The human dynamic of whether a country is an appealing investment location shouldn’t be underestimated. If a country isn’t considered to be a safe place to live, government incentives and policies to encourage overseas investment are likely to have a limited level of success. Similarly, the quality of life available in a given country or city is hugely important.
I find that multinational technology businesses consider it very easy to relocate people to the UK. Employees and their families want to come here for many reasons. In addition to the high quality of life, the English language is typically high on the list - English is a second language and a business language for so many.
The large numbers of people who do move to the UK to work also means that the social infrastructure is well established. For example, a Japanese family will find good quality international schools, residential areas with large numbers of fellow Japanese expatriates and a ready-made social network on tap.
The pull of certain parts of the UK, such as London and the M4 corridor, is of course stronger than others for tech firms. The proximity to Heathrow airport being part of the appeal for M4 corridor based-businesses.
I believe that we have key advantages over other European countries in addition to the ease with which people can settle here. The UK has a highly skilled tech workforce and four of the top six universities in the world.
The UK also benefits from a ‘virtuous circle’ scenario – as more and more businesses, including tech businesses, have a UK footprint, the more the infrastructure is tailored to the needs of overseas businesses looking to invest in the UK, making the move easier.
The UK government is also committed to creating the most competitive tax regime in the G20 and has reformed the corporate tax system to make it more attractive to international businesses. Today, the UK has a very competitive rate of corporation tax. The rate is 24 percent for the fiscal year 2011/12 and this will be reduced to 21 percent in the next two years.
I believe a further strength of the UK is that a ready-made community of like-minded tech companies exists which makes it easy for multinational groups to recruit specialist staff and access the support that they need to establish and operate in the UK.
Another factor is that English law is widely used in international contracts and our employment law is relatively flexible compared to other countries. This has the effect of reducing the risk associated with investing in the UK - the financial and legal implications of exiting certain markets can act a strong disincentive to invest at all.
However, UK immigration procedures can be more onerous than those of counties which we compete for investment with. The government appears aware of the issue - David Cameron’s visit to India and message to Indian students that, “there is no limit on the number of students who can come from India to study at British universities” being one example.
I also believe that in order to remain an attractive location, the UK has to define its role in Europe – regardless of any future referendum result. Part of the UK’s appeal to foreign investors has been the fact that as a member of the European Union, the UK has access to the single market without any customs barriers to trade in Europe. Uncertainty and a lack of clarity on such a significant issue needs to be addressed – if for no other reason than to pre-empt scaremongering by counties competing with the UK for investment.
On the subject of uncertainty, I believe that recent high profile government and media attention on the UK tax arrangements of foreign companies is contradictory to the UK’s ambition to encourage greater inward investment. This is unlikely to be seen as a decisive factor by investors, but it’s important to keep the scales tipped in the favour of the UK – and while the UK’s great heritage for welcoming inward investment and supporting fair and open commerce is well established, potential barriers must be kept in check.
Gerry O'Brien is International Corporate Tax Partner at KPMG in the UK