Jessica Fino 24 Feb 2017 05:03pm

UK businesses should invest in emerging economies, says PwC

UK companies should turn to mid-sized emerging economies like Colombia, Poland and Vietnam for growth opportunities, according to PwC

The Big Four firm's Global Economy Watch said that investing in these countries, which it called “pockets of opportunity”, could offer some of the best short-to-medium term prospects for businesses looking to grow in their respective regions.

Although the UK is expected to be the fastest growing economy in the G7 to 2050, its long-term annual growth rate is estimated to be just under 2% on average. This is compared with Vietnam at 5%, Colombia at 3% and Poland at 2.5%.

The report pointed out that Vietnam has agreed a new free trade agreement with the EU. At same time, domestic and foreign investment in labour-intensive industries has led to strong economic growth in the country recently.

Poland was also named in the report thanks to its low labour costs and its liberal foreign direct investment regime.

The Colombian government is expected to cut tax burden on business, with VAT increased to 19% to broaden the tax base away from the corporate sector, PwC said. It also plans to spend $70bn (£56bn) on infrastructure over the next two decades and tackle its connectivity issues.

Barret Kupelian, senior economist at PwC, said, “UK businesses have a lot to gain from engaging with fast growing emerging economies. While converting trust and reputation into revenue in a new market takes time, mid-size economies can be quicker to crack than their larger counterparts.

“In addition to having strong growth potential, the three countries we’ve identified have all shown themselves to be open to foreign businesses and investors through a range of trade agreements, liberal foreign direct investment regimes, tax reforms and government initiatives to reform aspects of their economy.”

The report said it expects the US Federal Reserve to tighten its monetary policy “in a cautious and measured manner” this year, which will have international consequences.

It warned that businesses and investors should remain aware of the impact of a stronger dollar on emerging markets and continue to stress test their business plans accordingly.