92154 Doing Business 2015 United Kingdom Economy Profile 2015 United Kingdom Doing Business 2015 United Kingdom 2 © 2014 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2015 United Kingdom 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 6 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 33 Registering property .................................................................................................................. 39 Getting credit .............................................................................................................................. 48 Protecting minority investors ................................................................................................... 54 Paying taxes ................................................................................................................................ 62 Trading across borders .............................................................................................................. 67 Enforcing contracts .................................................................................................................... 71 Resolving insolvency .................................................................................................................. 78 Labor market regulation ........................................................................................................... 83 Distance to frontier and ease of doing business ranking ...................................................... 90 Resources on the Doing Business website .............................................................................. 93 Doing Business 2015 United Kingdom 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is 1, 2014 (except for the paying taxes indicators, which for a local entrepreneur to open and run a small to cover the period January–December 2013). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, getting trading across borders and getting electricity), the credit, protecting minority investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and labor market regulation. macroeconomic conditions or the underlying strength of In a series of annual reports Doing Business presents institutions—are not directly studied by Doing Business. quantitative indicators on business regulations and the The indicators refer to a specific type of business, protection of property rights that can be compared generally a local limited liability company operating in across 189 economies, from Afghanistan to Zimbabwe, the largest business city. Because standard assumptions over time. The data set covers 47 economies in Sub- are used in the data collection, comparisons and Saharan Africa, 32 in Latin America and the Caribbean, 25 benchmarks are valid across economies. The data not in East Asia and the Pacific, 26 in Eastern Europe and only highlight the extent of obstacles to doing business; Central Asia, 20 in the Middle East and North Africa and they also help identify the source of those obstacles, 8 in South Asia, as well as 31 OECD high-income supporting policy makers in designing regulatory reform. economies. The indicators are used to analyze economic More information is available in the full report. Doing outcomes and identify what reforms have worked, where Business 2015 presents the indicators, analyzes their and why. relationship with economic outcomes and presents This economy profile presents the Doing Business business regulatory reforms. The data, along with indicators for United Kingdom. To allow useful information on ordering Doing Business 2015, are comparison, it also provides data for other selected available on the Doing Business website at economies (comparator economies) for each indicator. http://www.doingbusiness.org. The data in this report are current as of June Doing Business 2015 United Kingdom 5 CHANGES IN DOING BUSINESS 2015 As part of a 2-year update in methodology, Doing Finally, the name of the employing workers indicator set Business 2015 incorporates 7 important changes. First, has been changed to labor market regulation, and the the ease of doing business ranking as well as all topic- scope of this indicator set has also been changed. The level rankings are now computed on the basis of indicators now focus on labor market regulation distance to frontier scores (see the chapter on the applying to the retail sector rather than the distance to frontier and ease of doing business ranking). manufacturing sector, and their coverage has been Second, for the 11 economies with a population of more expanded to include regulations on labor disputes and than 100 million, data for a second city have been added on benefits provided to workers. The labor market to the data set and the ranking calculation. These regulation indicators continue to be excluded from the economies are Bangladesh, Brazil, China, India, aggregate distance to frontier score and ranking on the Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian ease of doing business. Federation and the United States. Third, for getting Beyond these changes there are 3 other updates in credit, the methodology has been revised for both the methodology. For paying taxes, the financial statement strength of legal rights index and the depth of credit variables have been updated to be proportional to 2012 information index. The number of points has been income per capita; previously they were proportional to increased in both indices, from 10 to 12 for the strength 2005 income per capita. For enforcing contracts, the of legal rights index and from 6 to 8 for the depth of value of the claim is now set at twice the income per credit information index. In addition, only credit bureaus capita or $5,000, whichever is greater. For dealing with and registries that cover at least 5% of the adult construction permits, the cost of construction is now set population can receive a score on the depth of credit at 50 times income per capita (before, the cost was information index. assessed by the Doing Business respondents). In addition, Fourth, the name of the protecting investors indicator set this indicator set no longer includes the procedures for has been changed to protecting minority investors to obtaining a landline telephone connection. better reflect its scope—and the scope of the indicator For more details on the changes, see the “What is set has been expanded to include shareholders’ rights in changing in Doing Business?” chapter starting on page corporate governance beyond related-party transactions. 24 of the Doing Business 2015 report. For more details Fifth, the resolving insolvency indicator set has been on the data and methodology, please see the “Data expanded to include an index measuring the strength of Notes” chapter starting on page 114 of the Doing the legal framework for insolvency. Sixth, the calculation Business 2015 report. For more details on the distance to of the distance to frontier score for paying taxes has frontier metric, please see the “Distance to frontier and been changed. The total tax rate component now enters ease of doing business ranking” chapter in this profile. the score in a nonlinear fashion, in an approach different from that used for all other indicators (see the chapter on the distance to frontier and ease of doing business ranking). Doing Business 2015 United Kingdom 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: OECD high income based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: High income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. This Population: 64,097,085 year's report presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 39,110 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier (DTF) scores. DB2015 rank: 8 The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute DB2014 rank: 9* distance to the best performance in each Doing Business Change in rank: 1 indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the DB 2015 DTF: 81 worst performance and 100 the frontier. (See the chapter on the distance to frontier and ease of doing business). DB 2014 DTF: 80.8 The 10 topics included in the ranking in Doing Business 2015: starting a business, dealing with construction Change in DTF: 0.2 permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading * DB2014 ranking shown is not last year’s published across borders, enforcing contracts and resolving ranking but a comparable ranking for DB2014 that insolvency. The labor market regulation indicators captures the effects of such factors as data (formerly employing workers) are not included in this corrections and the changes in methodology. See year’s aggregate ease of doing business ranking, but the the data notes starting on page 114 of the Doing data are presented in this year’s economy profile. Business 2015 report for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2015 United Kingdom THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2015 United Kingdom THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How United Kingdom and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 United Kingdom 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - United Kingdom (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - United Kingdom (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 United Kingdom 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business tells Doing Business introduced the distance to frontier score. This only part of the story, so do changes in that ranking. Yearly measure shows how far on average an economy is from the movements in rankings can provide some indication of best performance achieved by any economy on each Doing changes in an economy’s regulatory environment for firms, Business indicator. but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed in over time—how far it has moved toward (or away from) the different areas. To aid in assessing such changes, most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has United Kingdom come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2010, except for getting credit, paying taxes, protecting minority investors and resolving insolvency which had methodology changes in 2014 and thus are only comparable to 2013. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2015 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2015 United Kingdom 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for United Kingdom United Kingdom DB2015 United Kingdom DB2014 Best performer globally United States DB2015 Singapore DB2015 Germany DB2015 Ireland DB2015 Indicator France DB2015 Japan DB2015 DB2015 Starting a Business 45 50 28 114 19 83 6 46 New Zealand (1) (rank) Starting a Business (DTF 91.23 89.85 93.00 81.38 94.17 86.21 96.48 91.22 New Zealand (99.96) Score) Procedures (number) 6.0 6.0 5.0 9.0 4.0 8.0 3.0 6.0 New Zealand (1.0)* Time (days) 6.0 11.5 4.5 14.5 6.0 10.7 2.5 5.6 New Zealand (0.5) Cost (% of income per 0.3 0.3 0.9 8.8 0.3 7.5 0.6 1.2 Slovenia (0.0) capita) Paid-in min. capital (% 0.0 0.0 0.0 35.8 0.0 0.0 0.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 17 16 86 8 128 83 2 41 China (1) (rank) Dealing with Hong Kong SAR, Construction Permits 85.06 85.02 73.14 87.42 65.61 73.30 92.84 78.87 China (95.53) (DTF Score) Doing Business 2015 United Kingdom 12 United Kingdom DB2015 United Kingdom DB2014 Best performer globally United States DB2015 Singapore DB2015 Germany DB2015 Ireland DB2015 Indicator France DB2015 Japan DB2015 DB2015 Hong Kong SAR, Procedures (number) 9.0 9.0 8.0 8.0 10.0 12.0 10.0 15.8 China (5.0) Time (days) 105.0 105.0 183.0 96.0 150.0 197.0 26.0 78.6 Singapore (26.0) Cost (% of warehouse 1.2 1.2 4.7 1.1 9.5 0.6 0.3 1.0 Qatar (0.0)* value) Getting Electricity 70 66 60 3 67 28 11 61 Korea, Rep. (1) (rank) Getting Electricity (DTF 78.42 78.41 79.87 98.37 78.84 86.51 92.45 79.52 Korea, Rep. (99.83) Score) Procedures (number) 4.0 4.0 5.0 3.0 5.0 3.4 4.0 4.8 12 Economies (3.0)* Time (days) 126.0 126.0 79.0 28.0 85.0 97.7 31.0 89.6 Korea, Rep. (18.0)* Cost (% of income per 90.1 91.9 42.9 44.4 83.3 0.0 26.3 25.5 Japan (0.0) capita) Registering Property 68 67 126 89 50 73 24 29 Georgia (1) (rank) Registering Property 72.55 72.43 59.36 67.78 78.34 71.33 84.78 82.92 Georgia (99.88) (DTF Score) Procedures (number) 6.0 6.0 8.0 5.0 5.0 6.0 4.0 4.4 4 Economies (1.0)* Time (days) 21.5 21.5 49.0 40.0 31.5 13.0 4.5 15.2 3 Economies (1.0)* Cost (% of property 4.6 4.7 6.1 6.7 2.6 5.8 2.8 2.4 4 Economies (0.0)* value) Getting Credit (rank) 17 14 71 23 23 71 17 2 New Zealand (1) Getting Credit (DTF 75.00 75.00 50.00 70.00 70.00 50.00 75.00 95.00 New Zealand (100) Score) Strength of legal rights 7 7 4 6 7 4 8 11 3 Economies (12)* index (0-12) Doing Business 2015 United Kingdom 13 United Kingdom DB2015 United Kingdom DB2014 Best performer globally United States DB2015 Singapore DB2015 Germany DB2015 Ireland DB2015 Indicator France DB2015 Japan DB2015 DB2015 Depth of credit 8 8 6 8 7 6 7 8 23 Economies (8)* information index (0-8) Credit registry coverage 0.0 0.0 44.5 1.3 0.0 0.0 0.0 0.0 Portugal (100.0) (% of adults) Credit bureau coverage 100.0 100.0 0.0 100.0 100.0 100.0 50.8 100.0 23 Economies (100.0)* (% of adults) Protecting Minority 4 4 17 51 6 35 3 25 New Zealand (1) Investors (rank) Protecting Minority 78.33 78.33 67.50 59.17 73.33 62.50 80.00 65.83 New Zealand (81.67) Investors (DTF Score) Extent of conflict of interest regulation 8.3 8.3 5.7 5.0 8.3 7.0 9.3 8.3 Singapore (9.3)* index (0-10) Extent of shareholder governance index (0- 7.3 7.3 7.8 6.8 6.3 5.5 6.7 4.8 France (7.8)* 10) Strength of minority investor protection 7.8 7.8 6.8 5.9 7.3 6.3 8.0 6.6 New Zealand (8.2) index (0-10) United Arab Emirates Paying Taxes (rank) 16 15 95 68 6 122 5 47 (1)* Paying Taxes (DTF United Arab Emirates 90.52 90.09 72.12 77.02 95.07 67.19 97.19 80.84 Score) (99.44)* Payments (number per Hong Kong SAR, 8.0 8.0 8.0 9.0 9.0 14.0 5.0 10.6 year) China (3.0)* Time (hours per year) 110.0 110.0 137.0 218.0 80.0 330.0 82.0 175.0 Luxembourg (55.0) Trading Across Borders 15 17 10 18 5 20 1 16 Singapore (1) (rank) Trading Across Borders 88.32 88.24 90.18 87.67 93.01 87.23 96.47 88.25 Singapore (96.47) Doing Business 2015 United Kingdom 14 United Kingdom DB2015 United Kingdom DB2014 Best performer globally United States DB2015 Singapore DB2015 Germany DB2015 Ireland DB2015 Indicator France DB2015 Japan DB2015 DB2015 (DTF Score) Documents to export 4 4 2 4 2 3 3 3 Ireland (2)* (number) Time to export (days) 8.0 8.0 10.0 9.0 8.0 11.0 6.0 6.0 5 Economies (6.0)* Cost to export (US$ per 1,005.0 1,005.0 1,335.0 1,015.0 1,160.0 829.3 460.0 1,224.0 Timor-Leste (410.0) container) Cost to export (deflated 1,005.0 1,017.8 1,335.0 1,015.0 1,160.0 829.3 460.0 1,224.0 US$ per container) Documents to import 4 4 2 4 2 5 3 5 Ireland (2)* (number) Time to import (days) 6.0 6.0 11.0 7.0 9.0 11.0 4.0 5.4 Singapore (4.0) Cost to import (US$ per 1,050.0 1,050.0 1,445.0 1,050.0 1,121.0 1,021.3 440.0 1,289.0 Singapore (440.0) container) Cost to import (deflated 1,050.0 1,063.4 1,445.0 1,050.0 1,121.0 1,021.3 440.0 1,289.0 US$ per container) Enforcing Contracts 36 37 10 13 18 26 1 41 Singapore (1) (rank) Enforcing Contracts 68.08 68.08 77.67 76.74 75.47 69.95 89.54 67.26 Singapore (89.54) (DTF Score) Time (days) 437.0 437.0 395.0 394.0 650.0 360.0 150.0 420.0 Singapore (150.0) Cost (% of claim) 39.9 39.9 17.4 14.4 26.9 32.2 25.8 30.5 Iceland (9.0) Procedures (number) 29.0 29.0 29.0 31.0 21.0 32.0 21.0 33.6 Singapore (21.0)* Resolving Insolvency 13 13 22 3 21 2 19 4 Finland (1) (rank) Resolving Insolvency 82.04 82.04 75.94 91.78 76.90 93.74 77.94 90.12 Finland (93.85) (DTF Score) Doing Business 2015 United Kingdom 15 United Kingdom DB2015 United Kingdom DB2014 Best performer globally United States DB2015 Singapore DB2015 Germany DB2015 Ireland DB2015 Indicator France DB2015 Japan DB2015 DB2015 Time (years) 1.0 1.9 1.2 0.4 0.6 0.8 1.5 Ireland (0.4) Cost (% of estate) 6.0 6.0 9.0 8.0 9.0 3.5 3.0 8.2 Norway (1.0) Outcome (0 as piecemeal sale and 1 as 1 1 1 1 1 1 1 1 going concern) Recovery rate (cents on 88.6 88.6 77.2 83.4 87.7 92.9 89.7 80.4 Japan (92.9) the dollar) Strength of insolvency 11.0 11.0 11.0 15.0 9.5 14.0 9.5 15.0 5 Economies (15.0)* framework index (0-16) Note: DB2014 rankings shown are not last year’s published rankings but comparable rankings for DB2014 that capture the effects of s uch factors as data corrections and changes to the methodology. Trading across borders deflated and non-deflated values are identical in DB2015 because it is defined as the base year for the deflator. The best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2015 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2015 United Kingdom 16 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business measures the ease of starting a business in an economy by recording all procedures Each procedure starts on a separate day (2 officially required or commonly done in practice by procedures cannot start on the same day). an entrepreneur to start up and formally operate an Procedures that can be fully completed industrial or commercial business—as well as the online are recorded as ½ day. time and cost required to complete these procedures. Procedure completed once final document is It also records the paid-in minimum capital that received companies must deposit before registration (or within 3 months). The ranking of economies on the No prior contact with officials ease of starting a business is determined by sorting Cost required to complete each procedure their distance to frontier scores for starting a (% of income per capita) business. These scores are the simple average of the distance to frontier scores for each of the component Official costs only, no bribes indicators. