Flood of firms could quit UK

Oct 10 2006 by Brian Amble Print This Article

Imagine you are the CEO of a large U.S-based enterprise thinking about where to locate your European HQ. Do you plump for thriving Irish capital, Dublin, with a corporation tax rate of 12.5 per cent, or head to London, where you'll pay 30 per cent to the UK government?

As far as Google, Yahoo and Amazon were concerned, the answer wasn't exactly a brain-teaser, with the lure of office space at vastly cheaper rates than London's a further compelling inducement to locate by the Liffey rather than the Thames.

Meanwhile, in the past few months, two Lloyd's of London insurance syndicates have quit London for Bermuda, citing high tax rates as the main reason, while global banking giant HSBC has publicly said that it is considering moving its headquarters due to the burden of UK tax and regulation, saving itself some £400 million per year in the process.

Little wonder, then, the head of Britain's largest employers' group, the CBI, has warned that this trickle of companies quitting the UK will turn into a flood unless business taxes are cut.

"It seems to me, that the current corporation tax regime is unsustainable. Either companies will generate more of their profits outside the UK, or corporation tax will have to come down." Richard Lambert said

"Some companies are relocating. We can see a trickle. Our anxiety is, it doesn't turn into a flood."

Compared to the rest of Europe the burden of taxation is rising in the UK at the same time as tax collection has become noticeably more aggressive," he added.

The UK Treasury, meanwhile, seems to be having difficulty coming to terms with the fact that global businesses can pick and chose where they locate, claiming that: "The UK has one of the most competitive business climates in the world. This government has reduced corporation tax to its lowest ever rate and introduced the lower [19p] rate of tax for small companies. The UK is one of the most stable economies in the world, with low burdens on business, making it an attractive location."

Try telling that the Google and the rest.