by Paul Goodman
The claim comes from Policy Exchange, in a research note launched today entitled "Not With A Bang But A Whimper". According to Ted Sumpster, its author, "the UK’s financial services industry is in danger of fading away" – which has big implications for the economy and taxpayers, since one study found that despite the recession, financial services contributed £61.4bn to the Exchequer in 2008/09 – 12.1% of tax revenues.
Three-quarters of the London-based financial institutions polled by YouGov for Policy Exchange blamed the overall tax burden as a reason for their possible departure, while two-thirds blamed increasing regulation as a significant reason.
Sumpster, said –
"What the City needs is clear and stable taxes and regulations that will preserve its status as a leading international financial centre.
“There’s nothing pre-ordained about London’s reputation as one of the best places in the world to do business. Financial services is a highly mobile, globalised industry where the key people and firms are able to move to wherever they can best achieve their goals.
“Britain is in danger of driving away talent. In other words, we could end up killing the goose that lays the golden egg.”
According to the research note –
- Businesses and individuals are not looking to relocate to emerging markets. Instead the alternative locations they prefer are Switzerland and the Crown Dependencies – 59% for both – or Ireland, at 45%.
- 24% of those planning to relocate will do so within the year, rising to 54% within two years.
- Individuals planning to leave often cited high living costs and poor quality of life as the two biggest factors.
- But 63% said the overall tax burden was in danger of driving them out of Britain, with 34% blaming tax and regulatory uncertainty.
- The most highly-skilled professionals are the most likely to leave, not managers or support workers.
Recommendations in the study include –
- An annual “City Health Check” detailing inflows and outflows of businesses and employees in financial services.
- Action to monitor what the international finance industry thinks of the UK as a place to do business and a place to live.
- Collecting proper figures showing how much financial services contribute to the British economy and to tax revenues.
- A Government signal that the cumulative impact of changes to tax and regulation will be put into reverse.