The UK has already become a less attractive place to do business as a result of the Brexit vote, according to a new survey.
Professional services firm KPMG questioned 100 of the largest UK listed companies and foreign owned subsidiaries, as well as 60 companies from across the other G7 nations, and found that respondents deemed the UK less attractive than they did this time last year in terms of both tax competitiveness and appeal as a destination for foreign direct investment, the Independent reports.
“As in 2015, the Irish tax regime tops the rankings with 74 per cent of UK companies selecting it as one of their ‘top three’ and the UK again taking second place,” KPMG wrote in the accompanying report.
“What is noticeable however, is the widening gap between Ireland and the UK which was just 1 per cent in 2015 but has grown to 9 per cent in the past year,” they said.
The survey showed that amongst the 60 non-UK companies surveyed this year, the UK fell from first to fifth place in the rankings, trailing Ireland, Luxembourg, the Netherlands and Singapore.
“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,” KPMG said.
Asked why their perception of the UK had changed, non-domestic businesses mostly cited the prospect of sensitivity to disruptions in trade deals and tariffs as a result of Brexit, and an end to the UK’s access to the single market. One concern was also the risk to the mobility of skilled labour.
“The material change this year is that finance executives are now grappling with the question of how Brexit might impact current and future investment in the UK,” said Robin Walduck, tax partner at KPMG in the UK.
“It’s in this area we see a striking divergence between the views of UK companies and their G7 peers, providing some insight as to why the UK has started to fall out of favour.”
Mr Walduck said that those companies already investing or located in the UK, are broadly confident about the country’s future prospects. But those “on the outside looking in” are less optimistic.
“As Brexit negotiations get underway, this begs the question whether UK respondents are being too bullish with misplaced optimism, or if non-UK respondents are being too quick to discount the UK,” he said.
But while some companies have in the past hinted that a hard Brexit could mean that they re-evaluate their position in the UK, this year’s survey also shows that broadly speaking companies are not planning to withdraw their entire operations from the country.
However, the number of businesses seeking to move functions into the UK—which KPMG says is a crucial source of foreign direct investment— has dropped materially for both UK and non-UK participants this year.
The survey was conducted between December 2016 and February 2017 and 56 per cent of the companies interviewed had a turnover of over £1bn, according to KPMG. A total of 22 of the companies interviewed were members of the FTSE 100 bluechip index, with another 21 in the FTSE 250.