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Is a limited liability company, located in the  Has a start-up capital of 10 times income per largest business city and is 100% domestically capita. owned . 1  Has a turnover of at least 100 times income per  Has between 10 and 50 employees. capita.  Conducts general commercial or industrial  Does not qualify for any special benefits. activities.  Does not own real estate. 1 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 United Kingdom 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in United Kingdom? largest business city of an economy, except for 11 According to data collected by Doing Business, starting a economies for which the data are a population-weighted business there requires 6.0 procedures, takes 6.0 days, average of the 2 largest business cities. See the chapter costs 0.3% of income per capita and requires paid-in on distance to frontier and ease of doing business minimum capital of 0.0% of income per capita (figure ranking at the end of this profile for more details. 2.1). Most indicator sets refer to a case scenario in the Figure 2.1 What it takes to start a business in United Kingdom - Paid-in minimum capital (% of income per capita): 0.0 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 United Kingdom 18 STARTING A BUSINESS Globally, United Kingdom stands at 45 in the ranking of regional average ranking provide other useful 189 economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in United Kingdom to start a business. Figure 2.2 How United Kingdom and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2015 United Kingdom 19 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in United Kingdom (table 2.1)? Table 2.1 How has United Kingdom made starting a business easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform The United Kingdom made starting a business easier by DB2014 providing model articles for use in preparing memorandums and articles of association. The United Kingdom made starting a business easier by DB2015 speeding up tax registration. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 United Kingdom 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY United Kingdom is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Private Limited Company (Ltd) firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid in minimum capital requirement: GBP 0 the study of laws, regulations and publicly available City: London information on business entry in that economy. Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in United Kingdom - Time to No. Procedure Cost to complete complete Check name for uniqueness at the company names index database on the web This procedure can be done online at www.companieshouse.gov.uk. Less than one day 1 no charge (online procedure) Agency: Companies House Prepare memorandum and articles of association; fill out and sign Form IN01 (application for registration). Forms are available free of charge from the Companies House website: www.companieshouse.gov.uk. A company limited by shares that has adopted the Model Articles without modification does not need to deliver a copy for registration. Form IN01 must be signed by all the subscribers. In addition to the Memorandum and Articles of Association an 1 day GBP 35 2 application to register a company must contain the following information included on Form IN01 which should be lodged with the relevant Registrar of Companies (i.e., for England and Wales, Scotland, or Northern Ireland): (i) Statement of compliance with all requirements of the 2006 Companies Act; (ii) Application for registration of the company covering: - Proposed name (see section 3.6 for more detailed information on choosing a company name); - Country of registration office (e.g. England and Wales (or Wales), Doing Business 2015 United Kingdom 21 Time to No. Procedure Cost to complete complete Scotland or Northern Ireland); - Whether the liability of the members is to be limited and if so whether by shares or guarantee; and; - Whether the company is public or private; (iii) If the application is delivered by agents acting on behalf of the subscribers, the agent’s name and address, as was the case under the 1985 Companies Act. In addition, in the event that the application is delivered by an agent for the subscribers, they must also confirm that the requirements of the 2006 Companies Act relating to the registration have been complied with; (iv) In the case of a company with a share capital, the application must also include a statement of the capital and initial shareholdings, including the name and address of the subscriber. It is a director who can appoint a service address; (v) A statement of the proposed officers, being the first director and company secretary (unless in the case of a private company there is no company secretary); (vi) A statement of the intended registered office address; and (vii) A copy of the proposed Articles of Association (unless the Model Articles are adopted in their entirety). Incorporation can be done electronically or by paper. A same-day service is available. Agency: Companies House File incorporation documents with the Registrar of Companies at Companies House Fees for filing incorporation documents vary. The standard registration fee is GBP 14 for software and GBP 40 for paper. Same-day incorporation fees are GBP 30 for software and GBP 100 for paper. Registration is either submitted online, at the office, or over the phone by calling the HMRC New Employer Helpline at 0300 200 3211. For business registration at the Companies House office, there are Less than one day 3 GBP 30 computers with software at every branch of the Company registry. (online procedure) Web-filed incorporation costs now GBP 15. Same-day incorporation fees are GBP 30 for software and GBP 100 for paper. A Copy of the fee schedule can also be found here: http://www.companieshouse.gov.uk/toolsToHelp/ourPrices.shtml. Agency: Companies House Contact HMRC and register for VAT The company has to contact HMRC and register for the corporate tax. Less than one day 4 no charge VAT registration may be carried out online at: (online procedure) https://online.hmrc.gov.uk/registration. Doing Business 2015 United Kingdom 22 Time to No. Procedure Cost to complete complete Agency: HMRC * Contact HMRC and register for PAYE The company must separately contact the Inland Revenue to set up a contribution scheme for national insurance and pay-as-you-earn (PAYE) tax, which deducts income tax from employee wages or salary). The company will be issued with activation PIN within around a week and will need to activate this within 28 days (or else request a new PIN). Inland Revenue has been subsumed into HMRC. Companies need to 3 days, register and enroll online with activation code. For security reasons, a simultaneous with 5 no charge check is run on the data provided and bona fide businesses sent an previous activation pin within seven working days. A small percentage of procedure registrations who fail the security checks can take longer. Activation is done instantly online though the code expires after 28 days. Agency: HMRC Sign up for employer’s liability insurance The Employers’ Liability (Compulsory Insurance) Act of 1969 requires all employers in the United Kingdom to maintain employers’ liability insurance from an approved insurance company. The minimum legal requirement for employers’ liability insurance is a limit of indemnity of GBP 5,000,000. The Employers’ Liability (Compulsory Insurance) Act of 1969 requires 1 day no charge 6 that proof of insurance be posted at the workplace. Since October 1, 2008, it is possible to display this information electronically, although a company that wishes to do this will need to ensure that its employees know how and where to find the certificate and have reasonable access to it. Agency: Insurance company * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 United Kingdom 23 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records the procedures, time and cost Obtaining utility connections for water and for a business in the construction industry to obtain sewerage all the necessary approvals to build a warehouse in Registering the warehouse after its the economy’s largest business city, connect it to completion (if required for use as collateral or basic utilities and register the warehouse so that it for transfer of the warehouse) can be used as collateral or transferred to another Time required to complete each procedure entity. (calendar days) The ranking of economies on the ease of dealing with Does not include time spent gathering construction permits is determined by sorting their information distance to frontier scores for dealing with Each procedure starts on a separate day. construction permits. These scores are the simple Procedures that can be fully completed online average of the distance to frontier scores for each of are recorded as ½ day. the component indicators. Procedure considered completed once final To make the data comparable across economies, document is received Doing Business uses several assumptions about the business and the warehouse, including the utility No prior contact with officials connections. Cost required to complete each procedure (% The business: of warehouse value) Official costs only, no bribes  Is a limited liability company operating in the construction business and located in  Will have complete architectural and the largest business city. For the 11 technical plans prepared by a licensed economies with a population of more than architect or engineer. 100 million, data for a second city have  Will be connected to water and sewerage been added. Is domestically owned and (sewage system, septic tank or their operated. equivalent). The connection to each utility  Has 60 builders and other employees. network will be 150 meters (492 feet) long. The warehouse:  Will be used for general storage, such as of books or stationery (not for goods requiring  Is valued at 50 times income per capita. special conditions).  Is a new construction (there was no  Will take 30 weeks to construct (excluding all previous construction on the land). delays due to administrative and regulatory requirements). Doing Business 2015 United Kingdom 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build business city of an economy, except for 11 economies for a warehouse in United Kingdom? According to data which the data are a population-weighted average of the collected by Doing Business, dealing with construction 2 largest business cities. See the chapter on distance to permits there requires 9.0 procedures, takes 105.0 days frontier and ease of doing business ranking at the end of and costs 1.2% of the warehouse value (figure 3.1). this profile for more details. Most indicator sets refer to a case scenario in the largest Figure 3.1 What it takes to comply with formalities to build a warehouse in United Kingdom - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 United Kingdom 25 DEALING WITH CONSTRUCTION PERMITS Globally, United Kingdom stands at 17 in the ranking of other useful information for assessing how easy it is for 189 economies on the ease of dealing with construction an entrepreneur in United Kingdom to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How United Kingdom and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2015 United Kingdom 26 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while an effort to ensure building safety while keeping making compliance easy and accessible to all. Coherent compliance costs reasonable, governments around the and transparent rules, efficient processes and adequate world have worked on consolidating permitting allocation of resources are especially important in sectors requirements. What construction permitting reforms has where safety is at stake. Construction is one of them. In Doing Business recorded in United Kingdom (table 3.1)? Table 3.1 How has United Kingdom made dealing with construction permits easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform The United Kingdom made dealing with construction permits DB2010 easier and less time consuming through wider use of approved inspectors. The United Kingdom made dealing with construction permits DB2012 easier by increasing efficiency in the issuance of planning permits. