By JP Floru
Britain may have been declared open for business, but according to today’s FT hedge funds are leaving as fast as they can (£). And it’s not just financial companies. Back in December Cadbury announced that it is moving its headquarters to Switzerland. In February Pfizer announced it was closing its research factory in Sandwich because it is no longer competitive. The largest leavers of 2010 include: WPP, Shire, Informat, Aberdeen Asset Management, Ineos Runcorn UK, Hendersons Ireland, Charter, Regus, Brit Insurance, Wolsely, McDonalds (European HQ), UBM, Kraft Foods, Gallaher, Experian, Catlin, Hiscox and Shell. In 2010 a survey by HM Customs & Excise showed that one in five UK companies have considered leaving the UK for tax purposes.
Up in the Alps, they are laughing their heads off. Well, not everyone: the international School in Geneva has twice the number of applications as there are vacancies; and there is now an acute shortage of detached houses. In mid February David Hiler, Geneva Finance Minister, told the British-Swiss Chamber of Commerce: "We won't tell people not to come, but there is no more space". Many hedge funds are apparently moving to Malta. Monaco recently introduced legislation especially to attract hedge funds.
So, I have to raise a question, which I thought I would never ask in my life: What Is The Government Going To Do About This? Is it in Britain’s interest to see the tax take drop? Is there any difference between some politicians’ stated aim of wanting to refocus the economy away from the financial sector, and the disastrous policy of “picking winners” in the past? Remember how those "winners" invariably turned out to be losers?
To be fair, the Coalition has tried. They cut corporation tax and are introducing a one-in-one-out system for new regulations which impose costs on businesses. Other measures are in the pipeline. But is that sufficient, in the light of the hedge funds’ flight?
The hedge funds’ flight is mainly caused by European, rather than UK regulations. The nefarious effect of the Directive on Alternative Investment Fund Managers is well-documented.
Then the question remains: why did we agree to those? When will we bring the perpetuum mobile of EU power grabbing to a halt? Or are we still in the good old sclerotic Foreign Office mindset of “any agreement is better than no agreement at all”? Where is the handbag?
The only positive side to this is that I am looking forward to enjoying some friends’ guest rooms in sunny Malta.