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Researches 1 December 2022

Welcome to Londongrad: UK companies with Russian founders

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Welcome to Londongrad: UK companies with Russian founders

YouControl R&D Centre assessed the activity of Russian companies on the British market and traced the expansion of Russia’s corporate interests on the UK equity capital market. Analysts determined the number of British companies with Russian owners, the geographical distribution of subsidiaries, and the scope of their business activity. Details are in a new study. 

 

Key findings:

1) Russian owners have almost 11.3 thousand companies in the UK.

2) Over half of Russian companies are in London.

3) Russian business in the UK is most represented in IT, business services and retail.

5) Among all shareholders of Russian companies in the UK, 95% have Russian citizenship. At the same time, only half of the Russian owners of British companies live in Russia.

Timely identification of the "Russian trace" in the counterparties' activities will allow British businesses to avoid fines. It will be the key to a good reputation and compliance with ESG standards. 

 

Business on the Thames

 

The United Kingdom is Ukraine's leading ally in combating the aggression of the Russian Federation, including solid support on the economic sanctions frontline. At the same time, the previous long history of close interaction between British and Russian businesses in the financial and economic spheres has created a strong and extensive web of cross-shareholding chains. In particular, the intensification of Russian capital flows to the UK, the migration of "crony capitalism" representatives and families of the bureaucratic rents beneficiaries. 

According to Companies House gov.uk and USRLE registers, Russian owners have almost 11.3 thousand companies in the UK. And this is nearly five times more than the number of Russian companies with the participation of British non-residents in the authorised capital. More than 2,000 British companies continue doing business with Russia. YouControl formed and analyzed a complete list of British companies with current and historic business ties with Russia and has a comprehensive list of Russian owners doing business in the UK.

Among the 11.3 thousand British companies with Russian capital, 76.8% are fully active. At the same time, 2.4 thousand (21%) have a proposal to strike off the Companies House register (Active - Proposal to Strike off). An Active Proposal to Strike Off is when the directors ask the shareholders to close the company. Strike-off is when the limited liability company is removed or "struck off" from the register. Once removed from the registry, it ceases to exist and can no longer trade, make payments or sell assets. The rest (almost 2%) have the status of "inactive", "in the process of dissolution", "dissolved", "into administration", and others.

The relatively high proportion of companies under the liquidation process testifies to the intensification of the folding of Russian business activity in the UK. The closure of companies with Russian capital may be mandatory for sanctioned legal entities under pressure from the authorities or a voluntary gesture on the part of the shareholders. During the large-scale war in Ukraine, Russians tend to re-register their businesses in jurisdictions more loyal to the Russian Federation or transfer assets to affiliated nominee owners with non-Russian citizenship.

By legal form, 76.9% of British companies controlled by Russians are Private Limited Companies, 13.9% are Limited Partnerships, and 7.6% are Limited Liability Partnerships. Only 14 companies controlled by Russians are Public Limited Companies.

 

Not Londongrad alone: areas of concentration of Russian capital in the UK  

 

In the 2000s, rich Russian people snapped up real estate in the centre of London en masse. Since then, the British capital began to be jokingly called in the Soviet manner - Londondgrad, associated with an outpost for Russian money in the West. Londongrad shows the result of the penetration of Russian business into the real estate markets and corporate control of the leading financial centre of the UK and the Commonwealth.

 

Top 10 UK cities by the number of companies with Russian owners

 

Currently, more than half of Russian companies in the UK are in the capital, the global financial centre of the country - London (53.8%). The second and third most popular places for registration of British business are the largest cities of Scotland - Edinburgh (9.7%) and Glasgow (2.7%). The fourth is Douglas, Isle of Man (a famous offshore centre). 

 

Where is Russian money in the British economy?

 

Today Russian business in the UK is most represented in information technology, business services and retail sectors. More than half a thousand companies operate in finance and management consulting. There is also a significant penetration of Russian business in the media, construction and wholesale trade. The Russian capital has the most critical influence on the UK services sector, as opposed to industry and agriculture. 