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 United Kingdom 27 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for United Kingdom are BUILDING A WAREHOUSE based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated cost of information collected from experts in construction GBP 1,242,963 construction : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : London service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and cost, that apply to a company and structure matching the are summarized below. standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in United Kingdom - Time to No. Procedure Cost to complete complete Hire an Approved Inspector BuildCo signs a contract with an Approved Inspector. Approved Inspectors (AI) are companies or individuals authorized under the Building Act 1984 to carry out building control work in England and Wales. An Approved Inspector will: • Advise BuildCo on how the building regulations apply to its work (to a degree) • Check plans for compliance with building regulations • Issue a planning certificate (if requested) • Inspect the work as it progresses • Issue a final completion certificate (if requested) A list of AIs is available at the Association of Corporate Approved Inspectors. Currently, there are 60 AIs that are recognized in England 1 and Wales, accounting for about 20% of all building control work. The 1 day GBP 2,964 AIs are licensed by this independent board for every 5 years. They must also be insured, while the public building control authorities do not have that requirement. By hiring AIs, companies eliminate the need to deal with different external companies. It also eliminates the need for companies to interact with Building Control Department of Local Authority. However, the Local Authority is still responsible for the enforcement of the regulations. If the AI discovers any issues of noncompliance with the building regulations, the offences must be reported to the Local Authority so that they can take action. Unsurprisingly, the number of contraventions notified to the Local Authority by AIs is extremely low. Additionally, the Local Authority still has the power to cancel initial notices under certain circumstances -- e.g. the works have not commenced within the prescribed period (currently 3 years from the date of deposit). Doing Business 2015 United Kingdom 28 Time to No. Procedure Cost to complete complete The other decisive factor for a company to choose an AI is time. AIs would provide more expeditious services. For example, a plan approval could be done by them in 2 -- 3 weeks, whereas the Local Authority would take 6 to 8 weeks, according to statutory time-limits. The cost for the services of AI is comprised of the several elements and is mostly charged on an hourly basis. The below estimate is a sample of what an average cost breakdown by an AI looks like: • Plan checking: (16 hours x GDP 60) = GBP 960.00 • Inspections: (9 sessions x 2h x GBP 60.00) = GBP 1,080.00 • Structural checking: (2 hrs x GBP 60.00) = GBP 120.00 • Consultations: (0.5 hrs x GBP 60) = GBP 30.00 • Electronic/Internet drawings GBP 75.00 • Meetings: (3.75 hrs x GBP 60.00) = GBP 225.00 • Administrative: (0.5 hrs x GBP 60.00) = GBP 30.00 • Inspections petrol fee: (40 miles x GBP 3.60) = GBP 144.00 • Contingency: (5 hrs x GBP 60.00) = GBP 300.00 Total: GBP 2,964 Agency: Approved Inspector Obtain planning permission BuildCo must obtain planning permission from the local planning authority. In London, the decision-maker is the relevant London borough where the site is located. There are 33 boroughs in Greater London. The planning application must be accompanied by a plan of the site, drawings showing the proposed development, and any other information the local authority considers necessary. The local authority publishes a list with the information it considers necessary on its website, so that applicants know what is required of them. The relevant legislative framework is the Development Management Procedure Order (2010). If BuildCo is submitting a paper application, it must also provide at least 3 copies of the accompanying documents. Alternatively, BuildCo can apply online via the Planning Portal, which 2 accepts electronic planning applications on behalf of all London 56 days GBP 6,676 boroughs, using a standard application form that was introduced across England in 2008. If it applies electronically, no further copies are required. A fee is charged for the planning application, based on the amount of floor space that would be created by the scheme. The size of BuildCo's proposed development falls below the threshold for a “major application”, which means that the time frame for a decision is 8 weeks rather than 13. During this period, the local planning authority will publicize the application in the surrounding area and consult a number of statutory consultees -- bodies with a specialist responsibility such as nature conservation, heritage protection, highways -- who may wish to comment on the acceptability of the proposal from their perspective. The local authority accepts these comments and the comments of any local people who wish to comment on the application. They will be taken into account in the decision to grant or refuse permission. If no decision is made within 8 Doing Business 2015 United Kingdom 29 Time to No. Procedure Cost to complete complete weeks, or if the authority decides to refuse permission, the applicant is entitled to appeal to the Secretary of State. Additionally, in April 2010, the Government introduced new 'permitted development' rights for businesses who seek to extend their existing premises. This means that minor extensions, which would previously have required planning permission, may proceed without it, thereby saving time for the business owners and enabling the local planning authority staff to concentrate on larger and more important projects. In May 2013, the Government further extended these rights to allow for larger extensions of pre-existing agricultural buildings and warehouses. Agency: Planning Department of Local Authority Approved Inspector files the initial notice to the Local Authority Once the contract is signed and the terms of reference are outlined, the builder and the AI jointly notify the local authority of their intention to build -- also called an initial notice. This initial notice will inform the Local Council that the AI has been retained. Once this notice has been accepted by the local authority, the responsibility for plan checking and site inspection will be formally placed on the AI. The local council has 5 days to accept or reject the initial notice in 3 writing (via email, fax or post). Acceptance is given by default if the 5 days no charge local authority does not respond within the 5-day period. During that period of time, no work can be done. Once construction work commences, the AI would conduct at least 8 -- 9 inspections at various stages of construction and risk-based factors (for BuildCo’s case). Agency: Local Authority Submit application to local Fire Safety Office and obtain approval Approved Inspector submits (via mail) the respective elements of the drawing and plans pertinent to fire safety to a local Fire Safety Office to ensure that the building is compliant with the latest fire safety legislation and that the appropriate fire and life safety systems are in place. By law, the Fire Safety Office must respond within 15 business days (21 calendar days) and send its comments and approval. This is done as part of plan approval process and is recorded as an independent procedure since AI interacts with a Fire Officer. 21 days no charge 4 Upon the completion of the building, BuildCo used to obtain a Fire Certificate from Fire Safety Office. However, the Fire Certificate is no longer required following the reforms in the Regulatory Reform (Fire Safety) Order 2005 (FSO 2005) which came into effect in October 2006, and replaced over 70 pieces of fire safety laws. The FSO applies to all non-domestic premises in England and Wales, including the common parts of blocks of flats and houses in multiple occupations (HMOs). The FSO 2005 is a tool for self-regulation of Doing Business 2015 United Kingdom 30 Time to No. Procedure Cost to complete complete businesses for the fire risk of the premises. Under the FSO, the responsible person must carry out a fire safety risk assessment and implement and maintain a fire management plan. The companies have to carry out a risk assessment by completing a 5-step fire risk assessment survey online: (http://www.fire.gov.uk/Workplace+safety/WhatTheLawRequires/) According to this survey -- FSO 2005 the warehouse of BuildCo would be classified as medium risk object. Since there will be more than 5 people occupying/working in the building, BuildCo would need to file the copy of completed FSO 2005 to the local Fire Safety Office. BuildCo does not need to wait for the approval or any other consent before using the premises. This risk is with the building operators, as they are deemed liable for any problems. The Fire Safety Office may conduct an inspection under a risk-based scheme: whether there was a similar track record of companies with fire, or neighbors complain, etc. Small scale and standard objects would be seldom inspected. Also, given that this would be a new building it would be assumed by the Fire Safety Office that the latest techniques of fire safety prevention would have been considered during the planning process. Agency: Fire Safety Office * Apply for water and sewage connection 5 1 day no charge Agency: Thames Water Utilities Ltd. Procedure can be done online Receive inspection from the water and sewage provider Upon approval the engineer instructs Thames Water’s contractor to assess the physical work involved to make the connection. This includes a site survey, size of site gang/workforce, equipment and materials needed, plus any involvement with the local highway department as to whether there is any significant impact on the public road network. This element takes approximately 2-3 weeks. 6 1 day no charge The contractor will then send their report to the engineer with the scope of work, survey and technical proposal. The engineer will prepare and authorize the quote and send it out to BuildCo within 5 days of receipt of the contractor’s report. Agency: Thames Water Utilities Ltd. Doing Business 2015 United Kingdom 31 Time to No. Procedure Cost to complete complete Obtain water and sewerage connection 7 20 days GBP 5,321 Agency: Thames Water Utilities Ltd. * Request and receive energy performance certificate from Accredited Energy Assessor Following the nationwide implementation of the "Energy Performance of Buildings Directive" adopted on December 16, 2002, as of January 4, 2009 all commercial buildings require an Energy Performance Certificate (EPC) whenever built, rented or sold. The certificate records how energy efficient a property is as a building and provides A-G ratings. It is the responsibility of the builder/constructor to submit the EPC and Recommendations Report to the Purchaser upon physical completion of the building and notify the local authority Building Control officers or approved inspectors, who will not issue a certificate of completion until the EPC is provided. They are produced using standard methods and assumptions about energy usage so that the energy efficiency of one building can easily be compared with another building of the same type. This allows 1 day GBP 78 8 prospective buyers, tenants, owners, occupiers and purchasers to view information on the energy efficiency and carbon emissions from their building so they can consider energy efficiency and fuel costs as part of their investment. An EPC is always accompanied by a recommendation report that lists cost effective and other measures (such as low and zero carbon generating systems) to improve the energy rating. A rating is also given showing what could be achieved if all the recommendations were implemented. The fee for the EPC may vary between GBP 55.00 to GBP 100.00. Agency: Accredited Energy Assessor File completion certificate with the Local Building Control Department Once the building is completed, BuildCo would notify AI about the completion. AI completes the final inspection within 24 hours and prepares the certificate of completion. AI will file a copy of the completion certificate with the Building Control Department of Local 9 Authority (LABC) within 5 days after completion of the final inspection. 1 day no charge LABC then files the documents and sends an acknowledgement of receipt to BuildCo/AI. Although legally not required, LABC may conduct an inspection in practice. LABC is not required to issue an approval of a completion certificate prepared by an AI; however, failure by BuildCo to obtain one may prove to be problematic. Agency: Local Building Control Department Doing Business 2015 United Kingdom 32 Time to No. Procedure Cost to complete complete * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 United Kingdom 33 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity a customer is always to gain access by obtaining a connection (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. The obtaining final supply ranking of economies on the ease of getting electricity is determined by sorting their distance to Time required to complete each procedure frontier scores for getting electricity. These scores are (calendar days) the simple average of the distance to frontier scores Is at least 1 calendar day for each of the component indicators. To make the data comparable across economies, several Each procedure starts on a separate day assumptions are used. Does not include time spent gathering The warehouse: information  Is owned by a local entrepreneur, located Reflects the time spent in practice, with little in the economy’s largest business city, in follow-up and no prior contact with officials an area where other warehouses are Cost required to complete each procedure located. For the 11 economies with a (% of income per capita) population of more than 100 million, data Official costs only, no bribes for a second city have been added. Excludes value added tax  Is not in a special economic zone where the connection would be eligible for subsidization or faster service.  Is to either the low-voltage or the medium- voltage distribution network and either  Is located in an area with no physical overhead or underground, whichever is more constraints (ie. property not near a railway). common in the area where the warehouse is  Is a new construction being connected to located. Included only negligible length in the electricity for the first time. customer’s private domain.  Is 2 stories, both above ground, with a total  Requires crossing of a 10-meter road but all surface of about 1,300.6 square meters the works are carried out in a public land, so (14,000 square feet), is built on a plot of there is no crossing into other people's 929 square meters (10,000 square feet), is private property. used for storage of refrigerated goods  Involves installing one electricity meter. The The electricity connection: monthly electricity consumption will be 26880 kilowatt hour (kWh). The internal  Is 150 meters long and is a 3-phase, 4-wire electrical wiring has been completed. Y, 140-kilovolt-ampere (kVA) (subscribed capacity) connection. Doing Business 2015 United Kingdom 34 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in United Kingdom? According to data collected by business city of an economy, except for 11 economies for Doing Business, getting electricity there requires 4.0 which the data are a population-weighted average of the procedures, takes 126.0 days and costs 90.1% of income 2 largest business cities. See the chapter on distance to per capita (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in United Kingdom - Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 United Kingdom 35 GETTING ELECTRICITY Globally, United Kingdom stands at 70 in the ranking of regional average ranking provide another perspective in 189 economies on the ease of getting electricity (figure assessing how easy it is for an entrepreneur in United 4.2). The rankings for comparator economies and the Kingdom to connect a warehouse to electricity. Figure 4.2 How United Kingdom and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2015 United Kingdom 36 GETTING ELECTRICITY What are the details? The indicators reported here for United Kingdom are OBTAINING AN ELECTRICITY CONNECTION based on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— Name of utility: UK Power Networks identified by Doing Business. Data are collected from the distribution utility, then completed and verified by City: London electricity regulatory agencies and independent professionals such as electrical engineers, electrical The procedures are those that apply to a warehouse and contractors and construction companies. The electricity electricity connection matching the standard distribution utility surveyed is the one serving the area assumptions used by Doing Business in collecting the (or areas) in which warehouses are located. If there is a data (see the section in this chapter on what the choice of distribution utilities, the one serving the largest indicators cover). The procedures, along with the number of customers is selected. associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in United Kingdom - Time to No. Procedure Cost to complete complete Submit an application to UK Power Networks for an electricity connection and await a quotation and connection offer The application can be submitted online, in person or by mail. One has to attach with the application: completed initial enquiry form if initial enquiry was made, load details and detailed site drawings. At this stage the applicant can choose either UK Power Networks or a qualified contractor to design a part of the network extension while only UK Power Networks can do the design of certain parts of the network extension and design of upstream reinforcement works. If the design is carried out by a qualified contractor and not by the UK Power Networks there are additional procedures for approval of the designs. Majority of the clients choose the UK Power Networks to complete all parts of the design. 