POLL: UK FACING INSURER EXODUS
OVER 60 per cent of top executives at Britain’s insurance firms are feeling tempted to leave the UK because of high taxes, a poll reveals today.
The survey of 75 chief executives and finance directors also showed growing pessimism about the competitiveness of the City, with 80 per cent predicting the number of insurers based in the UK will tumble.
The survey, conducted by the Association of British Insurers (ABI), confirms a growing mood among top executives that Britain is facing renewed long-term decline unless radical action is taken.
The poll comes after insurers Brit, Beazley, Hardy and Hiscox have all fled the UK in the last two years for cheaper tax regimes like Bermuda and the Netherlands, and giant general insurer RSA has partially relocated to Dublin.
“The UK cannot afford to wait for a return to economic health to act,” Stephen Haddrill said. He added a crackdown on low-tax havens by the world’s biggest nations is an opportunity for the UK to boost its insurance sector: “Getting it right today could reap rich rewards tomorrow”.
The ABI said the UKcurrently hosts only 10 per cent of total global reinsurance capital, with no major reinsurance company based on its shores. It is proposing a range of measures to prevent an exodus, including a reduction of corporation tax – which 71 per cent of top bosses said was uncompetitive – once fiscal conditions allow it. Also proposed was a corporate tax exemption for those firms that have branches abroad, to encourage them not to ditch the UK.
And the ABI called for a more “stable” and “predictable” tax system with new rules for foreign companies that enable them to focus on getting returns on capital.
RSA told City PM yesterday the firm’s decision this month to keep its main headquarters in the UK, relocating only its reinsurance activities to Dublin, came after an assurance from tax body HMRC that things are set to change.
“We have had very constructive discussions, and we are very encouraged with the direction they are moving in,” a spokesman said.
A spokesman for Heath Lambert, the UK insurance broker that works with the Lloyd’s of London insurance marketplace, told City PM that Lloyds’ multi-billion pound contribution to the government’s tax coffers has “never been truly recognised by an appropriate tax regime”.
In 2007, insurers contributed nearly £10bn in tax revenues to the UK, paying the third highest corporation tax of any sector.
Fears of an exodus come amid concerns that the UK’s competitiveness is being threatened by red tape and plans to impose a 50p tax rate on the highest earners in 2011.