Healey is chasing away City professionals for very short-term gains
Retaining the individuals who allocate capital and fund business expansion should be considered a national priority, but Healey looks more likely to drive them away, writes Tom Goddard
Financial professionals have the resources to leave the UK if they feel unfairly targeted by tax rises, or that the tax they pay is not spent wisely by the government. By increasing taxes such as Capital Gains Tax (CGT) or dividend tax in the Autumn Budget, the Chancellor John Healey could be sacrificing long-term, high-value tax contributions for a short-term fiscal gain.
The top 10 per cent of taxpayers in the UK contribute 60 per cent of total income tax receipts. Private equity houses and venture capital firms directly generate approximately £200bn of the UK’s GDP, representing around seven per cent of economic output, and support more than 2.5m jobs, all of whom will pay income tax and National Insurance Contributions (NICs).
London remains one of the world’s premier financial centres. Alongside New York, it is one of only a handful of genuinely global hubs for financial services, private capital and asset management. It possesses a unique ecosystem comprising world-class legal services, deep capital markets, leading universities, a highly skilled workforce and an abundance of financial expertise. The government should recognise this as a national strength that can attract and retain global talent and focus on promoting its growth rather than treating it as a bottomless well for ever-higher taxation.
Healey must think longer term
When senior investment professionals choose to locate in London, they bring with them whole networks of advisers and businesses. They deploy capital into British businesses, support entrepreneurial ventures and create opportunities for future generations of founders and employees. The compounding effect generated by these industries has helped make London Europe’s dominant financial centre, which ultimately leads to larger tax hauls.
The danger is that when a senior financial executive relocates away from the UK, this wider supporting network of professionals may also leave. Although London’s success as a financial hub is not based on the UK’s tax regime, it is not immune from competition from other jurisdictions able to capitalise on the flow of professionals and businesses from the UK, which eventually, may weaken the same ecosystem that made the UK attractive in the first place.
Healey’s approach should therefore be one of strategic competitiveness and continued growth. Rather than viewing successful investors and entrepreneurs primarily as a source of additional tax revenue, the government should recognise them as drivers of economic activity whose presence generates investment, employment and innovation throughout the wider economy.
The UK is in competition with several countries that are actively seeking to attract internationally mobile wealth creators through favourable tax regimes. Greece, Italy, Portugal, Switzerland and the UAE have all developed frameworks designed to appeal to entrepreneurs, investors and senior financial executives. Their objective is to attract high earners who generate tax revenue, invest capital, create jobs and support economic growth.
At a time when economic growth remains the government’s primary challenge, retaining the individuals who allocate capital and fund business expansion should be considered a national priority and the UK must ensure that it remains not only a great place to invest, but also a great place for investors to live, work and build their businesses.
Tom Goddard is an assistant manager at Blick Rothenberg