1 20 calendar days GBP 0 UK Power Networks will do the assessment and design which will result in the budget estimate as well as the Construction and Adoption Agreement which will include the formal offer to connect. Since September 2008 UK Power Networks has not charged assessment and design charges in advance but they have been included in the final connection payment as an overhead cost. This follows a consultation by the UK energy regulator Ofgem. Ofgem is currently considering new regulation concerning assessment and design charges. A budget estimate and connection offer is free of charge. By law all of the quotations should be provided as soon as reasonably practicable with an absolute backstop of 90 days – this is a requirement of Standard License Condition 12 of the Electricity Distribution License. Doing Business 2015 United Kingdom 37 Time to No. Procedure Cost to complete complete Agency: UK Power Networks Await completion of the external connection works carried out by UK Power Networks Some of the external connection works which are contestable (not all works are contestable) can be performed by an approved contractor or by UK Power Networks. If contestable works are performed by a subcontractor additional procedures associated with inspections and testing of the contractor’s installation by UK Power Networks are required. In the majority of cases customers choose UK Power Networks to carry out all the external connection works. 2 106 calendar days GBP 22,400 Given the case assumptions the most common arrangement would be either 1) 200 amp TP & N (three phases and neutral) service off a passing LV main or 2) installation of a substation. The utility obtains the excavation permit at the local authority or Highways Agency or specific body such as TFL in London. Agency: UK Power Networks * Await issuance of a supply number by UK Power Networks, pass number on to an electricity supplier and await meter installation UK Power Networks issues a supply Number (or MPAN’s) after the connection offer has been accepted by the customer. UK Power Networks will issue a supply number (Metering Point Administration Number - MPAN) to the customer before the connection works are completed. The customer will pass the MPAN to its chosen electricity supplier. The supplier must register the MPAN with UK Power Networks. 3 The supplier will co-ordinate metering, energisation and application of 30 calendar days GBP 0 energy rates. The supply contract start date is aligned with connection energized date. The supplier will need to receive an estimate, or could work with the applicant to develop a load profile to be able to provide a supply contract. Agency: UK Power Networks/Supplier Doing Business 2015 United Kingdom 38 Time to No. Procedure Cost to complete complete * Receive meter installation and internal wiring inspection by meter operator and electricity starts flowing The metering industry in the UK is an open competitive market, and the applicant can choose their own Meter Operator or can choose to use the Meter Operator services provided by the supplier. The electricity supplier normally appoints the meter operator. Requirements regarding the conclusion of the meter operation contract vary. The applicant can sign a separate contract with the chosen meter operator or cost can be passed on through the supply contract . The internal wiring must be completed by the electrician to BS7671 standards. The electrician must carry out a full inspection and testing of the internal wiring and then provide a BS7671 certificate to both the Meter Operator and to the Electricity Distributor before the connection can be energized. The inspection of the internal wiring is done when a meter is installed. Inspection of internal wiring is done through a visual inspection by a meter operator. It is a good practice that somebody is present during the installation of the meter/internal wiring inspection. In the UK, the DNO only undertakes the work up to the cut-out. All 4 internal works are the responsibility of the customer who must appoint a 20 calendar days GBP 0 qualified electrician. All internal works must be carried out to BS 7671 standard and the Meter Operator (who works on behalf of the supplier) will need to see a BS 7671 certificate before the meter will be attached and the connection energized. There is no specific charge for the meter, but the customer can choose a meter operator and subject to measurement class there will be the annual operations and maintenance charge. The metering must be installed before a supply of electricity can be provided. The electricity can start flowing on the same day the external connection works are finished providing the supplier and the metering operator have sufficient notice. Agency: Meter Operator/Supplier * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2015 United Kingdom 39 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. The (calendar days) ranking of economies on the ease of registering Does not include time spent gathering property is determined by sorting their distance to information frontier scores for registering property. These scores are the simple average of the distance to frontier Each procedure starts on a separate day. scores for each of the component indicators. To Procedures that can be fully completed online are recorded as ½ day. make the data comparable across economies, several assumptions about the parties to the Procedure considered completed once final transaction, the property and the procedures are document is received used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure  Are limited liability companies, 100% (% of property value) domestically and privately owned and Official costs only, no bribes perform general commercial activities. No value added or capital gains taxes included  Are located in the economy’s largest business city . 2  Is located in a periurban commercial zone, and no rezoning is required.  Have 50 employees each, all of whom are nationals.  Has no mortgages attached, has been under the same ownership for the past 10 years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square  Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000  Is registered in the land registry or cada- square feet). The warehouse is in good stre, or both, and is free of title disputes. condition and complies with all safety standards, building codes and legal  Property will be transferred in its entirety. requirements. There is no heating system. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 United Kingdom 40 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest United Kingdom? According to data collected by Doing business city of an economy, except for 11 economies for Business, registering property there requires 6.0 which the data are a population-weighted average of the procedures, takes 21.5 days and costs 4.6% of the 2 largest business cities. See the chapter on distance to property value (figure 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in United Kingdom - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 United Kingdom 41 REGISTERING PROPERTY Globally, United Kingdom stands at 68 in the ranking of the regional average ranking provide other useful 189 economies on the ease of registering property information for assessing how easy it is for an (figure 5.2). The rankings for comparator economies and entrepreneur in United Kingdom to transfer property. Figure 5.2 How United Kingdom and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2015 United Kingdom 42 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut United Kingdom (table 5.1)? Table 5.1 How has United Kingdom made registering property easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform The United Kingdom speeded up property registration by DB2010 introducing automatic electronic processing of the land transaction return. The United Kingdom made transferring property easier by DB2014 introducing electronic lodgment for property transfer applications. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 United Kingdom 43 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: GBP 1,242,963 notaries and property registries. These procedures are those that apply to a transaction matching the City: London standard assumptions used by Doing Business in collecting the data (see the section in this chapter on The procedures, along with the associated time and what the indicators cover). cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in United??Kingdom Time to No. Procedure Cost to complete complete Standard enquiries of the seller delivered to the buyer's solicitor with a title pack Commercial Property Standard Enquiries (CPSE) are used by solicitors to find out details that cannot be inferred from the searches, eg. who is in actual occupation, how long the property has been used for its present use. Most solicitors use the commercial property standard enquiries prepared by members of the London Property Support Lawyers Group and endorsed by the British Property Federation. Depending on the 1-4 weeks enquiries raised, the seller's solicitor would typically spend 1-3 billable GBP 3,500 - GBP 1 (simultaneous hours to prepare the enquiries taking his client's instructions. It would 10,000 with Procedure 2) probably take the buyer's solicitor 30 minutes to 1 hour to review the replies. If there was no particular urgency, this part of the process would typically be started at the same time as the searches are requested, and would be completed in around 1 week after the results of all the searches are received. Agency: Solicitors of the parties * Conduct searches on the property The buyer's solicitor will review the registered title to the property. It is the responsibility of the buyer's conveyancer to confirm to the buyer that it will be acquiring good and marketable title to the property. 1-3 weeks GBP 300 to GBP 2 As part of the due diligence to determine whether the title is good and (simultaneous 1000 marketable, the purchaser's solicitor will conduct the following searches: with Procedure 1) 1. Investigation of the title: to know whether the land is registered at the Land Registry and know what interests affect this land and if there are any limitations. If the land is unregistered, the solicitor would have to look at the deeds and correspondence between the persons that appear on those deeds. This will be decreasingly the case as registration is now Doing Business 2015 United Kingdom 44 Time to No. Procedure Cost to complete complete compulsory. 2. Conveyancing searches, which would include: • Local Authority Search • Planning history (eg. permissions) • Desktop environmental search (to determine any environmental issues, such as flooding or contamination) • Public highway search • Chancel repair liability search (in this case the solicitor does not search the property itself, but the area in which the property is. If the area turns out to be affected by the liability to contribute to chancel repairs, then the property has to be insured against any future chancel repair claims. The amount of the insurance depends on the value of the property) • Other searches depending on the area, eg. coal mine shaft search or underground search (these issues affect the value of the property) 3. Seller company search: to see the articles of association and what powers the representatives have For a property in London, solicitors usually request most of these searches through a search portal. These search portals are the one stop shop for most searches, and solicitors need a user name to access them. The search portals will pass on to the solicitor the information that they acquire from the relevant authorities. In total, these searches are usually 300 to 1000 pounds, depending on the number of searches requested, the amount that each local authority charges, and whether the solicitor requests the standard searches or is adding additional questions, which increase the cost. The results of the searches take from one day to 2/3 weeks to come back, depending on the search. The local authority search is the lengthiest one. Once satisfied with the results of the searches, the information provided in the standard enquiries and the title pack, the buyer's solicitor will prepare a report for the buyer on the title and other matters affecting the property. Agency: Search portal Drafting of contracts and exchange of contracts once agreed Property transactions are conducted by licensed conveyancers or solicitors. However, in the case of commercial properties, these transactions are usually conducted by solicitors. The seller's solicitor will prepare a draft of the contract and submit it to the purchaser's solicitor 1 day included in 3 once approved by his/her client. The purchaser's solicitor will review the (simultaneous Procedure 1 draft and suggest any suitable amendments. Once the two parties with Procedure 4) agree on the contract, contracts are exchanged. The solicitors acting for the buyer and seller can meet to exchange contracts, but that is rare. The exchange is usually done over the telephone in accordance with a specific formula for exchanging contracts over the phone. The most common is formula B where each solicitor holds a 'part' contract signed Doing Business 2015 United Kingdom 45 Time to No. Procedure Cost to complete complete by his client. The solicitors agree over the phone specific terms of the contract (e.g., the amount of the deposit, completion date, etc.) and record the time of exchange and other details. Each solicitor sends their client's part contract to the other solicitor in the post that day. The buyer's solicitor will also send a check for the deposit (usually 10% of the purchase price). It is usual for there to be a gap in time between exchange of contracts and completion of the transfer of the property. Agency: Lawyer's office Pre-completion search with priority requested at the Land Registry The buyer's solicitor raises pre-completion enquiries of the seller's Less than a day solicitor known as 'requisitions on title' and a 'pre-completion search GBP 3 if lodged (online with priority' in order to block any movements on the property until electronically; GBP 4 procedure), completion of the property tansfer. 