Just weeks before Budget day, polls suggest that the UK may lose talent as business owners prepare for looming tax rises.
Around 680,000 out of the UK’s 5.67 million SMEs are actively planning to relocate themselves, their businesses, or both due to the current tax burden, according to a new report. This is around one in eight enterprises.
This worrying statistic comes from a poll by Rathbones, one of the UK’s leading wealth and asset management groups. It reveals that nearly two out of three (63%) SME owners and bosses believe the government does not do enough to encourage business growth in the UK. In fact, 42% actually state that they believe that the Government is unsupportive.
With concerns that the Chancellor is going to raise the tax burden on businesses, the data reflects leaders’ nerves around the upcoming Autumn Budget.
Why are businesses considering leaving?
According to Rathbones, the main driver for businesses contemplating moving abroad is the prospect of a higher tax burden. Some businesses – especially in hospitality – are already struggling with rising employment costs following last year’s hiked National Insurance rates.
The poll supported this, saying that 36% of respondents report that increases to Employers’ National Insurance and the National Living Wage have “moderately or significantly affected” their businesses. 43% say tax changes have had the biggest impact on their business.
While it is a small percentage considering leaving – disillusionment about tax levels is shared by many. More than a quarter of business leaders say that while they are not planning on moving overseas, they are concerned about the tax environment.
What do businesses want?
Nearly half of the respondents (49%) say that tax breaks to encourage business growth and staff hiring are top of their wishlist. A further 25% support incentives for business owners to take risks while 21% favour rewards for business success.
Senior Financial Planning Director at Rathbones, Ade Babatunde, says: “SME owners are sending a clear message: they feel let down by current government policy.
“With nearly two-thirds saying not enough is being done to support business creation and growth, and many citing tax changes and rising employment costs as major challenges, it’s no surprise that confidence is waning.”
Where are businesses going?
Among the business leaders interviewed who were considering an overseas move – Ireland was the top destination with 26% of the vote, while Dubai came a close second with 21%. The US also got a mention, though the visa hike is sure to put many off.
As we reported last month, Dubai is actively courting entrepreneurs with no personal income tax and a corporate tax that is also considerably lower than the UK. It has also set up a Golden Visa scheme for long term residence as the state tries to encourage growth in its real estate, retail, logistics, and tourism industries.
The reported exodus, which the Government says has been vastly inflated, is being driven by the Government’s decision to scrap special tax privileges for non-domiciled residents in April. The loophole allowed these residents (whose domicile or home is another country) to avoid UK taxes on overseas earnings for up to 15 years.
However, one high profile leaver is Nik Storonsky, the co-founder of Revolut, who is reported to have moved to the UAE because of the licensing issues he has faced in the UK when trying to win its UK banking license.
Whatever the reason for which entrepreneurs are making the final decision to move, the poll reflects a wider confidence issue. Founders are shouting that present conditions won’t allow them to grow and innovate; something they desperately hope the Budget will address.
