Red tape and taxes could stifle London’s recovery

BURDENSOME regulation and taxes could thwart the City’s ability to spearhead economic recovery in the UK, the Centre for Economic and Business Research (CEBR) said today.

The 50 per cent rate of income tax, immigration quotas, and the Vickers Commission proposals on banking are “likely to constrain financial sector growth,” the CEBR said.

“We cannot rule out the possibility that some financial services firms will carry out their threats and leave London as a response to regulatory burden and the existence of more laissez-faire regimes elsewhere.”

“While growth in financial services outperformed other business services between 2001 and 2008, we expect this trend will not hold up over the next four years,” the CEBR said.

London’s economy will expand by 1.5 per cent this year, down from the CEBR’s last estimate of 1.9 per cent but still above the one per cent that it anticipates for the UK as a whole.