7 if lodged in simultaneous paper with Procedure 3 Agency: Land Registry Complete and lodge a Land Transaction Return and pay the Stamp Duty Land Tax (SDLT) (available on-line) The buyer's solicitor would usually prepare the Land Transaction Return for the approval of the buyer (as SDLT is a self-assessment tax) prior to completion. For every land transaction the purchaser must complete, sign and send the land transaction return to be received by HM Revenue & Customs before the end of 30 days following the effective date of the transaction. The return includes a self-assessment of the stamp duty land tax chargeable on the transaction returned. The completed Land Transaction Return must be sent by post to the Revenue's Rapid Data Capture center in Netherton (near Liverpool) or submitted electronically (functionality available since 2006). When the Return is submitted, the correct amount of SDLT must also be paid either by cheque, through the Less than a day CHAPS automated payment system or via direct bank transfer. Once the (online GBP 13 + 4% SDLT 5 Return has been processed by the Revenue the Revenue will issue a Land procedure) Transaction Return Certificate. If the Return has been submitted electronically, the Certificate is typically received within two hours (since 2009). If the Return has been submitted in the post, the Certificate is typically received within one month. The issue of a Land Transaction Return Certificate merely evidences that a Return has been filed at the Revenue; issuance of a Certificate does not necessarily mean that the information contained within the Return and/or amount of SDLT paid is correct. The Certificate must be sent to the Land Registry when an application for registration of the transfer is made. If the buyer acquires the property with financing, any legal charge created by it (if it is a company) must be registered at Companies House within 21 days of its creation, failing which the charge is void against a liquidator or another creditor of the company. SDLT is calculated according to the following schedule: For property Doing Business 2015 United Kingdom 46 Time to No. Procedure Cost to complete complete value under GBP 150,000, the rate is 0%. Between GBP 150,000 and GBP 250,000, the rate is 1%. Between GBP 250,000 and GBP 500,000, the rate is 3% Above GBP 500,000, the rate is 4%. Agency: HM Revenue & Customs The transfer and any legal charges are registered at the Land Registry The buyer's solicitor drafts a Transfer Deed and sends it to the seller's solicitor for approval. Once approved, it is signed by the parties. The Transfer deed makes the transfer of the property to the buyer effective on completion. Parties register the transfer deed (and any legal charges) at the Land Registry by submitting the appropriate documents and paying the Land Registry's fees. A cheque made payable to "Land Registry" must accompany the application for registration to the correct office of the Land Registry (unless there was a prior authorized agreement with the Registry to pay by direct debit) On completion of the registration the Land Registry will send to the buyer's solicitor a title information document. The documentation shall include: - Completed Land Registry form AP1 - Original and certified copy of transfer deed Less than a day 6 - Land transaction certificate (online), 7 days GBP 455 - Original and certified copy mortgage if the buyer acquires the property (paper-based) with financing The law requires conveyancers, from 10 November 2008, when they submit an application to register the interest of their client in a property, to provide details of the conveyancers who acted for all other parties involved in the transaction. If any involved person (including a company) is not represented by a conveyancer, the person lodging the application must either confirm that they are satisfied that sufficient steps have been taken to verify the identity of the unrepresented person or otherwise lodge evidence of the unrepresented person's identity. If confirmation of identity is required for an application, but is not provided, the Land Registry will reject the application. Identification requirements extend to buyers, sellers, landlords, tenants, borrowers and lenders. Land registry information available at www.landregistry.gov.uk. Agency: Land Registry * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 United Kingdom 47 Doing Business 2015 United Kingdom 48 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable Strength of legal rights index (0–12) 3 lenders’ rights to view a potential borrower’s financial history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially Depth of credit information index (0–8) 4 movable property, as security to generate capital— while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2015 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. 3 For the legal rights index, 2 new points are added in Doing Business 2015 for new data collected to assess the overall legal framework for secured transactions and the functioning of the collateral registry. 4 For the credit information index, 2 new points are added in Doing Business 2015 for new data collected on accessing borrowers’ credit information online and availability of credit scores. Doing Business 2015 United Kingdom 49 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, United Kingdom stands at 17 in the ranking of and bankruptcy laws in United Kingdom facilitate access 189 economies on the ease of getting credit (figure 6.1). to credit? The economy has a score of 8 on the depth of The rankings for comparator economies and the regional credit information index and a score of 7 on the strength average ranking provide other useful information for of legal rights index (see the summary of scoring at the assessing how well regulations and institutions in United end of this chapter for details). Higher scores indicate Kingdom support lending and borrowing. more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How United Kingdom and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2015 United Kingdom 50 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for United Kingdom and shows the scores indicators into context is to see where the economy for comparator economies as well as the regional stands in the distribution of scores across economies. average score. Figure 6.3 shows the same for the depth Figure 6.2 highlights the score on the strength of legal of credit information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2015 United Kingdom 51 GETTING CREDIT What are the details? The getting credit indicators reported here for United The data on the legal rights of borrowers and lenders are Kingdom are based on detailed information collected in gathered through a survey of financial lawyers and that economy. The data on credit information sharing are verified through analysis of laws and regulations as well collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Strength of legal rights index (0–12) Index score: 7 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable No assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of Yes movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically Yes to the products, proceeds or replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an electronic database indexed by debtor's No name? Does a notice-based collateral registry exist in which all functional equivalents can be No registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and No searches can be performed online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor Yes defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is Yes liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law protect secured creditors’ rights by No providing clear grounds for relief from the stay and/or sets a time limit for it? Doing Business 2015 United Kingdom 52 Strength of legal rights index (0–12) Index score: 7 Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through Yes public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 8 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - Yes No 1 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on Yes No 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes No 1 capita distributed? By law, do borrowers have the right to access their Yes No 1 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an Yes No 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions Yes No 1 assess the creditworthiness of borrowers? Note: Prior to Doing Business 2015, the depth of credit information index covered only the first 6 features listed above. An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 14,714,435 0 Number of individuals 47,827,635 0 Percent of total 100.0 0.0 Doing Business 2015 United Kingdom 53 Source: Doing Business database. Doing Business 2015 United Kingdom 54 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions ; Disclosure requirements for related-party transactions What do the indicators cover? Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold interested indicators and shareholders’ rights in corporate directors liable for prejudicial related-party transactions; governance through another. The ranking of economies Available legal remedies (damages, disgorgement of on the strength of minority investor protections is profits, fines, imprisonment, rescission of the transaction) determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the extent of shareholder governance index. To make the Extent of conflict of interest regulation index data comparable across economies, a case study uses (0–10) several assumptions about the business and the Sum of the extent of disclosure, extent of director liability transaction. and ease of shareholder indices, divided by 3 The business (Buyer): Extent of shareholder rights index (0-10.5)  Is a publicly traded corporation listed on the Shareholders’ rights and role in major corporate decisions economy’s most important stock exchange (or at least a large private company with Strength of governance structure index (0- multiple shareholders). 10.5) Governance safeguards protecting shareholders from  Has a board of directors and a chief executive undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Extent of corporate transparency index (0-9) specifically required by law. Corporate transparency on ownership stakes, The transaction involves the following details: compensation, audits and financial prospects  Mr. James, a director and the majority Extent of shareholder governance index shareholder of the company, proposes that (0–10) the company purchase used trucks from Sum of the extent of shareholders rights, strength of another company he owns. governance structure and extent of corporate transparency indices, divided by 3  The price is higher than the going price for used trucks, but the transaction goes forward. Strength of investor protection index (0–10)  All required approvals are obtained, and all Simple average of the extent of conflict of interest required disclosures made, though the regulation and extent of shareholder governance indices transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2015 United Kingdom 55 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in United Kingdom? The economy has a not measure all aspects related to the protection of score of 7.8 on the strength of minority investor minority investors, a higher ranking does indicate that an protection index, with a higher score indicating stronger economy’s regulations offer stronger minority investor protections. protections against self-dealing in the areas measured. Globally, United Kingdom stands at 4 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How United Kingdom and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2015 United Kingdom 56 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the protecting indices for United Kingdom in 2014. A summary of minority investors indicators into context is to see where scoring for the protecting minority investors indicators at the economy stands in the distribution of scores across the end of this chapter provides details on how the comparator economies. Figures 7.2 through 7.7 highlight indices were calculated. the scores on the various minority investor protection Figure 7.2 How extensive are disclosure Figure 7.3 How extensive is the liability regime for directors? requirements? Extent of director liability index (0-10) Extent of disclosure index (0-10) Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2015 United Kingdom 57 PROTECTING MINORITY INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Ease of shareholder suits index (0-10) Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2015 United Kingdom 58 PROTECTING MINORITY INVESTORS Figure 7.5 How extensive are shareholder rights? Extent of shareholder rights index (0-10.5) Note: The higher the score, the stronger the protections. Source: Doing Business database. Figure 7.6 How strong is the governance structure? Strength of governance structure index (0-10.5) Note: Higher scores indicate more stringent governance structure requirements. Source: Doing Business database. Doing Business 2015 United Kingdom 59 Figure 7.7 How extensive is corporate transparency? Extent of corporate transparency index (0-9) Note: Higher scores indicate greater transparency. Source: Doing Business database. Doing Business 2015 United Kingdom 60 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported of conditions relating to disclosure, director liability, here for United Kingdom are based on detailed shareholder suits, shareholder rights, governance information collected through a survey of corporate and structure and corporate transparency in a standard case securities lawyers about securities regulations, company study (for more details, see the Data Notes section of the laws and court rules of evidence and procedure. To Doing Business 2015 report). The summary below shows construct the six indicators on minority investor the details underlying the scores for United Kingdom. protection, scores are assigned to each based on a range Table 7.2 Summary of scoring for the protecting minority investors indicators in United Kingdom Answer Score Extent of disclosure index (0-10) 10.0 Which corporate body can provide legally sufficient Shareholders excluding interested 3 approval for the Buyer-Seller transaction? (0-3) parties Is disclosure by the interested director to the board of Full disclosure of all material facts 2 directors required? (0-2) Is disclosure of the transaction in published periodic filings Disclosure on the transaction and 2 (annual reports) required? (0-2) on the conflict of interest Is immediate disclosure of the transaction to the public Disclosure on the transaction and 2 and/or shareholders required? (0-2) on the conflict of interest Must an external body review the terms of the transaction Yes 1 before it takes place? (0-1) Extent of director liability index (0-10) 7.0 Can shareholders sue directly or derivatively for the damage caused by the Buyer-Seller transaction to the company? (0- Yes 1 1) Can shareholders hold the interested director liable for the Liable if unfair or prejudicial 2 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body liable for the damage cause by the transaction to the Liable if negligent 1 company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a Yes 1 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder Yes 1 plaintiff? (0-1) Can both fines and imprisonment be applied against the No 0 interested indrector? (0-1) Can a court void the transaction upon a successful claim by Voidable if negligently concluded 1 a shareholder plaintiff? (0-2) Ease of shareholder suits index (0-10) 8.0 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? Yes 1 (0-1) Can the plaintiff obtain any documents from the defendant Documents that directly prove 2 Doing Business 2015 United Kingdom 61 and witnesses during trial? (0-3) specific facts in the plaintiff’s claim Can the plaintiff request categories of documents from the Yes 1 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if successful 1 the company? (0-2) Strength of minority investor protection index (0-10) 7.8 Extent of conflict of interest regulation index (0-10) 8.3 Extent of shareholder rights index (0-10.5) 8.0 Can shareholders amend company bylaws or statutes with a No 0 simple majority? Can shareholders owning 10% of the company's share Yes 1.5 capital call for an extraordinary meeting of shareholders? Can shareholders remove members of the board of Yes 1.5 directors before the end of their term. Must a company obtain its shareholders’ approval every Yes for listed companies 1 time it issues new shares? Are shareholders automatically granted subscription rights Yes 1.5 on new shares? Must shareholders approve the election and dismissal of the Yes 1.5 external auditor? Can shareholders freely trade shares prior to a major Yes for listed companies 1 corporate action or meeting of shareholders? Strength of governance structure index (0-10.5) 6.0 Is the CEO barred from also serving as chair of the board of Yes 1.5 directors? Must the board of directors include independent board Yes for listed companies 1 members? Must a company have a separate audit committee? Yes for listed companies 1 Must changes to the voting rights of a series or class of shares be approved only by the holders of the affected Yes 1.5 shares? Must a potential acquirer make a tender offer to all Yes for listed companies 1 shareholders upon acquiring 50% of a company? Is cross-shareholding between 2 independent companies No 0 limited to 10% of outstanding shares? Is a subsidiary barred from acquiring shares issued by its No 0 parent company? Extent of corporate transparency index (0-9) 8.0 Must ownership stakes representing 10% be disclosed? Yes for listed companies 1 Must information about board members’ other directorships as well as basic information on their primary employment Yes for listed companies 1 be disclosed? Must the compensation of individual managers be Yes 1.5 disclosed? Must financial statements contain explanatory notes on significant accounting policies, trends, risks, uncertainties Yes 1.5 and other factors influencing the reporting? Must annual financial statements be audited by an external Yes 1.5 Doing Business 2015 United Kingdom 62 auditor? Must audit reports be disclosed to the public? Yes 1.5 Extent of shareholder governance index (0-10) 7.3 Source: Doing Business database. PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2013 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as the Time required to comply with 3 major taxes administrative burden of paying taxes and (hours per year) contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax payable transactions made over the year. Information is also compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if required the simple average of the distance to frontier scores for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to Profit or corporate income tax one of the component indicators, the total tax rate . 