Why UK Businesses Should Expand to Saudi Arabia: A Complete Business Guide

Introduction

The United Kingdom and Saudi Arabia have long-standing trade and investment relationships. The economic reforms under Saudi Arabia’s Vision 2030 present significant opportunities for UK businesses to expand in this dynamic market. The Kingdom’s commitment to creating a business-friendly environment, combined with its strategic location and young, tech-savvy population, makes it an attractive destination for foreign investment.

UK businesses have a unique opportunity to leverage their expertise and innovation in a market that is eager for development and modernization. From energy and sports to education and healthcare, Saudi Arabia presents numerous sectors where UK companies can thrive. However, understanding and respecting the local culture and business practices are crucial for success in this market.

This blog will explore the top sectors offering the most potential for UK investors, while also providing insights into UK company registration and the cultural factors that can influence business dealings in Saudi Arabia. By addressing these aspects, UK businesses can unlock opportunities to establish a strong presence for UK companies in Saudi Arabia, one of the most promising markets in the Middle East.

Trade and Investment Statistics

Total trade in goods and services between the UK and Saudi Arabia was £17.3 billion in the four quarters to the end of Q4 2023, an increase of 5.3% from the previous year. UK exports to Saudi Arabia amounted to £13.1 billion, while imports from Saudi Arabia were £4.2 billion. Saudi Arabia was the UK’s 24th largest trading partner, accounting for 1.0% of total UK trade.

Country Comparison: An Overview

Advantages of Expanding to Saudi Arabia

Expanding your business to Saudi Arabia offers several key benefits:

1. Economic Stability and Growth: As the largest economy in the Middle East, Saudi Arabia’s Vision 2030 initiative aims to diversify its economy, creating vast opportunities in various sectors.
2. 100% Foreign Business Ownership: Saudi Arabia allows 100% foreign ownership in most sectors, enabling UK companies to fully own and control their operations without a local partner.
3. No Income Tax for Individuals: There is no income tax on individuals, making it financially attractive for expatriate employees.
4. Lower Cost of Living: The cost of living in Saudi Arabia is on average 16.84% lower than in the UK, including cheaper housing and utilities.
5. Government Incentives: The Saudi government offers various incentives, including tax breaks and streamlined business setup processes, to attract foreign investment.
6. Corporate Tax Differences: Saudi Arabia has a lower corporate tax rate of 20% compared to the UK’s 25%, which can result in significant tax savings for businesses operating in the Kingdom.
7. Ease of Doing Business: Saudi Arabia has significantly improved its business environment, with streamlined processes for business registration, licensing, and permits, making it easier for foreign companies to set up and operate.

Top Saudi Business Sectors for UK Investors

The dynamic growth and reforms in Saudi Arabia, driven by Vision 2030, present a wealth of opportunities for UK businesses across various sectors. By understanding the local market, leveraging their expertise, and building strong relationships, UK companies can significantly contribute to and benefit from Saudi Arabia’s economic transformation.

Energy: The energy sector remains crucial, given Saudi Arabia’s vast oil reserves. However, there is also a strong focus on renewable energy projects, including plans to install 41 gigawatts of solar capacity by 2032. This offers UK companies opportunities in renewable technologies, project management, and sustainable practices. The green hydrogen sector is another area of potential, with $300 billion earmarked for investment by 2030, spanning production, storage, and transport.

Sports: Saudi Arabia’s sports industry is growing rapidly, with a market value expected to reach SAR 84 billion ($22.38 billion) by 2030. There are opportunities for UK companies in infrastructure development, event management, sports technology, and grassroots programs. The Kingdom’s push to host international sports events and its focus on youth sports development align well with UK expertise in these areas.

Education: Education is a major priority under Vision 2030, with a focus on vocational training, schools, and EdTech. There is a growing demand for British schools, recognition of UK qualifications, and early years provision. Vocational training in sectors like tourism, hospitality, engineering, and industrial sectors is also highly sought after. EdTech solutions, particularly those utilizing AI and adaptive learning, are in demand across the K-12 space.

Healthcare: The healthcare sector offers extensive opportunities for UK companies in medical equipment, technology, and healthcare management. With the National Centre for Privatisation & PPP approving 200 projects for privatisation, there are significant scopes for private sector investment and involvement. Digital health, smart hospital design, and training for medical staff are key areas where UK businesses can contribute.

Infrastructure: Continuous development in transportation, healthcare, education, and smart cities like NEOM presents numerous opportunities. UK companies with expertise in engineering, construction, and urban planning can play a pivotal role. British firms like Mace and Turner & Townsend have already been actively involved in major projects.

Financial and Professional Services: The Saudi fintech market is experiencing unprecedented growth, with initiatives like the open banking policy driving financial inclusion. UK firms specializing in fintech, regulatory compliance, and operational efficiency can find significant opportunities. The consultancy market is also thriving, particularly in areas such as mergers and acquisitions, capital markets, and real estate.

