United Kingdom Corruption Report

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Corruption does not represent a constraint to business in the United Kingdom, and companies are unlikely to be put in a situation where bribery is needed. Despite some isolated instances of abuse of administrative power, the UK promotes high ethical standards in public services. The UK Bribery Act establishes liability for corruption offenses committed anywhere in the world, including bribery between businesses and of foreign public officials. It also introduces a liability offense for companies that fail to prevent bribery committed by representatives; this can be avoided only by implementing preventive anti-corruption policies and procedures. There is no distinction made between bribery and facilitation payments, and these practices rarely occur in the UK. Gifts and hospitality can be considered illegal depending on the intent and benefit obtained. The UK has a strong legal framework for fighting bribery at home and abroad, and the agencies tasked with fighting corruption are efficient and independent.

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Judicial System

There is a low risk of corruption in the British judicial system. Bribes and irregular payments in return for favorable judicial decisions are rare (GCR 2015-2016). Companies express strong confidence in the independence of the judiciary and are satisfied with the legal framework pertaining to settling disputes and challenging regulations (GCR 2017-2018). The judiciary is perceived as independent, accountable and open (ICS 2017). The court system is efficient, and the rule of law is well established (ICS 2017). About one in five judges believe that some judges have been appointed or promoted based on factors other than experience or merit (ENCJ 2017). Judges and prosecutors have been commended by GRECO for effectively preventing corruption, and the government is continuously implementing anti-corruption training in the form of new-material and e-learning for judges (GRECO 2015). Judges have been trained with a ‘Judicial Conduct and Ethics’ module containing in-and-out-of-court filmed scenarios and raising ethical and conduct dilemmas (GRECO 2015).

Enforcing a contract in the UK is significantly less time-consuming than elsewhere in the OECD, but the costs involved are more than double the OECD average (DB 2018). The United Kingdom is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

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The British security sector poses a moderately low risk of corruption. Companies perceive the police services effective in protecting them from crime (GCR 2017-2018), and the government has effective mechanisms to investigate and punish police abuse and corruption (HRR 2016). A fifth of Britons perceive the police as corrupt, but no respondents reported having been asked for a bribe (Eurobarometer 2017). The amount of complaints against police officers for serious corruption has doubled in four years (The Times, May 2017). However, the Independent Police Complaints Commission (IPCC) and Her Majesty’s Inspectorate of Constabulary (HMIC) have found and confirmed that the overwhelming majority of police officials operate with integrity and honesty (UKACP 2014).

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Public Services

There is a low risk of corruption when interacting with public services in the UK. Government bureaucracy is considered burdensome but irregular payments and bribes very rarely occur when using public services (GCR 2015-2016). Businesses almost never report being asked to pay bribes to obtain business permits, licenses and other related services (European Commission, Feb. 2014). About one in five Britons believe officials issuing business permits are corrupt, but none report having been asked for a bribe (Eurobarometer 2017). The regulatory system is transparent and there are clear guidelines for business on how to act (ICS 2017). Brexit has brought uncertainty about whether the UK will follow EU regulatory standards in the coming years or will develop its own standards (ICS 2017). The government and public administration act in line with legal provisions (SGI 2017). The government has extensive control over the legislative process; they are able to alter provisions if they constitute a hindrance to the government’s policy objectives (SGI 2017). The reduction of the cost of regulation is a long-standing policy goal for UK governments; Regulatory Impact Assessments (RIAs) have to be prepared for all legislation (SGI 2017). However, some experts contend that the results of RIAs are not systematically integrated into the decision-making process (SGI 2017).

Starting a business takes significantly less time than elsewhere in OECD countries (DB 2018). Dealing with construction permits takes about half the time of the OECD average (DB 2018).

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Land Administration

There is a moderate risk of corruption in the UK’s land administration. Companies express confidence in the government’s ability to protect property rights (GCR 2017-2018). Companies report that bribery almost never occurs when obtaining building permits (European Commission, Feb. 2014). A quarter of Britons perceive officials issuing building permits to be corrupt, but no respondents indicate having been asked for a bribe (Eurobarometer 2017). Corruption cases involving building development sometimes arise at the local level (SGI 2017).