5 The financial statement variables have been updated Social contributions and labor taxes paid by to be proportional to 2012 income per capita; the employer previously they were proportional to 2005 income Property and property transfer taxes per capita. To make the data comparable across Dividend, capital gains and financial economies, several assumptions are used. transactions taxes  TaxpayerCo is a medium-size business that Waste collection, vehicle, road and other taxes started operations on January 1, 2012.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paidof by the 5 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power 0.8. The threshold is defined as and mandatory the total contributions tax rate at the 15th percentilepaid during of the company. overall distribution for all years included in the analysis. It is calculated and adjusted on a the yearly basis. second The thresholdyear of is not operation based are recorded. on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set  range Alower at the end ofstandard of deductions the distribution and of tax rates levied on medium-size  Taxes and mandatory contributions are exemptions enterprises in the manufacturing sector as observed through the paying taxes indicators. are also This reduces recorded. the bias in the indicators toward economies that do not need to levyat measured all levels significant government. ofon taxes companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 26.1%. Doing Business 2015 United Kingdom 63 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in United Kingdom—and how much do firms pay in frontier and ease of doing business ranking at the end of taxes? On average, firms make 8.0 tax payments a year, this profile for more details. spend 110.0 hours a year filing, preparing and paying Globally, United Kingdom stands at 16 in the ranking of taxes and pay total taxes amounting to 33.7% of profit 189 economies on the ease of paying taxes (figure 8.1). (see the summary at the end of this chapter for details). The rankings for comparator economies and the regional Most indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the United Kingdom. Figure 8.1 How United Kingdom and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2015 United Kingdom 64 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue rise. consolidating filings, reducing the frequency of What tax reforms has Doing Business recorded in United payments or offering electronic filing and payment. Kingdom (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has United Kingdom made paying taxes easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform The United Kingdom made paying taxes less costly for DB2013 companies by reducing the corporate income tax rate. The United Kingdom made paying taxes less costly for DB2015 companies by reducing the corporate income tax rate. On the other hand, it increased the landfill tax. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 United Kingdom 65 PAYING TAXES What are the details? The indicators reported here for United Kingdom are LOCATION OF STANDARDIZED COMPANY based on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section City: London in this chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 1 online filing 37 20% - 25% 20.9 profit 13.8% (floor gross Labor tax 1 online filing 48 of GBP 148 11.3 salaries per week) property Municipal business tax 1 0 various 1.2 value insurance Tax on insurance contracts 1 0 6% 0.1 premium weight of GBP 72 per Environmental tax 1 0 active 0.1 tonne waste depending on weight Vehicle tax 1 0 various 0 and size of vehicle value not Sales tax 1 online filing 25 20% 0 added included included in Fuel Tax 1 0 0 fuel price Doing Business 2015 United Kingdom 66 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Labor tax paid by the various gross 0 0 0 employees rates salaries Totals 8.0 110.0 33.7 Source: Doing Business database. Doing Business 2015 United Kingdom 67 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from a Customs clearance documents 10% drop in their trading costs than from a similar reduction in the tariffs applied to their products in Port and terminal handling documents global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing a Inland transport and handling standard shipment of goods by sea transport, and the number of documents necessary to complete the Customs clearance and inspections transaction. The indicators cover predefined stages Port and terminal handling such as documentation requirements and procedures Does not include sea transport time at customs and other regulatory agencies as well as at the port. They also cover trade logistics, including Cost required to export and import (US$ per the time and cost of inland transport to the largest container) business city. The ranking of economies on the ease All documentation of trading across borders is determined by sorting their distance to frontier scores for trading across Inland transport and handling borders. These scores are the simple average of the Customs clearance and inspections distance to frontier scores for each of the component Port and terminal handling indicators. To make the data comparable across economies, Doing Business uses several assumptions Official costs only, no bribes about the business and the traded goods. The business:  Is located in the economy’s largest The traded product: business city. For the 11 economies with a population of more than 100 million, data  Is not hazardous nor includes military items. for a second city have been added.  Does not require refrigeration or any other  Is a private, limited liability company, special environment. domestically owned and does not operate  Do not require any special phytosanitary or with special export or import privileges. environmental safety standards other than  Conducts export and import activities, but accepted international standards. does not have any special accreditation  Is one of the economy’s leading export or such as an authorized economic operator import products. status.  Is transported in a dry-cargo, 20-foot full container load. Doing Business 2015 United Kingdom 68 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in United population-weighted average of the 2 largest business Kingdom? According to data collected by Doing Business, cities. See the chapter on distance to frontier and ease of exporting a standard container of goods requires 4 doing business ranking at the end of this profile for more documents, takes 8.0 days and costs $1005.0. Importing details. the same container of goods requires 4 documents, Globally, United Kingdom stands at 15 in the ranking of takes 6.0 days and costs $1050.0 (see the summary of 189 economies on the ease of trading across borders four predefined stages and documents at the end of this (figure 9.1). The rankings for comparator economies and chapter for details). Most indicator sets refer to a case the regional average ranking provide other useful scenario in the largest business city of an economy, information for assessing how easy it is for a business in except for 11 economies for which the data are a United Kingdom to export and import goods. Figure 9.1 How United Kingdom and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2015 United Kingdom 69 TRADING ACROSS BORDERS What are the details? The indicators reported here for United Kingdom are LOCATION OF STANDARDIZED COMPANY based on a set of specific predefined stages for trading a standard shipment of goods by ocean transport (see the section in this chapter on what the Port Name: Southampton indicators cover). Information on the required documents and the time and cost to complete export and import is collected from local freight forwarders, City: London shipping lines, customs brokers, port officials and The predefined stages, and the associated time and cost, banks. for exporting and importing a standard shipment of goods are listed in the summary below, along with the required documents. Table 9.2 Summary of predefined stages and documents for trading across borders in United Kingdom Stages to export Time (days) Cost (US$) Customs clearance and inspections 1 75 Documents preparation 3 175 Inland transportation and handling 2 550 Ports and terminal handling 2 205 Totals 8 1,005 Stages to import Time (days) Cost (US$) Customs clearance and inspections 1 75 Documents preparation 2 180 Inland transportation and handling 2 590 Ports and terminal handling 1 205 Totals 6 1,050 Doing Business 2015 United Kingdom 70 Documents to export Bill of Lading Commercial invoice Customs export declaration Packing list Documents to import Bill of Lading Commercial invoice Customs import declaration Packing list Source: Doing Business database. Doing Business 2015 United Kingdom 71 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Procedures to enforce a contract through businesses know they can rely on the courts if a new the courts (number) customer fails to pay. Speedy trials are essential for Steps to file and serve the case small enterprises, which may lack the resources to Steps for trial and judgment stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before Time to file and serve the case local courts. Following the step-by-step evolution of Time for trial and obtaining judgment a standardized case study, it collects data relating to Time to enforce the judgment the time, cost and procedural complexity of resolving a commercial lawsuit. The ranking on the ease of Cost required to complete procedures (% of enforcing contracts is the simple average of the claim) percentile rankings on its component indicators: Average attorney fees procedures, time and cost. Court costs The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The Enforcement costs case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city. For the 11 economies with a population of more than  The seller requests a pretrial attachment to 100 million, data for a second city have secure the claim. been added.  The dispute on the quality of the goods  The buyer orders custom-made goods, requires an expert opinion. then fails to pay.  The judge decides in favor of the seller; there  The seller sues the buyer before a is no appeal. competent court.  The seller enforces the judgment through a  The value of the claim is 200% of the public sale of the buyer’s movable assets. income per capita or the equivalent in local currency of USD 5,000, whichever is greater. Doing Business 2015 United Kingdom 72 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial 2 largest business cities. See the chapter on distance to dispute through the courts in United Kingdom? frontier and ease of doing business ranking at the end of According to data collected by Doing Business, contract this profile for more details. enforcement takes 437.0 days, costs 39.9% of the value Globally, United Kingdom stands at 36 in the ranking of of the claim and requires 29.0 procedures (see the 189 economies on the ease of enforcing contracts (figure summary at the end of this chapter for details). Most 10.1). The rankings for comparator economies and the indicator sets refer to a case scenario in the largest regional average ranking provide other useful business city of an economy, except for 11 economies for benchmarks for assessing the efficiency of contract which the data are a population-weighted average of the enforcement in United Kingdom. Figure 10.1 How United Kingdom and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2015 United Kingdom 73 ENFORCING CONTRACTS Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business technology. Lower-income economies often work on recorded in United Kingdom (table 10.1)? Table 10.1 How has United Kingdom made enforcing contracts easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform The United Kingdom improved the process for enforcing DB2011 contracts by modernizing civil procedures in the commercial court. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 United Kingdom 74 ENFORCING CONTRACTS What are the details? The indicators reported here for United Kingdom are COURT NAME based on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter on Claim value: GBP 48,732 what the indicators cover). These procedures, and the time and cost of completing them, are identified County Court of England through study of the codes of civil procedure and Court name: and Wales other court regulations, as well as through questionnaires completed by local litigation lawyers City: London (and, in a quarter of the economies covered by Doing Business, by judges as well). Table 10.2 Summary of time, cost and procedures for enforcing a contract in United Kingdom OECD high Indicator United Kingdom income average Time (days) 437 540 Filing and service 30 Trial and judgment 345 Enforcement of judgment 62 Cost (% of claim) 39.9 21.4 Attorney cost (% of claim) 35.0 Court cost (% of claim) 3.7 Enforcement Cost (% of claim) 1.2 Procedures (number) 29 32 Number of procedures (without bonus points) 31 Electronic filing of court cases -1 Specialized commercial courts -1 Total number of procedures (including bonus points) 29 Doing Business 2015 United Kingdom 75 No. Procedures Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. 2 Plaintiff hires a lawyer: Plaintiff hires a lawyer. Plaintiff pays court fees: Plaintiff pays court fees (e.g. court duties, stamp duties, or any other type of court * fees). Answer ‘yes’ even if Plaintiff recovers these costs. Assignment of court case to a judge: Assignment of court case to a judge (through a random procedure, * automated system, ruling of an administrative judge, court officer, etc). Judicial scrutiny of summons and complaint: Judge examines Plaintiff's summons and complaint for 3 formal requirements as a matter of law or standard practice. Mailing of summons and complaint: Court or process server, including (private) bailiff, mails summons * and complaint to Defendant. * Proof of service: Plaintiff submits proof of service to court, as required by law or standard practice. