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The next UK government should examine ways of penalising start-ups that accept state support if they later list overseas or move valuable operations abroad, according to the lobby group for British banks.
Any move to claw back tax breaks or other incentives from British companies that list overseas would be a significant escalation of efforts to halt the flow of businesses floating outside the UK, particularly in the US.
In a paper published this week, UK Finance said: “The government should . . . consider ways in which an expanded set of taxpayer-funded supports for early-stage growth companies involve a two-way commitment and would become repayable in part or full if a recipient ultimately chooses to list, or move valuable operations, outside the UK.
Choosing a listing venue was a matter for each company but “there is a strong case for linking taxpayer supports to future commitments to using UK public markets and operating in the UK”, it added in the paper, written with Global Counsel, the advisory group set up by former Labour minister Lord Peter Mandelson.
Most of the efforts over recent years to revive the UK’s capital markets have focused on making the country more attractive by reducing regulatory requirements, including an overhaul of stock market listing rules, and boosting the amount of capital being invested in British companies by domestic pension funds.
The lobby group also called for more generous government support for high-growth companies and for existing funding schemes to be expanded to include regulated fintech businesses.
The UK has been hit by a steady flow of its start-ups listing in New York, being bought by foreign companies or relying on overseas investors to fuel their growth, raising concerns that Britain is becoming an “incubator economy”.
Both the Conservative and Labour parties have broadly backed calls from the London Stock Exchange and City executives to try to halt this phenomenon, which can lead to jobs, intellectual property and other parts of companies’ operations moving out of the UK over time.
The proposals to date have mostly focused on making a positive case for companies to expand or list in the UK rather than penalising companies that leave.
Conor Lawlor, a managing director at UK Finance, told the Financial Times that other countries, including the US and France, were “much more interventionist” in their approach to supporting and retaining domestic businesses.
The UK should consider following suit with “tax penalties” for companies that benefit from taxpayer support and then leave within a period of five-to-seven years, he said.
Further work would be needed to assess how much government support had been accepted by companies that had subsequently listed abroad within that period, he said. Any intervention would need to be designed to avoid “overkill”, which could push companies to bypass the UK entirely and begin life in the US, he added.
