THE UNITED Kingdom has become an increasingly unattractive place for business to invest over the past decade and may become even more so over the next five years, the Confederation of British Industry has warned.
Taxation is seen as the major hurdle, and the issue is particularly important for companies that have become used in recent years to running global operations, according to a poll of executives from the FTSE’s 350 largest firms.
“Business leaders are optimistic that the coalition can turn things around; indeed some say that they have already made a good start.However, the majority seem to be reserving judgment before changing their investment strategies,” said the CBI.
China and India are seen as better locations for new operations by the companies polled despite the difficulties in doing business in both locations, though the UK is considerably more attractive than other major European Union countries.
The UK is seen as being competitive because, up to now, of good labour relations, the flexibility of workers, and the historical legacy which companies enjoy through having run their businesses for many decades.
However, it has fallen badly over the past decade in rankings that measure companies’ attitudes to personal taxes; the availability of skilled staff; regulation; planning restrictions; exchange risks; infrastructure and quality of life.
“The UK is under threat of companies moving operations abroad or changing the UK from a primary to a secondary location,” said the CBI, pointing out that one-fifth of those polled said they believed they could move core functions away in the next five years.
“Perhaps alarmingly, some of the most significant changes would be in areas where the UK has been traditionally strong: design, marketing and brand development and service provision,” said the CBI, which holds its annual conference in London today. “Having acted fast to tackle the deficit, the government must now focus on how to attract more investment to the UK if we are to create new jobs and grow the economy,” said CBI director-general Richard Lambert.
The UK may face a battle to hold onto the headquarters of major firms, some of which have moved to Ireland for tax reasons. Close to a fifth of executives say they expect their headquarters to have moved out in five years’ time.
Higher personal tax rates have made the UK less appealing to foreign talent: “No one wants to work here: everyone wants to work in Latin America, America or Asia. It’s a big issue,” said one executive.Some 55 per cent of those polled said they were “very positive” the government would improve the business climate.
