The UK remains a preferred international destination for 89% of Indian mid-market businesses, according to the latest data from the Grant Thornton International Business Report (IBR).

The survey, which gathers insights from around 3,500 senior executives across 31 economies each quarter, shows that Indian businesses view the UK as a key growth market. However, despite the opportunities, many Indian companies face significant challenges when looking to expand into the UK.

Among the top barriers identified were the high cost of doing business, including expensive property rents and operational overheads, the heavy burden of regulatory compliance, and the complexity of the UK's immigration and visa policies.

Anuj Chande OBE, Head of the South Asia Business Group at Grant Thornton UK LLP, said: “Significant investments, such as the recent stake in BT Group, demonstrate the ongoing interest from Indian investors in the UK.

"However, the high cost of doing business, due to high property rents and operational costs, along with the demanding compliance and regulatory environment, can pose challenges for international companies. The complexities of the UK's immigration system further compound these issues.”

Chande suggested that streamlining regulatory processes and simplifying compliance requirements could help ease the path for Indian businesses seeking to enter the UK market, making it a more attractive environment for investment and growth.

UK Businesses Eyeing Opportunities in India

The report also reveals that UK businesses are increasingly looking to India as a key destination for global expansion. Among the 301 UK businesses surveyed, 61% identified India as a priority growth market. Notably, while 71% of UK firms do not currently have a presence in India, 42% of those plan to establish operations within the next two years. Of the businesses already operating in India, 95% intend to expand further.

However, UK companies face their own challenges when entering the Indian market, particularly around the ease of doing business, regulatory hurdles, and foreign exchange controls. Infrastructure concerns also remain a significant barrier.

Chande noted the mutual interest between the two countries, saying: “Businesses in both the Indian and UK markets see each other as strategic destinations for growth, driven by strong cultural ties and complementary market strengths. While UK firms encounter difficulties when entering India, support is available through entities like the Department for Business and Trade, as well as advisory firms such as ours.”

Free Trade Agreement Expected to Boost Activity

The prospect of a Free Trade Agreement (FTA) between the UK and India has the potential to address some of the current barriers and stimulate further economic collaboration. The report reveals that 92% of Indian businesses surveyed said an FTA would encourage them to explore more opportunities in the UK, while 72% of UK businesses expressed similar sentiments regarding India.

Chande highlighted the potential impact of the FTA: “The Free Trade Agreement between India and the UK represents a significant opportunity to enhance the already strong economic ties between the two countries. Greater market access, easing visa restrictions, and other provisions could pave the way for increased trade and investment, further amplifying growth in both economies.”