Money laundering through the property market is a growing problem. Secret offshore companies have laundered money by buying property in the UK, rendering the UK property market a safe haven for corrupt money (TI 2017). Despite domestic legislation being considered exemplary in guaranteeing beneficial ownership transparency for UK companies, secret company ownership in UK Overseas Territories are the main obstacle to investigating money laundering. In fact, more than 35,000 property titles in London are held by companies in the British Overseas Territories and Crown Dependencies (TI 2017). It is estimated that over GBP 4.2 billion in real estate assets is held in the UK by individuals and companies whose activities represent a high risk of money laundering (TI 2017).

The time required to register property in the UK is roughly in line with the OECD average (DB 2018).

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Tax Administration

Corruption in the tax administration represents a moderately low risk of corruption for businesses. Companies report that irregular payments and bribes when making tax payments are uncommon (GCR 2015-2016). About a fifth of citizens perceive the tax administration as corrupt (Eurobarometer 2017). The British tax system is transparent, and foreign-owned companies are taxed like local firms (ICS 2017). However, the House of Commons Public Accounts Committee has been highly critical of the governance of Her Majesty’s Revenue and Customs service (HMRC) (SGI 2017). The Committee has expressed concerns that HMRC might not be ready to process customs declaration, which are expected to increase five-fold, following Brexit in March 2019 (UK House of Commons 2017). The VAT gap, the difference between the tax that is estimated to be owed and the amount collected, reached over EUR 22 billion, representing a 10,88 percent gap (EC VAT GAP 2017).

Companies should be aware that the Income Act and the Corporation Tax Act forbid any tax deduction of payments that constitute a criminal offense, including foreign bribery. Paying taxes is less time-consuming on average compared with other OECD countries (DB 2018).

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Customs Administration

There is a moderately low risk of corruption when dealing with the UK’s customs administration. Companies report that bribes and irregular payments during customs procedures are uncommon (GETR 2016). Companies express satisfaction with the time-predictability and efficiency of the clearance process (GETR 2016). Corruption at the border is not considered a problematic factor for importing and exporting (GETR 2016). An assessment of organized crime in the UK found that the smuggling of illegal commodities is likely facilitated by corruption at the ports in some cases (NCA 2017).

The cost and time involved in complying with border procedures for exporting exceeds the OECD average (DB 2018). However, the time and costs required to comply with import procedures are significantly below the OECD averages (DB 2018).

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Public Procurement

There is a moderate risk of corruption in the UK’s public procurement sector. Companies report that bribes and irregular payments in the process of awarding public contracts and licenses are uncommon (GCR 2015-2016). Likewise, favoritism in the decisions of government officials is perceived to be fairly uncommon, while the diversion of public funds is very uncommon (GCR 2017-2018). Around one in five companies reported having experienced procurement fraud in 2016, which is down from one in four in 2014 (PwC 2016). Nearly a fifth of business respondents believe that corruption has prevented their company from winning a public tender in past years (European Commission, Feb. 2014). The total cost of procurement fraud in the UK is estimated at roughly GBP 7,3 billion per year as a share of central government procurement costs and roughly GBP 4,4 billion per year as a share of local government procurement costs, representing roughly five percent of the total procurement expenditure (AFI 2017). UK procurement regulations follow the EU public procurement directives. Regardless of where the act was committed, a company can be debarred from participating in public procurement if it has been previously convicted of a criminal offense or if it has committed an act of grave misconduct. See the UK Public Contracts Regulations 2015.

Allegations of corruption in the development of two skyscrapers in London’s Canary Wharf area surfaced in December 2017 (BBC, Dec. 2017). It is alleged that a businessman linked to a local government council led by the Labour party demanded a GBP 2 million bribe from the developers in exchange for planning permission (BBC, Dec. 2017). An external investigation has been launched and the case has been referred to the Serious Fraud Office (BBC, Dec. 2017). Companies are recommended to implement special due diligence procedures to counter the likelihood of encountering corruption in the procurement process.

