The Confederation of British Industry (CBI) were understandably alarmed at the current exodus of firms from UK markets. As CEO Rupert Soames has referred to the growing state of disrepair as an emergency, claiming, “Houston, we have a problem. In fact, 88 companies moved out last year, with another 70 already having left this year. This continuing leak of firms has caused great alarm among the business and political leadership.
Soames, the chief executive of the Confederation of British Industry, went further, insisting that action was desperately overdue. He’s keen to hang onto companies like Shell and AstraZeneca. As he pointed out, the same has been true for both companies amid their own, and similar, perennial rumors of their demise in the UK. But AstraZeneca has emerged as the UK’s most valuable firm. This underscores the importance of ensuring we have a positive business climate.
To stop the flood of corporations out of his city, Soames suggested three main strategies. He made the case for avoiding heavy-handed regulation, better marketing and outreach campaigns, and investor-specific incentives. “If you want to have international companies here you’ve got to allow them to pay management what they think that they need to be paid and not be squeamish,” he stated.
The former Conservative government removed many of those listing requirements to incentivize investment. The results have been disappointing. In fact, the UK investment industry only invests 4% of its assets in publicly-traded UK companies today. This begs the questions as to how competitive the UK market truly is.
Beyond regulatory relief, several other meaningful reforms are being discussed. Other potential impacts Rachel Reeves, Shadow Chancellor of the Exchequer, has announced plans to pool public sector pension funds into superfunds. The backdrop to this shift is a desire to make the investments more efficient and return even better returns to pensioners. Reeves’ proposals would be enough to reverse the regressive incentives in the current system that reward everyone who hoards their wealth in cash ISAs. In the past, this decision would have encouraged millions more to start investing in stocks and shares.
Soames said they supported modifications in tax law to encourage more investment in equities. He voiced concern over the current tax-free interest annual allowance of £20,000 for cash ISAs. He contended that this is too little to stimulate any growth in the economy. “Of all the investments that God ever invented, cash [ISA] is the worst possible one,” he remarked.
The need for these conversations has only grown more urgent. ARM Holdings, a large and respected UK technology company, has chosen to apply for its stockmarket listing in New York rather than the UK. This decision signifies a positive trend amongst companies attempting to foster markets more conducive to their business.
Both the stock market and associated activities are extremely important for the UK’s financial services industry. In reality, it punches way above its weight by providing about 10% of total federal taxes collected in the entire country. If more firms follow, the long-term impact on state tax revenues and overall state economic stability would be devastating.
Soames urged a more adult engagement on issues like data privacy. This change will be essential for the UK to remain competitive as a global business destination. His remarks reflect an increasing party consensus seen among the rank-and-file industry leaders. They expressed concern over the future attractiveness of the UK as a place for international businesses to locate.