What are the risks and challenges of starting a business in the UK?

There were almost 37,000 foreign-owned businesses in the UK's non-financial business economy in 2021 and collectively, they contributed £400 billion to the economy that year.  

But if you’re not a resident and you don’t run a UK-domiciled business, it can be tricky to access banking services in the country. Part of the solution might be registering a new company – or a branch of your existing company – in the UK. 

If you need information about incorporating in Britain, keep reading. We'll begin this guide with some of the most common risks and challenges of starting a UK business as a non-resident. Then, we'll talk about ways in which you can solve them. 

Challenge 1: You find it difficult to open a business account 

Opening a business bank account can be hard because most banks require directors to hold UK business and home addresses. While the law doesn’t forbid UK banks from considering applications made by non-residents, many applicants are instantly rejected because they don't have UK addresses.  

All financial institutions must follow strict anti-money laundering regulations, and most automatically consider UK non-residents high risk – especially if they’re business owners. 

Challenge 2: You can’t pay, receive or hold funds in a wide range of different currencies 

If you run a global business, you may need to transact with clients in many countries. But if your bank only allows you to pay, receive or hold funds in your home currency, your business and your clients’ businesses could be subject to hefty currency conversion fees whenever you move money between jurisdictions. 

Challenge 3: You rely on several business bank accounts for your international transactions 

The more business accounts you use to manage international payments and collections, the more complicated and time-consuming it can be to monitor transactions. Between account maintenance fees, FX fees and other costs, multiple business accounts also get expensive very quickly. 

Challenge 4: You find it difficult or impossible to speak to a human when you have a problem 

Many banks use chatbots and other technology as a replacement for human customer service agents – and it can be hard to break through the virtual barrier when you have an urgent problem. If you run an international business, you’re likely to need help at least occasionally – but one-on-one attention can be hard to find.

Challenge 5: Your bank imposes limits on international transactions 

Payment limits for international transactions vary widely between traditional banks. Some impose a daily limit of £20,000, while others offer more generous daily limits of up to £100,000. If you sometimes have to stagger large payments because of your bank’s transaction limits, it might be time to consider another provider. 

Challenge 6: Your bank doesn’t help you navigate complex UK tax and compliance laws 

From AML (Anti-Money Laundering) to KYC (Know Your Customer), the UK has some of the most sophisticated financial regulations and tax laws in the world. If you're unfamiliar with the UK market, it's important to choose a provider that can guide you through the jargon and make sure you're compliant with local laws.

Challenge 7: You’re unable to access services because you don’t have a UK credit rating 

Credit ratings don’t cross borders – so, even if you have an excellent credit rating in the country you live in now, UK banks will consider you high risk because you don’t have a domestic credit history. This can make it hard to open a traditional bank account in the UK. 

As a non-resident, it’s likely you’ll have no credit rating at all rather than a bad rating. Unfortunately, if you don’t have a good or excellent rating, this can make it harder to access loans or credit cards – especially those with lower interest rates. 

How to overcome risks and challenges of starting a business in the UK 

Solution 1: Choose an alternative banking provider 

An alternative account can help you establish your business in the UK, buy property and transact internationally. Multi-currency accounts also reduce transaction costs and the admin time of managing multiple accounts, leaving you free to concentrate on innovation and expansion. 

Alternative providers like Interpolitan allow you to pay, receive and hold money in various currencies, so you can save money and transact in a more flexible way. They can take as little as a week to set up, rather than months, so business owners can hit the ground running. 

Solution 2: Build your credit rating 

If you're a business owner and you've just moved to the UK, focus on building your UK credit score. A good credit score can help you access more banking services, such as loans and credit cards with lower interest rates. 

• Try to minimise your credit utilisation. This is the percent of your credit limit. For example, if you have a £5,000 credit limit and you're already using £4,000, that means you have a credit utilisation of 80%. According to Experian, you should try to keep this below 30% to build your UK credit score. 

• Once you have a UK credit rating, fix any errors in your report. Credit rating agencies do make mistakes, so make sure the information they hold about you is correct. When you report an error, they must remove it, or tell you that the information is correct, within 28 days. 

• Register on the UK electoral roll. When you register to vote in the UK, this is recorded on your credit report, as lenders can use this information to verify your name and address. 

• Pay your bills on time. This may seem obvious, but even a slightly late utility payment can have a negative impact on your credit rating. 

You can't improve your credit score overnight; however, credit rating agencies usually review your score every month. Therefore, any actions you take this month to improve your score may be reflected in a slightly higher score as early as next month. 

Solution 3: Network with other international business owners 

Networking can help you find support and learn the ropes of doing business in the UK – and if you’re currently outside the UK, online forums can be useful. The UK Business Owners Starting a Business forum, for example, can help you find peers and learn more about topics like overseas trade, accounting, IT and ecommerce.  

Within the UK, business associations and networking groups like Business Networking International (BNI), the Federation of Small Businesses (FSB) and the British Chambers of Commerce (BCC) offer business support services and help entrepreneurs connect with each other. Many groups have local chapters, making it easy to network in person and settle into the business landscape. 

Find solutions with Interpolitan 

One of the biggest challenges for businesses new to the UK is finding the right financial partner. If you’re having trouble opening a business account at a traditional bank or plan to make regular international payments and collections, Interpolitan Money can help. 

At Interpolitan, we blend cutting-edge technology with truly personal service to deliver a comprehensive alternative banking solution. When our clients need assistance, they receive one-on-one attention from a dedicated account manager. We tailor our products and services to meet your needs and offer FX risk management solutions to help you hedge against currency fluctuations. 

With Interpolitan, you can: 

• Open an account in as little as 7–10 days. 

• Get a unique IBAN for secure domestic and cross-border transactions. 

• Pay in more than 55 currencies. 

• Do business with partners in over 160 countries. 

• Access 24/7 support via phone and email. 

If you want more flexibility and the ability to pay, collect and hold funds in different currencies, maybe it’s time to consider Interpolitan? Click here to find out more or open an account today.