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Natural Resources

Corruption is not an obstacle to business in the UK’s natural resources sector. No companies report being asked or expected to pay a bribe for environmental permits (European Commission, Feb. 2014). As Europe’s second-largest oil and gas producer, Britain was successfully admitted as a candidate country to the Extractive Industries Transparency Initiative (EITI), which aims to ensure the transparent publication and accountability of extractive industry revenues and expenses. The UK is perceived as a leader in international efforts to increase transparency in the extractive industries, as EITI was set-up under its leadership (EITI 2015). The Natural Resource Governance Institute (NRGI) reports that the UK has good governance controls in place in the sector (NRGI 2017). NRGI signaled, nonetheless, that the UK could further improve by disclosing more details of licensing, ownership, and environmental documentation (NRGI 2017). The UK has declared its intention to set-up a beneficial ownership registry (EITI 2017). As the first EU member state, the country has implemented Chapter 10 of the EU Accounting Directive, which stipulates that extractive companies have to disclose payments made to governments since 2015 (UKACP 2017-2022).

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The UK government generally implements the anti-corruption framework effectively (HRR 2016). The UK Bribery Act establishes criminal offenses for bribing (giving, promising and accepting) foreign public officials and bribery between businesses, and the offenses are enforceable against acts committed around the globe. Trading in influence, embezzlement, and abuse of function are also criminalized under the Act. Criminal offenses apply to companies and to persons, and it is an offense when companies fail to prevent corruption. Businesses can be held responsible for persons acting on their behalf, including employees and third parties. The Bribery Act provides companies with a full defense if a company can document ‘adequate procedures’ to prevent corruption prior to an offense. The Ministry of Justice has published the Quick start guide, which references the Business Anti-Corruption Portal, and the more detailed Guidance to the Bribery Act, which can assist companies in adopting ‘adequate procedures’ to prevent bribery. There is no exception for facilitation payments, and small-value payments, gifts, and hospitality may be illegal depending on their intent and benefit obtained. Sanctions for violating the Bribery Act include unlimited fines, imprisonment of up to ten years and debarment from public contracts. The Civil Service Code prohibits the acceptance of gifts or hospitality by civil servants which compromise their personal judgment or integrity. The Proceeds of Crime Act (POCA) allows authorities to confiscate the proceeds of crimes, including corruption offenses. Related UK legislation includes the Fraud Act and Money Laundering Regulations, which apply to a number of business sectors, including financial and credit businesses, accountants and estate agents. Whistleblowers are protected by the Public Interest Disclosure Act, which covers public and private sector employees. Corruption risks that lay with lobbying include the absence of requirements on lobbyists to report their expenditures on lobbying, including gifts and hospitality to public officials, the lack of limits set on political party donations, the permission of legislators to retain conflicts of interest as long as these are declared, and the allowing of legislators and civil service officials to meet with lobbyists without needing to report the meetings (TI, Feb. 2015). The OECD has commended the UK on its increasing enforcement of foreign bribery offenses (OECD 2017). The OECD does call on the UK to further improve inter-agency cooperation and to ensure the Serious Fraud Office (SFO) has the proper resources it needs to continue its enforcement actions (OECD 2017).

The UK is a signatory to the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption (UNCAC), the Council of Europe’s Civil and Criminal Law Conventions against Corruption and is a member of the Group of States Against Corruption (GRECO). The UK has published an Anti-Corruption Strategy 2017-2022.

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Civil Society

Freedom of the press is legally guaranteed, and British media is independent, diverse, and journalists are able to operate freely without fear of attack and serious extralegal harassment (FotP 2017; HRR 2016). Concerns regarding press accountability have been raised in light of the News of the World case, in which the telephones of hundreds of public figures and crime victims had been illegally hacked by journalists (FotP 2017). The newspaper industry has launched its own regulator, the Independent Press Standards Organisation (IPSO) (FotP 2017). The official regulator, the Independent Monitor for the Press (IMPRESS) was recognized as the official print regulator in October 2016, but only about forty publications have joined it (FotP 2017). Concerns have also been raised about increasing government surveillance of citizens and journalists following the passage of a comprehensive bill in November 2016 that gives security agencies massive powers, and grants limited protection to journalists and their sources (FotP 2017). Only a quarter of Britons indicate they trust the media (Edelman 2017). The UK’s media environment is considered ‘free’ (FotP 2017).

The government generally respected the rights of association and assembly (HRR 2016). Since 2010, the government has increasingly incorporated civil society organizations into decision-making processes (SGI 2017).

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