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Scaling back tax breaks or other government support for companies listed overseas would be an escalation compared with most other attempts to boost Britain’s capital markets.
An influential City lobby group has called on the next government to explore ways to punish start-ups that receive taxpayers’ money if they later decide to move their valuable operations outside the UK.
UK Finance, which represents more than 300 banks, payments companies and other financial institutions, said in a briefing this week that while most British companies that choose to list do so in the UK, there is “no doubt that competition from overseas locations is increasing”.
It added that as a result, the government “should consider ways in which a comprehensive range of taxpayer-funded support for businesses in the early stages of their growth would involve a mutual commitment and become partly or fully repayable if a recipient ultimately chooses to list or relocate its valuable operations outside the UK”.
The group added that while choosing where to list or establish a business is a matter for a company to decide, “there is a strong argument for linking taxpayer support to future commitments to use UK public markets and to operate in the UK”.
Reducing tax breaks or other government support for companies listed abroad would be an escalation from most other attempts to stimulate the UK’s capital markets, which have focused on reducing perceived regulatory burdens and encouraging investment by UK pension funds.
UK Finance also recommended making government support for fast-growing companies more generous and expanding funding for existing schemes to include regulated fintechs.
Measures to limit the number of companies going abroad come after a number of British companies abandoned the London Stock Exchange for IPOs in New York or moved their listings overseas, fearing that jobs and operations could move abroad as a result.
Conor Lawlor, a director at UK Finance, told the Financial Times that the UK should pay attention to “much more interventionist” countries such as the US and France and consider “tax penalties” for companies that benefit from British taxpayer support but then leave within a period of five to seven years.
He added that more research is needed to investigate the extent to which these companies have accepted government support and to ensure that any intervention does not encourage companies to start in the US and bypass the UK.
UK Finance’s recommendations came ahead of Thursday’s general election, which polls suggest will see Keir Starmer’s Labour Party win.
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