10th GBCI report: rankings revealed - Netherlands and UK among 10 easiest countries to invest in. The US loses position in top 10. France overtakes Brazil as the most complex jurisdiction to do business

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May 24, 2023, 07:01 ET

LONDON, May 24, 2023 /PRNewswire/ -- TMF Group, a leading provider of compliance and administrative services, today launches the 10th edition of the Global Business Complexity Index (GBCI).

The comprehensive report analyses 78 jurisdictions which account for 92% of the world's total GDP and 95% of net global FDI flows. It compares 292 annually tracked indicators, offering data on key aspects of doing business, including incorporation timelines, payroll and benefits, rules, regulations, tax rates, and other compliance factors.

The study reveals some important news: the US has fallen out of the bottom ten (the easiest places to do business) after many years of featuring in that prestigious list. Meanwhile, Denmark, the UK and Hong Kong keep their places in the ten least complex jurisdictions.

The list of the ten most business-friendly jurisdictions has some new entries, such as Malta (69^th position vs 67^th place in 2022) and the Netherlands (75^th position vs 56^th place in 2022). The Cayman Islands (78^th) retains its place as the easiest jurisdiction to do business.

The UK has moved down the ranking this year, cementing its position in the ten least complex places to do business. Great political turmoil in 2022 and high inflation impacted the economy. However, the political environment has settled and over the next 12 months the UK is expected to remain a simple place to do business. The authorities here are consistent at implementing new funds and capital markets regulations and are also keeping in line with ESG recommendations. This makes it attractive to foreign investors.

The United States has slipped out of the ten least complex but it still one of the simplest jurisdictions. A key driver is that the government actively looks to be business friendly: in recent years corporate tax rates were reduced in an effort to increase investment. Thanks to its skilled workforce and clear global reach, the US will remain one of the most attractive jurisdictions for foreign businesses.

When it comes to complex jurisdictions, France takes the top spot in this year's GBCI, following two years in second position. Factors making it the most complex place to do business include the focus on maintaining traditional ways of working, such as the use of the French language, and the historically stringent employee protection laws.

TMF Group CEO Mark Weil said: "World trade is in recovery from the difficult years of the Covid-19 pandemic. Challenges of course remain including the ongoing war in Ukraine, associated sanctions and geopolitical tensions. Rising interest rates have also been the trigger for stresses in the financial markets that have so far been contained by prompt intervention by relevant authorities. Against that backdrop, we want to do all we can to simplify the path to investing and operating around the world. Trade and investment stimulate economic growth. Complex places to do business are often among the most attractive, whether that involves gaining access to resources, workers or consumers."

The report also identifies key themes shaping the global business landscape and regulatory environment:

Geopolitical and economic turbulence

Since the start of the war in Ukraine, jurisdictions have observed disrupted supply chains and increased energy prices, as well as barriers to international trade. This makes doing business more challenging, particularly across borders. Many jurisdictions that were reliant on Russia and Ukraine for exports like grain and oil are severely impacted, which increased inflation, demonstrating that the impacts of the war are global, not limited to Europe.

In 2020, 74% of those jurisdictions reported that businesses would find it more appealing to operate there over the next five years. This has dropped to 65% in 2023, suggesting that optimism has faded somewhat, and organisations may be taking a more cautious approach over the coming years.

Another worrying indicator is rising inflation, which causes significant issues such as huge price increases on essentials like food, fuel and utilities. As a consequence, employees are seeking more financial support from their employers to make ends meet. This has led to widespread salary demand increases, and workers seeking better opportunities elsewhere. 60% of jurisdictions report that inflation has increased employee attrition.

Global compliance challenges

Compliance requirements, such as reporting on ultimate beneficial owners (UBO) and persons of significant control (PSC), have been a core part of conformity processes in locations around the world in recent years. Regulations such as know your customer (KYC) and anti-money laundering (AML) have been adopted by at least some industries across all jurisdictions.

Due to this pressure and increased complexity, almost half (48%) of jurisdictions report that at least some companies will rethink their expansion goals. This demonstrates the true impact that global compliance legislation and reporting can have, limiting the attractiveness of a jurisdiction and encouraging businesses to look elsewhere.

Environmental, social and governance (ESG) considerations

ESG criteria are increasingly prominent, with companies now required to abide by at least one requirement in the majority of jurisdictions, with diversity to the fore. Half of jurisdictions (51%) require companies to abide by laws relating to diversity of the workforce, with over one quarter (27%) requiring companies to report on it.

Almost half (49%) of jurisdictions require all companies to submit reports on employee demographics to government authorities, which has continued to grow year on year (28% in 2020, 41% in 2021, 47% in 2022). In South America, 80% of jurisdictions require all companies to report on employee demographics, followed by 64% of jurisdictions in APAC.

As the importance of ESG continues to grow, companies will have to navigate new requirements beyond simple box-ticking exercises and commit to reporting on their ESG indicators. However, given that ESG requirements are in their infancy in many jurisdictions, the impacts and future of ESG reporting remains unclear.

Top and bottom ten (1 = most complex, 78 = least complex)

1. France
2. Greece
3. Brazil
4. Mexico
5. Colombia
6. Turkey
7. Peru
8. Italy
9. Bolivia
10. Argentina

69. Malta
70. Jersey
71. New Zealand
72. United Kingdom
73. British Virgin Islands
74. Hong Kong
75. The Netherlands
76. Curaçao
77. Denmark
78. Cayman Islands

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SOURCE TMF Group