Dubai and London are two locations that often come up when entrepreneurs think about expanding their business, and choosing between them can be daunting. In this article, we will weigh up the advantages and disadvantages of starting a business in Dubai or London, helping one to make a more informed decision. 

What are the arguments for and against Dubai?

One of the most significant advantages of setting up a business in Dubai is the favourable tax climate. It is the perfect place for businesses to develop and thrive since there is a low rate of corporation tax^[i] (9%), no personal income taxes, low value-added taxes^[ii] (5%), and no capital gains taxes^[iii] (0%). When compared to London, firms may earn more and have reduced operational costs because of the lack of these taxes. Profit enables plans for development and reinvestment, driving both aggregate supply and demand. Employees make more money when personal income taxes aren't applied, increasing their purchasing power and raising consumer spending, which boosts aggregate demand. On top of this, the government adopts a number of programmes to encourage and assist enterprises, including giving incentives and subsidies to new entrepreneurs.

However, Dubai’s business environment and dependency on oil may pose challenges to new startups. It is highly competitive and saturated, with many businesses from different sectors operating in the region. As a result, new startups may struggle to gain market share^[iv] and establish their brand in a crowded market, making it difficult to attract customers and generate revenue due to high barriers to entry. Due to the complexity of the industry, Dubai's regulatory system can be difficult for new companies to navigate because they must do so before they can function. This may be expensive and time-consuming, especially for young firms with little funding. Although Dubai has broadened its economy recently, it is regrettably still mostly dependent on oil exports. This puts the economy at risk from changes in the price of oil globally, which is negative for new businesses since the government may not have as much money available to help them when oil prices are low globally.

What are the arguments for and against London?

London is a well-established location for businesses, with a highly skilled and educated workforce, and a stable political environment. Having access to a pool of skilled workers is beneficial as it provides the business with necessary expertise and knowledge to help startups succeed and grow. Furthermore, skilled workers bring new ideas to the table, allowing startups to differentiate themselves from existing competitors in their industry and develop innovative products and services that meet the needs of customers. By attracting and retaining skilled workers, the business will be capable of surviving in the market whilst making profits, thus contributing to long term success. Despite Brexit, the UK still has access to the European market, which is the largest single market in the world. This makes it an attractive location for businesses looking to expand into Europe.

However, the UK has a comparatively high tax rate, which places a heavy financial burden on companies doing business there. This may have a substantial negative effect on profitability and restrict how quickly new and small enterprises can expand. Second, living expenses in London are famously high, including expensive rent and other costs. Businesses, especially those with limited resources, may experience tremendous strain as a result of these prices. Additionally, the UK is frequently known for its bureaucracy, which makes it difficult for business owners to manage rules and formal procedures. Red tape and complicated administrative processes can impede business growth and slow down operations.

Footnotes:

[i] Corporation Tax - a type of direct tax levied on the income or capital of corporations and other similar legal entities.

[ii] Value Added Tax - a consumption tax on goods and services that is levied at each stage of the supply chain where value is added.

[iii] Capital Gains Tax - a levy on the profit that an investor makes from the sale of an investment such as stock shares.

[iv] Market Share - the percentage of the total revenue or sales in a market that a company's business makes up; the portion of a market controlled by a particular company or product.

Bibliography:

Why Dubai has potential to be top 10 city for entrepreneurs - Arabian Business