Technology: Saudi Arabia’s investment in digital infrastructure and technology-driven sectors creates a fertile ground for UK SMEs specializing in IT, cybersecurity, fintech, and digital transformation. Initiatives by entities like the Public Investment Fund to develop digital infrastructure across cities further enhance these opportunities.

Key Steps to Register a Business in Saudi Arabia

Registering a business in Saudi Arabia involves several steps to ensure compliance with local laws and regulations. Partnering with Al Taasis simplifies this your UK company registration journey, providing expert guidance through each stage, from initial setup to full compliance. Here are the key steps to get started:

1. Choose the Right Business Structure:

Determine the type of business entity that best suits your needs, such as a Limited Liability Company (LLC), Joint Stock Company (JSC), or Branch Office.

2. Reserve a Company Name:

Reserve your business name through the Ministry of Commerce and Investment (MCI). Ensure that the name complies with Saudi naming conventions.

3. Prepare Required Documents:

Gather necessary documents, including copies of passports for all shareholders, Articles of Association, company bylaws, and a business plan.

4. Obtain Initial Approval:

Submit your application to the Ministry of Investment Saudi Arabia (MISA) to obtain initial approval for foreign investment. This involves providing your business plan and other relevant documents.

5. Notarize Articles of Association:

Notarize the Articles of Association at a public notary. This document outlines the company’s structure, activities, and governance.

6. Open a Bank Account:

Open a corporate bank account in Saudi Arabia to deposit the required share capital.

7. Register with the Commercial Register:

Submit all required documents to the Commercial Register at the Ministry of Commerce and Investment (MCI) to obtain a Commercial Registration (CR) certificate.

8. Register with the Chamber of Commerce:

Register your business with the local Chamber of Commerce to obtain a membership certificate, which is necessary for further licensing and permits.

9. Obtain Licenses and Permits:

Depending on your business activity, obtain the necessary licenses and permits from relevant authorities. This may include municipal licenses, industry-specific permits, and environmental clearances.

10. Register for Taxes:

Register your business for VAT and other applicable taxes with the General Authority of Zakat and Tax (GAZT).

11. Hire Employees:

Comply with Saudi labor laws by hiring the required number of Saudi nationals under the Nitaqat system. Ensure that employment contracts and work permits are in place for all employees. Ensure compliance with Saudization (Nitaqat) requirements, which mandate hiring a certain percentage of Saudi nationals.

12. Set Up Office Space:

Secure office space that meets the requirements for your business operations. Obtain the necessary municipal licenses for the premises.

13. Post-Registration Compliance:

Maintain ongoing compliance with local regulations, including annual license renewals, tax filings, and labor law compliance.

Cultural Considerations for UK Investors in Saudi Arabia

By understanding and respecting these cultural aspects, UK businesses can navigate the Saudi market effectively and build their dream UK company in Saudi Arabia, forging strong and successful partnerships.

Prayer Times and Religious Practices: Saudi Arabia observes five daily prayers, which can impact business schedules. Meetings should not be scheduled during these times. Major Islamic holidays like Eid al-Fitr and Eid al-Adha slow down business activities, so it’s best to avoid scheduling important meetings during these periods.

Gender Interaction: Interactions between men and women in business are limited. Female business professionals should adapt their behaviour and dress modestly, wearing an abaya in public. Women’s clothing should cover the collarbone, elbows, and knees, and they may need a male colleague present during meetings with Saudi businessmen.

Building Trust and Relationships: Engage in pleasantries before business discussions and respect hierarchy by addressing colleagues with titles and names. Offer compliments generously and be cautious with criticism to avoid causing a loss of face.

Hospitality and Social Etiquette: Accepting refreshments like coffee, tea, and dates is essential as a sign of respect. Direct eye contact between men shows respect, while direct eye contact between men and women is inappropriate. Avoid showing the soles of your feet.

Business Practices: While prayer times and religious festivals are fixed, business appointments are flexible. Schedule extra time for meetings. Building personal relationships is key, with early meetings focusing on social interaction rather than business details. Patience is crucial.

Meeting and Greeting: Men greet each other with a strong handshake and may embrace or kiss on the cheeks. Public touching between men and women is minimal. Follow your counterpart’s lead in greetings.

Expand Your Business to KSA with Al Taasis

Expanding your business to Saudi Arabia is a smart move, and Al Taasis is here to make it easy for UK businesses. We provide all the support you need, from setting up your company to ensuring you follow local laws. As Saudi Arabia grows and diversifies its economy, this is the perfect time to enter the market. Let Al Taasis help you establish a strong presence and succeed in this exciting market. We’re with you every step of the way, making your expansion smooth and hassle-free.

Start your Saudi business journey now!