and regional talent. Jurisdictions with tight labour laws and a strong union presence - or those with a shortage of available talent - are much less able to adapt staffing levels responsively.
Top and bottom ten (1= most complex, 79= least complex)
| 1 Greece 2 France 3 Colombia 4 Mexico 5 Bolivia 6 Turkey 7 Brazil 8 Italy 9 Peru 10 Kazakhstan | 70 Jamaica 71 British Virgin Islands 72 Jersey 73 United Kingdom 74 The Netherlands 75 New Zealand 76 Hong Kong, SAR 77 Denmark 78 Curaçao 79 Cayman Islands |
Media Contacts:
TMF GROUP:
Giampaolo Arghittu
giampaolo.arghittu@tmf-group.com
