Australia and Europe's relationship goes back to European settlement in 1788, and while so many things have changed, a close economic connection continues. In 2016, the European Union contributed to 14.6% of Australia's exports and imports, and 20.7% of foreign direct investment (FDI).
The United Kingdom is Australia's second largest FDI destination, and third largest FDI source. Yet despite their economic history, for many UK-based businesses, Australia is not front of mind as a place to expand into. Firstly, Australia is perceived as remote. Secondly, many Australian and British businesses that have attempted to expand into the other jurisdiction haven't succeeded – mostly due to a lack of proper planning, a misunderstanding of the subtle cultural differences between the two countries, or businesses simply trying to transpose what works at home without adapting to a local market.
“If you're making an investment on the other side of the world, you need to pay close attention to it.”
But with proper consideration and planning, many British businesses recognise the positive attributes that make Australia a viable place for expansion, and likewise, make the UK a possible stepping stone into Europe – and, as a result, they reap the benefits.
Businesses crave certainty
For businesses looking to invest overseas, one of the most important considerations is certainty. Businesses want certainty around taxation and a level playing field in terms of regulation. Australia is known for this – with 27 years of good economic growth and a financially healthy outlook, Australia is considered a safe place to invest.
Likewise, for Australian businesses looking to invest in Europe, even post-Brexit, starting in the UK is often the best bet because it is so economically similar to the Australian system. The legal framework, taxation and workplace legislation are similar to Australia's, and are relatively straightforward. A challenge in investing across Europe is taking on markets that are significantly different to each other, whereas the UK is a fairly simple place to start.
Opportunities for Australian and European businesses
With demographics shifting sharply towards an ageing population in countries like Germany, Switzerland and the UK, there are a number of opportunities for investment in healthcare. Similarly, non-medically assisted senior living is under-developed in the UK. Retirement villages don't really exist. There is a great opportunity for Australian operators to take advantage of a gap in the market by utilising their know-how and experience.
For European businesses investing in Australia, we're seeing opportunities off the back of innovations in agriculture, renewable energy, healthcare and defence. Technology is also a growing area, and MinterEllison has been working with a number of fintech businesses that have grown up in London and are now expanding to Australia. In particular, in the defence sector, the A$50 Billion Future Submarine Programme awarded to France’s DCNS and the $A35 billion new Frigate project awarded to BAE Systems plc of the UK are drawing significant supply chain interest from across Europe.
A Free Trade Agreement, currently being negotiated between Australia and the European Union, will allow a relaxation of regulation around food products and agriculture, which will open up huge opportunities too.
Bridging the gap between Australia and Europe
Key to success in investing across jurisdictions is good advice from people on the ground.