I know I’ve gone quiet for a bit: turns out this writing Economics PhD Thesis business is much tougher than it looks. But I found myself so outraged by the sentiments expressed by ‘the business community’ that I had to have a rant.
So yesterday our glorious Prime Minister sat down with some ‘business leaders’ to reassure them Britain is still a good place to do business. Apparently they have some issues with the Hester Bonus debacle, some high tax rates and the unknighting of MR fred goodwin.
Apparently the market for talent in these high up places so very mobile and they will all spit out their dummies and fly off to Hong Kong or some such hotter place with lower tax rates. Apparently this is especially bad in the financial services sector upon which we are oh so reliant.
I say: It’s all a load of codswallop.
First off the biggest financial centres of the day are the same was the have been for most of the last two centuries. Clearly when new economies become global players they set up markets, first Hong Kong (mid 1800’s), then New York (1900’s) and more recently various cities in mainland China, SE Asia and South America. If business was going to be scared off by high tax rates they would have upped and left in the mid 70’s.
If the city really didn’t care where it was then it wouldn’t pay some of the highest rents in the world to be located in the square mile. The truth is it’s still easier to business in person and like all sectors of business there are huge advantages in cluster effects. Yes I could more my hedgefund to some far off land with no taxes but do they have the infrastructure? the pool of potential employees? The IT services companies? The pool of graduates I can train up? The list goes on.
And you might come back and say: But lots of places do have this set up. Hong Kong being the most obvious. But they already have a much lower tax rate than the UK, so why haven’t businesses already moved?
The truth the UK is a nice place to live and a great place to do business. And if, in order to preserve that which we value, we scare off a few petulant CEO’s? I say good riddance.
Lots more to say about large corporations feeling unloved (mainly look at Germany) and how there’s no evidence that even if we scare off the top 1% of earners we’d be any worse off but I’ll save that for another day.