 

The most popular sectors of the British economy are of the most interest to Russian shareholders

 

Citizenship of Russian companies' shareholders in the UK

 

Among 11.2 thousand shareholders of Russian companies in the UK, 95% have Russian citizenship, with 3% specifying dual or triple citizenship. The second passports of states like the UK, Israel, and France are the most popular with Russian business people.

The remaining 5% of the ultimate beneficial owners of Russian companies in the UK are citizens of more than 70 countries. Most are the UK, Ukraine, Belarus, Italy and Israel citizens.

Only 49% of Russian owners of British companies indicated their residence as the Russian Federation. Another 38% live in the UK (at least 20% in England, 0.9% in Scotland, 0.2% in Wales, and 0.1% in Northern Ireland). For other shareholders of Russian companies with British residence, the popular countries of residence are Latvia, Cyprus, Spain, Germany, the Czech Republic and... Ukraine.

That is, almost every second British businessman with Russian citizenship is an expatriate who does not live in the Russian Federation. At the same time, every 20th owner of British companies under Russian control has either refused a Russian passport or is not Russian by origin. 

Sanctioned Russian billionaire beneficiaries of British companies

The research revealed many cases of Russian beneficiaries of British companies on the sanctions lists. One of the first oligarchs to make his way to London was Roman Abramovich. The Russian billionaire bought the Chelsea football club in 2003 (officially sold in May 2022). The oligarch is on the Forbes list of the richest people in the world and owns FORDSTAM LIMITED and CHELSEA DIGITAL VENTURES LIMITED. Several countries, including the UK, sanctioned Roman Abramovich. Among the Russian billionaires in the Forbes rating who are the beneficiaries of British companies under sanctions are also:

 

  • Vladimir Potanin (The Potanin Foundation),
  • Marina Mordashova and Alexey Mordashov (Nord Gold PLC),
  • Mikhail Prokhorov (Renaissance Capital Limited, Renaissance Capital Services Limited, RCL Nominees LTD, Renaissance Capital (UK) Holdings Limited),
  • Alexey Kuzmichev (Expertica Services Limited, Little Smoothie Food Company Limited, Russian Energy Futures Limited) and others.

 

Some British companies belonging to these oligarchs and officials are at various stages of dissolution. However, a significant part is still active and requires close attention and compliance procedures during cooperation. 

 

Corrupt ties and Kremlin friendship

 

YouControl analysis shows that there are almost five times as many Russian companies in Britain as there are British companies in Russia. Among them are subsidiaries of such famous brands as Sberbank, Gazprom, Rosneft, and others. The disproportion in favour of the Russian presence in the UK is even more striking. After all, most of the final beneficiaries of nominally UK-owned Russian companies are not citizens of the United Kingdom.

The above data testifies to the significant scale of penetration and entrenchment of Russians in the business community of the United Kingdom. The active processes of naturalization and permanent residence of thousands of Russian business people and their families in the UK leach out the entrepreneurial potential of the Russian Federation. It also strengthens the viability of the ruscist regime and generates considerable challenges for the economic security of the UK itself.

The threats are exacerbated by the fact that shareholders are often closely connected by corrupt ties with the Kremlin elite and the extensive bureaucratic apparatus, and sometimes even direct representatives of the Russian government, the aggressor country. The difficulty of further analysis is to distinguish whether the links identified with the Kremlin and the military-industrial elite remained in history at the primary equity capital formation stage. Could British business people of Russian origin remain active players in Putin's octopus-like system of crony capitalism?

Therefore, automated monitoring of current and historical changes in the ownership of British companies with Russian shares or nominal shareholders of Russian assets is crucial for compliance officers of financial institutions. It will help identify key methods and jurisdictions for concealing the Russian role in the English corporate sector. The international platform RuAssets, created by the YouControl team, allows for finding Russian assets abroad and uncovering toxic Russian PEPs (Politically Exposed Persons) and sanctioned persons. Access to the tool is free for journalists.

Timely identification of "Russian traces" in the portfolio of customers and counterparties, minimisation of risks of cooperation with the sanctioned persons and voluntary folding of business interaction with Russia will allow British businesses to avoid unnecessary fines. It will also be a "good taste" rule to preserve the reputation and ESG standards compliance (environmental, social and corporate governance factors that are taken into account when investing in a company) for future sustainable development.

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