Our survey finds that the UK remains an attractive place to do business, but has lost ground over Brexit.
The UK has lost ground in KPMG in the UK’s 2017 tax competitiveness survey. Our annual rankings of both tax competitiveness and appeal as a destination for Foreign Direct Investment (FDI). Brexit uncertainty appears to be the cause, according to the survey respondents - 100 of the largest UK listed companies and foreign owned subsidiaries and 60 companies from across the other G7 nations. As in 2015, the Irish tax regime tops the rankings with 74 percent of UK companies selecting it as one of their ‘top three’ and the UK again taking second place. What is noticeable however, is the widening gap between Ireland and the UK which was just 1 percent in 2015 but has grown to 9 percent in the past year.
Added to this, amongst the 60 non-UK companies surveyed this year the UK fell from first to fifth place in the rankings. Not only does this demonstrate a sharp decline in perceptions of the UK’s tax regime, there also seems to be a clear divide in sentiment between UK versus non-UK businesses.
Non-domestic businesses cite particular sensitivity to disruptions in trade deals and tariffs, an end to the UK’s access to the single market, and the mobility of skilled labour as reasons for concern. This indicates that the Brexit vote has raised questions about the UK’s overall appeal and the competitiveness of its tax regime versus other, comparatively more stable, European peers.
Reassuringly, the research shows that companies are not planning to withdraw their entire operations from the UK. In fact the number of respondents considering taking business functions out of the country is broadly unchanged in comparison to the 2015 survey.
What is striking however, is that businesses seeking to move functions into the UK - a crucial source of inbound FDI - has dropped materially for both UK and non-UK participants this year. Added to this, executives cite Brexit as having greatest impact on investments and activities in the next 12 months and suggest it could ultimately lead to substantial reductions in investment and high-value activities, such as capital expenditure, employment and R&D investment.
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