British chancellor of the exchequer George Osborne has moved to abolish stamp duty on asset managers that had encouraged many of them to transfer their operations to Ireland and Luxembourg.
In his budget, Mr Osborne announced a series of measures to attract and keep business in the UK, including a cut in corporation tax to 20 per cent by 2015 – the lowest figure for any of the world’s biggest economies.
Three years ago, he said, the UK was "at the bottom of the table" in a KPMG survey of investors that ranks the most competitive tax regimes: "Now we're at the top. But in this global race, we cannot keep still," he told MPs.
In London and Edinburgh, the UK has a world-beating asset management industry, he said, but it has been losing "business to other places in Europe " – countries that included Ireland, his chief economic adviser, Rupert Harrison, said later.
The chancellor announced the abolition of Schedule 19 tax – a 0.5 per cent duty paid by all UK-domiciled fund managers when unit trusts and other investment vehicles are sold and reinvested.
'First step'
Daniel Godfrey, chief executive of the Investment Managers' Association, welcomed the decision, saying: "Abolishing stamp duty on funds is crucial first step towards creating a level playing field with Luxemburg and Dublin."
In a foreword for a paper published alongside the budget, Mr Osborne wrote that the UK’s share of global asset management has fallen in the last decade: “We must act now to rebuild our share of this global business . . . Some of the decline has been as a consequence of strong competition from other jurisdictions, whose companies and infrastructure have been better focused and marketed,” the treasury paper noted.
In 2000, the UK controlled 34 per cent of investments funds in Europe, but this figure had dropped to just 20 per cent two years ago, largely because of the threat posed by Dublin and Luxembourg, it went on.
Illustrating the scale of the industry, it said the UK investment management industry holds £4.9 trillion of funds and earns nearly £12 billion annually, along with providing a third of all investment in UK equities.
Back-office services
"If the UK cannot maintain its share of the increase in domiciled fund volume across Europe, we shall lose substantial potential for jobs and growth in middle and back-office administration, and the legal and consulting services that support this."
Many of these jobs are located not in London or in Edinburgh, but in the West Midlands, Scotland and the northwest: "If the UK is to arrest this relative decline, the government recognised it will be necessary to act decisively."
The decision to accelerate the fall in corporation tax would “send a message to anyone who wants to invest [in the UK], to create jobs, that Britain is open for business”, Mr Osborne declared.
He conceded the target set in 2010 to bring debt and spending under control cannot now be met, while the pledge that borrowing would fall this year happened only because government departments halted spending weeks before the end of the UK financial year.
Among other populist measures – a freeze in petrol duties and a cut in the price of a pint – Mr Osborne has put his hopes in a plan to build 500,000 homes over the next three years, part-funded by the government.
