|Friday, 10 December 2010 12:15|
When UK companies threaten to domicile themselves abroad, it implies they’re not above trying to hold democratically elected politicians to ransom, says the Daily Mail’s associate City editor Ruth Sunderland
It started with the bankers and hedge fund managers. When threatened with being taxed, regulated or in any way restrained from going about what Goldman Sachs chief Lloyd Blankfein called “God’s work”, they in turn threaten to leave the UK.
So far the threatened exodus from the City has led to a very much smaller actual one. Nearly a year after broker Tullett Prebon offered to help its London staff move to Switzerland to avoid bonus taxes, not a single one has gone.
But the threats keep coming. Barclays’ chief executive in waiting, American-born Bob Diamond, complained in an email about “Little England” when the UK regulators stopped him from taking over Lehman Brothers before it went under. But he wouldn’t necessarily find the US government any more accommodating than politicians here - the Dodd-Frank rules in the States has had Wall Street squealing in outrage. HSBC moved the office of Michael Geoghegan, its outgoing chief executive, to Hong Kong, and has suggested on many occasions that as an international bank, its status as a UK company should not be taken for granted. This is sending out some very poor messages, beyond the obvious populist response of “good riddance”.
The threatened exodus from the City smacks of petulance
It smacks of petulance. It implies the company or executive concerned is not above trying to hold democratically elected politicians to ransom.
Worse, it is conveying that this is a business prepared to tout itself to the government that will offer it the most lenient regime on tax, regulation and pay.
As the experience of Tullett Prebon suggests, a mass diaspora of financiers is unlikely. Whatever they say, the attractions of Zug pale in comparison with London’s cultural life, our time zone advantages and excellent schools and universities. All this crying wolf is leading to a loss of credibility.
There is, though, a steady stream of businesses that are shifting their tax domicile to Dublin, Luxembourg or Zurich in protest at the UK regime on profits earned overseas, including media giant WPP, office rental group Regus and building materials company Wolseley.
They have a point about the foreign earnings regime, which can leave UK domiciled companies at a competitive disadvantage, but the coalition has promised to make reforms by 2012.
They argue they are not moving their business as such and not cutting any jobs. But the change is not merely cosmetic: it means more boardroom decisions are taken overseas and the AGM takes place in the new home, effectively disenfranchising small shareholders who can’t travel there.
Again, it is sending out the undesirable signal that commitment to this country is conditional on getting the tax policy they demand.
The UK has a sensible policy of attracting foreign investment and has long been welcoming to talented individuals from overseas. But for the benefit of our economy as a whole, we need businesses which are prepared to show some loyalty to this country and their employees and customers here.
In a globalised world, companies can be mobile and rootless. So can the MBA-educated business elite – but most of their employees and customers cannot.