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. Decision on pre-judgment attachment: Judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. Pre-judgment attachment order: Defendant's property is attached prior to judgment. Attachment order 4 either involves physical attachment, or is achieved by freezing, registering, marking, or otherwise separating and restricting Defendant’s movement of specific moveable assets. Hearing on pre-judgment attachment: A hearing takes place as a matter of law or standard practice to 5 resolve the question of whether Defendant’s assets can be attached prior to judgment. This process may include the submission of separate summons and petitions. Trial and judgment: Defendant files an answer to Plaintiff’s claim: Defendant files a written pleading which inc ludes his answer 6 or defense on the merits of the case (see assumption 4). Court’s mailing of allocation questionnaire to parties: The court mails a questionnaire to the parties asking * each to allocate the case among different case-tracks (for example, multi track, fast track) and asking each to frame the issues for trial. Parties’ answer to court's allocation questionnaire: Parties submit their completed allocation 7 questionnaires to the court (including their answers regarding case-tracks and the issues for trial). Pre-trial conference on procedure: The judge meets with the parties to discuss procedural issues (for 8 example which applications and motions parties intend to file, which documents parties intend to rely on, etc.). Doing Business 2015 United Kingdom 76 No. Procedures Discovery requests: Plaintiff and Defendant make requests for the disclosure of documents, attempting to * force the other party to reveal potentially detrimental documents. Check as ‘yes’ if discovery requests usually entail disputes. Discovery disputes: Following a request for discovery of documentary evidence by one of the parties, the 9 other party disputes the request and calls upon the judge to decide the issue. Check as ‘yes’ if discovery disputes are provided by law and commonly happen. Request for oral hearing or trial: Plaintiff lists the case for trial on the court’s calendar or applies for the 10 date(s) for the oral hearing or trial. * Setting of date(s) for oral hearing or trial: Judge sets the date(s) for the oral hearing or trial. Pre-trial conference aimed at preparing for trial: The judge meets with parties to make practical 11 arrangements for the trial (for example, the number of witnesses parties intend to call on during trial, how much time each party is given to present oral arguments etc.). * List of (expert) witnesses: The parties file a list of (expert) witnesses with the court (see assumption 5-a). Trial (prevalent in common law): The parties argue the merits of the case at (an) oral session(s) before the 12 court. Witnesses and expert witnesses are questioned and cross-examined during trial. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 13 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 14 judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 15 judgment is available at the courthouse. Plaintiff receives a copy of the judgment: Plaintiff receives a copy of the written judgment which is 100% 16 in favor of Plaintiff (see assumption 6). Defendant is formally notified of the judgment: Plaintiff or court formally notifies the Defendant of the 17 judgment. The appeal period starts to run from the day the Defendant is formally notified of the judgment. Appeal period: By law Defendant has the opportunity to appeal the judgment during a specified period. 18 Defendant decides not to appeal. Seller decides to start enforcing the judgment when the appeal period ends (see assumption 8). Order for reimbursement by Defendant of Plaintiff's court fees: The judgment orders Defendant to 19 reimburse Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff hires a lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by * a lawyer during the enforcement of judgment phase. Plaintiff retains an enforcement agent to enforce the judgment.: Plaintiff retains the services of a court 20 enforcement officer such as a court bailiff or sheriff, or a private bailiff. Doing Business 2015 United Kingdom 77 No. Procedures Plaintiff requests an enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). 21 Plaintiff advances enforcement fees: Plaintiff pays the fees related to the enforcement of the judgment. Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 22 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a private bailiff. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 23 private bailiff requests Defendant to voluntarily comply with the judgment. Identification of Defendant's assets by court official or Defendant for purposes of enforcement: The judge, 24 a court enforcement officer, a private bailiff or the Defendant himself identifies Defendant's movable assets for the purposes of enforcing the judgment through a sale of Defendant’s assets. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 25 assets). Report on execution of attachment: A court enforcement officer or private bailiff delivers a report on the 26 attachment of Defendant's movable goods to the judge. Call for public auction: Judge calls a public auction by, for example, advertising or publication in the 27 newspapers. 28 Sale through public auction: The Defendant’s movable property is sold at public auction. Distribution of proceeds: The proceeds of the public auction are distributed to Plaintiff (and, where 29 applicable, to other creditors, according to the rules of priority). Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which 30 Plaintiff had advanced previously. 31 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2015 United Kingdom 78 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient INDICATORS MEASURE companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By improving the expectations of creditors Appeals and requests for extension are and debtors about the outcome of insolvency included proceedings, well-functioning insolvency systems can facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and thereby improve growth and estate) sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome of Fees of insolvency administrators insolvency proceedings involving domestic legal Lawyers’ fees entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Assessors’ and auctioneers’ fees dollar recouped by secured creditors through Other related fees reorganization, liquidation or debt enforcement (foreclosure) proceedings. To determine the present Outcome value of the amount recovered by creditors, Doing Whether business continues operating as a Business uses the lending rates from the International going concern or business assets are sold Monetary Fund, supplemented with data from piecemeal central banks and the Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) determines the maximum value that can be framework index. The index tests whether economies recovered adopted internationally accepted good practices in four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of the Resolving Insolvency indicator is account based on the recovery rate and the total score of the Present value of debt recovered strength of insolvency framework index. The Strength of insolvency framework index (0- Resolving Insolvency indicator does not measure 16) insolvency proceedings of individuals and financial institutions. The data are derived from survey Sum of the scores of four component indices: responses by local insolvency practitioners and Commencement of proceedings index (0-3) verified through a study of laws and regulations as well as public information on bankruptcy systems. Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Doing Business 2015 United Kingdom 79 RESOLVING INSOLVENCY Where does the economy stand today? Combination of quality regulations and efficient practice According to data collected by Doing Business, United characterize the top-performing economies. How Kingdom scores 3.0 out of 3 points on the efficient are insolvency proceedings in United Kingdom? commencement of proceedings index, 5.0 out of 6 points According to data collected by Doing Business, resolving on the management of debtor’s assets index, 1.0 out of 3 insolvency takes 1.0 years on average and costs 6.0% of points on the reorganization proceedings index, and 2.0 the debtor’s estate, with the most likely outcome being out of 4 points on the creditor participation index. that the company will be sold as going concern. The United Kingdom’s total score on the strength of average recovery rate is 88.6 cents on the dollar. Most insolvency framework index is 11.0 out of 16. indicator sets refer to a case scenario in the largest Globally, United Kingdom stands at 13 in the ranking of business city of an economy, except for 11 economies for 189 economies on the ease of resolving insolvency which the data are a population-weighted average of the (figure 11.1). The rankings for comparator economies 2 largest business cities. See the chapter on distance to and the regional average ranking provide other useful frontier and ease of doing business ranking at the end of benchmarks for assessing the efficiency of insolvency this profile for more details. proceedings in United Kingdom. Figure 11.1 How United Kingdom and comparator economies rank on the ease of resolving insolvency Doing Business 2015 United Kingdom 80 Source: Doing Business database. Doing Business 2015 United Kingdom 81 Figure 11.2 Recovery Rate (0-100) - United Kingdom Source: Doing Business database. Figure 11.3 Strength of insolvency framework index (0-16) - United Kingdom Source: Doing Business database. Doing Business 2015 United Kingdom 82 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in United Kingdom (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has United Kingdom made resolving insolvency easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Amendments to the United Kingdom’s insolvency rules DB2011 streamline bankruptcy procedures, favor the sale of the firm as a whole and improve the calculation of administrators’ fees. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 United Kingdom 83 LABOR MARKET REGULATION Doing Business measures flexibility in the regulation of Doing Business 2015 presents the data for the labor employment, specifically as it affects the hiring and market regulation indicators in an annex. The report redundancy of workers and the rigidity of working hours. does not present rankings of economies on these This year, for the first time, the indicators measuring indicators nor include the topic in the aggregate distance flexibility in labor market regulations focus on those to frontier score or ranking on the ease of doing affecting the food retail industry, using a standardized business. Detailed data collected on labor market case study of a cashier in a supermarket. Also new is that regulations are available on the Doing Business website Doing Business collects data on regulations applying to (http://www.doingbusiness.org). The data on labor employees hired through temporary-work agencies as market regulations are based on a detailed survey of well as on those applying to permanent employees or employment regulations that is completed by local employees hired on fixed-term contracts. The indicators lawyers and public officials. Employment laws and also cover additional areas of labor market regulation, regulations as well as secondary sources are reviewed to including social protection schemes and benefits as well ensure accuracy. To make the data comparable across as labor disputes. economies, several assumptions about the worker and the business are used. Over the period from 2007 to 2011 improvements were made to align the methodology for the labor market The worker: regulation indicators (formerly the employing workers  Is a cashier in a supermarket or a grocery store indicators) with the letter and spirit of the International  Is a full-time employee Labour Organization (ILO) conventions. Only 6 of the 188  Is not a member of the labor union, unless ILO conventions cover areas measured by Doing membership is mandatory Business: employee termination, weekend work, holiday The business: with pay, night work, protection against unemployment  Is a limited liability company (or the equivalent and medical care and sickness benefits. The Doing in the economy) with 60 employees. Business methodology is fully consistent with these 6  Operates a supermarket or grocery store in the conventions. The ILO conventions covering areas related economy’s largest business city. For 11 to the labor market regulation indicators do not include economies the data are also collected for the the ILO core labor standards—8 conventions covering second largest business city. the right to collective bargaining, the elimination of  Is subject to collective bargaining agreements if forced labor, the abolition of child labor and equitable such agreements cover more than 50% of the treatment in employment practices. food retail sector and they apply even to firms that are not party to them. Between 2009 and 2011 the World Bank Group worked  Abides by every law and regulation but does not with a consultative group—including labor lawyers, grant workers more benefits than those employer and employee representatives, and experts mandated by law, regulation or (if applicable) from the ILO, the Organisation for Economic Co- collective bargaining agreements. operation and Development (OECD), civil society and the private sector—to review the methodology for the labor market regulation indicators and explore future areas of research. A full report with the conclusions of the consultative group is available at: http://www.doingbusiness.org/methodology/employing-workers. Doing Business 2015 United Kingdom LABOR MARKET REGULATION Employment laws are needed to protect workers from the past 5 years did so in ways that increased labor arbitrary or unfair treatment and to ensure efficient market flexibility. What changes did United Kingdom contracting between employers and workers. Many adopt that affected the Doing Business indicators on economies that changed their labor market regulation in labor market regulation (table 12.1)? Table 12.1 What changes did United Kingdom make in terms of labor market regulation? DB year Reform DB2010 The United Kingdom increased mandatory paid annual leave. United Kingdom increased the severance payment obligation DB2012 applicable in cases of redundancy dismissals. The United Kingdom increased redundancy costs of the DB2013 severance pay applicable in cases of redundancy dismissals. Source: Doing Business database. Doing Business 2015 United Kingdom 85 LABOR MARKET REGULATION What are the details? The data reported here for United Kingdom are based on Employment laws and regulations as well as secondary a detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Difficulty of hiring index Difficulty of hiring covers 4 areas: (i) whether fixed-term wage to the average value added per worker. The contracts are prohibited for permanent tasks; (ii) the average value added per worker is the ratio of an maximum cumulative duration of fixed-term contracts; economy’s GNI per capita to the working-age population (iii) the minimum wage for a cashier, age 19, with 1 year as a percentage of the total population. of work experience; and (iv) the ratio of the minimum Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? No No limit, but employees who have worked successive fixed term contracts for a period of four years or more will Maximum length of a single fixed-term contract (months) become permament employees unless the employer can objectively justify the continued use of a fixed term arrangements. Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study 1371.67 (US$/month) Ratio of minimum wage to value added per worker 0.27 Source: Doing Business database. Doing Business 2015 United Kingdom 86 LABOR MARKET REGULATION Rigidity of hours index Rigidity of hours covers 7 areas: (i) whether the premium for work on a weekly rest day (as a percentage workweek can extend to 50 hours or more (including of hourly pay); (v) whether there are restrictions on night overtime) for 2 months in a year to respond to a work; (vi) whether there are restrictions on weekly seasonal increase in workload; (ii) the maximum number holiday work; and (vii) the average paid annual leave for of days allowed in the workweek; (iii) the premium for workers with 1 year of tenure, 5 years of tenure and 10 night work (as a percentage of hourly pay); (iv) the years of tenure. Rigidity of hours index Data 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in workload? Maximum working days per week 6.0 Premium for night work (% of hourly pay) 0% Premium for work on weekly rest day (% of hourly pay) 0% Major restrictions on night work? No Major restrictions on weekly holiday? No Paid annual leave for a worker with 1 year of tenure (in working days) 28.0 Paid annual leave for a worker with 5 years of tenure (in working days) 28.0 Paid annual leave for a worker with 10 years of tenure (in working days) 28.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 28.0 working days) Source: Doing Business database. Doing Business 2015 United Kingdom 87 LABOR MARKET REGULATION Difficulty of redundancy index Difficulty of redundancy index looks at 9 questions: (i) whether the employer needs approval from a third party what the length is in months of the maximum to terminate 1 redundant worker; (vi) whether the probationary period; (ii) whether redundancy is employer needs approval from a third party to terminate disallowed as a basis for terminating workers; (iii) a group of 9 redundant workers; (vii) whether the law whether the employer needs to notify a third party (such requires the employer to reassign or retrain a worker as a government agency) to terminate 1 redundant before making the worker redundant; (viii) whether worker; (iv) whether the employer needs to notify a third priority rules apply for redundancies; and (ix) whether party to terminate a group of 9 redundant workers; (v) priority rules apply for reemployment. Difficulty of redundancy index Data Maximum length of probationary period (months) 6.0 Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? No Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? No Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? No Priority rules for reemployment? No Source: Doing Business database. Doing Business 2015 United Kingdom 88 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice requirements and severance payments applicable to a requirements, severance payments and penalties due worker with 1 year of tenure, a worker with 5 years and when terminating a redundant worker, expressed in a worker with 10 years is considered. One month is weeks of salary. The average value of notice recorded as 4 and 1/3 weeks. Redundancy cost indicator (in salary weeks) Data Notice period for redundancy dismissal for a worker with 1 year of tenure 1.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 5.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 10.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 5.3 of tenure) Severance pay for redundancy dismissal for a worker with 1 year of tenure 0.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure 3.5 Severance pay for redundancy dismissal for a worker with 10 years of tenure 8.5 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 4.0 of tenure) Source: Doing Business database. Social protection schemes and benefits & Labor disputes Doing Business collects data on the existence of Doing Business also assesses the mechanisms available unemployment protection schemes as well as data on to resolve labor disputes. More specifically, it collects whether employers are legally required to provide data on what courts would be competent to hear labor health insurance for employees with permanent disputes and whether the competent court is contracts. specialized in resolving labor disputes. Social protection schemes and benefits & Labor disputes indicator Data Availability of unemployment protection scheme? Yes Health insurance existing for permanent employees? Yes Availability of courts or court sections specializing in labor disputes? Yes Source: Doing Business database. Doing Business 2015 United Kingdom 89 Doing Business 2015 United Kingdom 90 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING This year’s report presents results for 2 aggregate defined as the total tax rate at the 15th percentile of the measures: the distance to frontier score and the ease of overall distribution for all years included in the analysis. doing business ranking, which for the first time this year For the time to pay taxes the frontier is defined as the is based on the distance to frontier score. The ease of lowest time recorded among all economies that levy the doing business ranking compares economies with one 3 major taxes: profit tax, labor taxes and mandatory another; the distance to frontier score benchmarks contributions, and value added tax (VAT) or sales tax. In economies with respect to regulatory best practice, addition, the cost to export and cost to import for each showing the absolute distance to the best performance year are divided by the GDP deflator, to take the general on each Doing Business indicator. When compared price level into account when benchmarking these across years, the distance to frontier score shows how absolute-cost indicators across economies with different much the regulatory environment for local entrepreneurs inflation trends. The base year for the deflator is 2013 for in an economy has changed over time in absolute terms, all economies. while the ease of doing business ranking can show only In the same formulation, to mitigate the effects of how much the regulatory environment has changed extreme outliers in the distributions of the rescaled data relative to that in other economies. for most component indicators (very few economies Distance to Frontier need 700 days to complete the procedures to start a business, but many need 9 days), the worst performance The distance to frontier score captures the gap between is calculated after the removal of outliers. The definition an economy’s performance and a measure of best of outliers is based on the distribution for each practice across the entire sample of 31 indicators for 10 component indicator. To simplify the process, 2 rules Doing Business topics (the labor market regulation were defined: the 95th percentile is used for the indicators are excluded). For starting a business, for indicators with the most dispersed distributions example, Canada and New Zealand have the smallest (including time, cost, minimum capital and number of number of procedures required (1), and New Zealand the payments to pay taxes), and the 99th percentile is used shortest time to fulfill them (0.5 days). Slovenia has the for number of procedures and number of documents to lowest cost (0.0), and Australia, Colombia and 110 other trade. No outlier was removed for component indicators economies have no paid-in minimum capital bound by definition or construction, including legal requirement (table 15.1 in the Doing Business 2015 index scores (such as the depth of credit information report). index, extent of conflict of interest regulation index and strength of insolvency framework index) and the Calculation of the distance to frontier score recovery rate (figure 15.1 in the Doing Business 2015 Calculating the distance to frontier score for each report). economy involves 2 main steps. First, individual Second, for each economy the scores obtained for component indicators are normalized to a common unit individual indicators are aggregated through simple where each of the 31 component indicators y (except for averaging into one distance to frontier score, first for the total tax rate) is rescaled using the linear each topic and then across all 10 topics: starting a transformation (worst − y)/(worst − frontier). In this business, dealing with construction permits, getting formulation the frontier represents the best performance electricity, registering property, getting credit, protecting on the indicator across all economies since 2005 or the minority investors, paying taxes, trading across borders, third year after data for the indicator were collected for enforcing contracts and resolving insolvency. More the first time. For legal indicators such as those on complex aggregation methods—such as principal getting credit or protecting minority investors, the components and unobserved components —yield a frontier is set at the highest possible value. For the total ranking nearly identical to the simple average used by tax rate, consistent with the use of a threshold in Doing Business . Thus Doing Business uses the simplest 6 calculating the rankings on this indicator, the frontier is 6 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to Doing Business 2015 United Kingdom 91 method: weighting all topics equally and, within each overall tax system. Instead, it is mainly empirical in topic, giving equal weight to each of the topic nature. The nonlinear transformation along with the components . threshold reduces the bias in the indicator toward 7 economies that do not need to levy significant taxes on An economy’s distance to frontier score is indicated on a companies like the Doing Business standardized case scale from 0 to 100, where 0 represents the worst study company because they raise public revenue in performance and 100 the frontier. All distance to frontier other ways—for example, through taxes on foreign calculations are based on a maximum of 5 decimals. companies, through taxes on sectors other than However, indicator ranking calculations and the ease of manufacturing or from natural resources (all of which are doing business ranking calculations are based on 2 outside the scope of the methodology). In addition, it decimals. The difference between an economy’s distance acknowledges the need of economies to collect taxes to frontier score in any previous year and its score in from firms. 2014 illustrates the extent to which the economy has closed the gap to the regulatory frontier over time. And Calculation of scores for economies with 2 cities in any given year the score measures how far an covered economy is from the best performance at that time. For each of the 11 economies for which a second city Treatment of the total tax rate was added in this year’s report, the distance to frontier score is calculated as the population-weighted average This year, for the first time, the total tax rate component of the distance to frontier scores for the 2 cities covered of the paying taxes indicator set enters the distance to (table 12.1). This is done for the aggregate score, the frontier calculation in a different way than any other scores for each topic and the scores for all the indicator. The distance to frontier score obtained for the component indicators for each topic. total tax rate is transformed in a nonlinear fashion before it enters the distance to frontier score for paying taxes. Table 12.1 Weights used in calculating the distance to As a result of the nonlinear transformation, an increase in frontier scores for economies with 2 cities covered the total tax rate has a smaller impact on the distance to Economy City Weight (%) frontier score for the total tax rate—and therefore on the Dhaka 78 distance to frontier score for paying taxes—for Bangladesh Chittagong 22 economies with a below-average total tax rate than it São Paulo 61 would have in the calculation done in previous years (line Brazil Rio de Janeiro 39 B is smaller than line A in figure 15.2 of the Doing Shanghai 55 China Business 2015 report). And for economies with an Beijing 45 extreme total tax rate (a rate that is very high relative to Mumbai 47 India the average), an increase has a greater impact on both Delhi 53 these distance to frontier scores than before (line D is Jakarta 78 Indonesia bigger than line C in figure 15.2 of the Doing Business Surabaya 22 Tokyo 65 2015 report). Japan Osaka 35 The nonlinear transformation is not based on any Mexico City 83 Mexico economic theory of an “optimal tax rate” that minimizes Monterrey 17 distortions or maximizes efficiency in an economy’s Lagos 77 Nigeria Kano 23 Karachi 65 Pakistan that from the simple average method because both these methods Lahore 35 assign roughly equal weights to the topics, since the pairwise Moscow 70 Russian Federation correlations among indicators do not differ much. An alternative to the St. Petersburg 30 simple average method is to give different weights to the topics, New York 60 depending on which are considered of more or less importance in the United States Los Angeles 40 context of a specific economy. Source: United Nations, Department of Economic and Social 7 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned Affairs, Population Division, World Urbanization Prospects, to the strength of legal rights index and 40% to the depth of credit 2014 Revision. http://esa.un.org/unpd/wup/CD- information index. Indicators for all other topics are assigned equal ROM/Default.aspx. weights Doing Business 2015 United Kingdom 92 Economies that improved the most across 3 or more Selecting the economies that implemented regulatory Doing Business topics in 2013/14 reforms in at least 3 topics and had the biggest improvements in their distance to frontier scores is Doing Business 2015 uses a simple method to calculate intended to highlight economies with ongoing, broad- which economies improved the ease of doing business based reform programs. The improvement in the the most. First, it selects the economies that in 2013/14 distance to frontier score is used to identify the top implemented regulatory reforms making it easier to do improvers because this allows a focus on the absolute business in 3 or more of the 10 topics included in this improvement—in contrast with the relative improvement year’s aggregate distance to frontier score. Twenty-one shown by a change in rankings—that economies have economies meet this criterion: Azerbaijan; Benin; the made in their regulatory environment for business. Democratic Republic of Congo; Côte d’Ivoire; the Czech Republic; Greece; India; Ireland; Kazakhstan; Lithuania; the former Yugoslav Republic of Macedonia; Poland; Ease of Doing Business ranking Senegal; the Seychelles; Spain; Switzerland; Taiwan, China; Tajikistan; Togo; Trinidad and Tobago; and the The ease of doing business ranking ranges from 1 to 189. United Arab Emirates. Second, Doing Business sorts these The ranking of economies is determined by sorting the economies on the increase in their distance to frontier aggregate distance to frontier scores, rounded to 2 score from the previous year using comparable data. decimals. Doing Business 2015 United Kingdom 93 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 10,700 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 139 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, reform case repreneurship studies and customized economy and regional profiles Distance to frontier http://www.doingbusiness.org/reports Data benchmarking 189 economies to the frontier in regulatory practice Methodology http://www.doingbusiness.org/data/distance-to- The methodologies and research papers underlying frontier Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good practices identified Research by Doing Business have been adopted Abstracts of papers on Doing Business topics and http://www.doingbusiness.org/data/good-practice related policy issues http://www.doingbusiness.org/research Doing Business iPhone App Doing Business at a Glance—presenting the full Doing Business reforms report, rankings and highlights for each topic for Short summaries of DB2015 business regulation the iPhone, iPad and iPod touch reforms, lists of reforms since DB2008 and a ranking http://www.doingbusiness.org/specialfeatures/ simulation tool iphone http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2015 United Kingdom 94