A report from business group London First, seen by City A.M., shows that while the UK’s capital remains one of the world’s most attractive places to do business, it is losing out to emerging cities such as Singapore, and faces renewed threats from the likes of Paris and Frankfurt.
The group has blamed London’s perilous position on “instability in the tax regime, an immigration policy that potentially deters top business people and students, restricted capacity for expanding connections to the emerging markets, and an increasingly burdensome regulatory framework”.
The report has aggregated data from key global indices to show that London’s tax system has become less friendly in recent years, that flights to emerging hubs lag behind Frankfurt and Paris, and that national exports to Brazil, Russia, India and China – the so-called BRIC countries – are lower than other countries.
A combination of rises to the top rate of income tax (now the joint highest in the G20), increased stamp duty for businesses buying high-value properties, and the banking levy have hit London’s tax competitiveness, the report highlights.
PwC figures show that London has the eighth-friendliest tax regime out of 27 financial centres. This is above the likes of New York and Frankfurt, but down from fifth in 2009.
George Osborne’s recent cuts to corporation tax and the proposed change in the top rate of income tax to 45 per cent were highlighted as evidence of a turnaround.
However, the government’s immigration policy – aiming to reduce net migration to tens of thousands – was criticised as a threat to the influx of talent, especially when it comes to encouraging international students. And the research showed that London runs fewer flights a week to emerging cities such as Beijing and Shanghai than either Paris or Frankfurt.
“London’s position remains vulnerable, especially in certain key business sectors, such as financial services,” the group’s Review of London’s Competitiveness 2012 warns.