Would corporations move abroad if restrictions were tightened?

×

Error message

Warning: array_flip(): Can only flip STRING and INTEGER values! in DrupalDefaultEntityController->load() (line 175 of /home/speak692/public_html/includes/entity.inc).
Many banks and businesses claim that they would leave the UK if regulations were tightened, therefore taking tax revenues and future investment with them.

For example, Diageo’s CEO claims “our location here in London should not be taken for granted” and Unilever boss warns that it would be “unfortunate for the UK” if additional regulations and taxes were to hamper his business. But are these threats substantive?

The director of Worldwide Financial Planning, Nick McBreen states that the current panic is simply “smoke and mirrors”, explaining that, due to complexities, “people leaving the UK seems to be a recurring story that never quite happens”. This indicates that, despite threats, it may not be an easy or simple decision for corporations and their wealthy CEOs to leave Britain in search of greener grass or to escape the kind of regulation that SPEAK's Unfinished Business Campaign is calling for.    

It is arguable, therefore, that these threats are just that- threats- especially considering that Britain remains an attractive place for corporations to do business. A spokesman for the Treasury rejected Diageo's suggested reasons for leaving, stating that international surveys consistently showed that "the UK is one of the most attractive places to do business ". Similarly, the general secretary of the TUC, Brendon Barber, stated that "the UK simply does not have a particularly burdensome corporate tax structure compared to equivalent economies, so when firms claim they can no longer afford to make their fair contribution to our strained public finances their comments should face close scrutiny”. Perhaps businesses are simply using these threats as a ploy to yield their monetary power over the government and British society in order to ensure that their profits will not be impinged upon by tighter regulations (including their impact on workers, communities and the environment), which are an essential component of a just society.

Furthermore, the market does not operate within a vacuum, and so, as one state changes its regulations to inhibit unfair behaviour, others may follow suit. Bloomsbury Financial Planning director Jason Butler recognises that overseas business does not come without its problems saying that “what is to say the Irish, Germans or Cypriots will not implement [changes]”. That is to say, businesses are aware that if they were to leave Britain in response to increased corporate taxes or tighter regulation, they could still be faced with a similar situation in their new location. Mcbreen, from Worldwide Financial Planning, also states that “Europe is just becoming more homogenised… [this] will encourage them to stay because the UK will be the same as elsewhere”. In addition, the decision to move abroad is not only made on the part of the business, but also the host country. Svein Andressen of the Financial Stability Board (FSB), who argues that banks claim to relocate in protest at new regulations are ‘empty threats’, reminded the IMF at their spring meeting that countries may reject banks as they would then be responsible for the cost of potential bail-outs, which may be too big for a country to bear. At the same meeting, FSB chairman, Mario Draghi added that "differences in regulations are only one reason why banks might move" (Aldwick, 2011).

It is therefore apparent that British businesses threat of leaving, and thus their promise of an impending doom and gloom which would ensue if they were held accountable, is easy to deconstruct. Evidently, there are numerous other factors which impact upon a company’s decision to leave the British economy, which ultimately may impact negatively upon their business anyway. Thus, there is substantial evidence to assume that the ease with which they would leave is not as simple as they would like us or the government to believe. Campaigns to change the ways in which UK-based business impacts upon society, the economy and the environment therefore are unlikely to lead to their mass exodus.