When a very British plc decamps to Dublin, we should all be worrying

The Government still appears to be under the illusion that the UK is a competitive place to do business. It needs to wake up to reality – fast
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The Independent Online

Companies complaining about paying too much tax is nothing new. So when firms started coming out of the woodwork again last year, saying that their corporate tax bills were too high, issuing threats to move abroad to places such as Ireland or Switzerland, I have to admit: I took it with a large pinch of salt.

Posturing, shots across the governmental bows, call it what you will, to me it seemed that the prospect of a large FTSE 100 or 250 company packing up its bags and heading across the Irish Sea was remote.

Back in 2000 Vodafone kicked up a stink, warning that it would quit Britain over tax – it is still in Newbury – while three years ago, Experian was the only firm to leave these shores for Dublin's prospering economy. Others have rattled their sabres in the meantime but the chances of big corporates leaving Britain, with all its supposed advantages, seemed very, very remote.

But how wrong I have been.

Last week Henderson, the fund manager; Regus, the office rental group; and Charter, the engineering group, all indicated they were planning to quit the UK and stop paying large sums in tax to the Exchequer. WPP, the world's biggest advertising group, led by the always vocal Sir Martin Sorrell, has said it too could leave, as has Brit, the insurance firm.

Because of horrendous deferred losses in the recent past, Henderson paid corporation tax of just 16 per cent last year. It now faces having to pay 28 per cent, like every other corporate in Britain, as opposed to just 12.5 per cent in Dublin, so its out-going chief executive, Roger Yates, has made the move across the Irish Sea his final major decision. It's a brave one.

Henderson is one of the City of London's best-known names, managing around £60bn worth of assets and employing near enough 1,000 staff. It has roots going back to 1934, when it was created to look after the estate of Alexander Henderson, the 1st Lord Faringdon. Its British heritage makes its imminent departure all the more significant.

It's been suggested that as many as 12 of our largest 100 listed companies are serious about going abroad, with the rest all handing mandates out to the big four accountants to evaluate the merits of a move. Henderson, Regus and Charter could be just the tip of the iceberg.

For the Government, and its beleaguered Chancellor, Alistair Darling, these latest moves could not have come at a worse time. For a government that has purported to put stability at the core of its economic and fiscal thinking, Labour's stance on corporate tax has been hapless.

I heard a Treasury spokesman commenting at the end of last week, in the arrogant way that perhaps only comes after more than 10 years in office, that Britain's corporate-tax landscape was still one of the most competitive in Europe. It truly was a head-in-the-sand view.

As with many other issues, the Government needs to wrestle back the tax agenda. After the non-doms fiasco and the mothballing of changes to foreign profit payment rules, the Treasury must reassure UK plc that the rules of the game won't be changed or tinkered with again. The corporate sector has to be shown that this sceptred isle isn't a bad place to do business.

Gordon Brown is set to unveil his "economic plan" very soon, perhaps this week. The corporate tax issue should be at the heart of this rather Soviet-sounding strategy. Sadly it won't be. Instead he will no doubt to use the plan to reveal a headline-grabbing suspension of stamp duty in a belated attempt to stoke life into the housing market and, oh yes, win back some votes.

Perhaps, like me, Mr Brown and his cronies at No 11 thought the threats from corporates to quit Britain were empty ones. As last week's announcements show, they weren't. Let's hope the Government wakes up to this fact soon, before more tax receipts disappear abroad and our ailing finances get still worse.



Margareta Pagano is away

Ferrovial must fasten its seat-belt. It's going to be a bumpy ride over BAA

Ferrovial, the Spanish conglomerate, faces real trouble over BAA, the airports operator that counts Heathrow, Gatwick and Stansted in its portfolio. And no, not for the well-trailed reason that the Competition Commission is all but certain to break up BAA in 2009, just three years after Ferrovial splashed out £10.3bn.

As regular readers will know, we've long been of the view that Ferrovial always planned the break-up. The reason was basic maths. Sell off Gatwick and Stansted, couple this with cash already raised from property and retail sales, and Ferrovial raises £6bn. The Spanish group thus ends up buying Heathrow for a net price of less than £5bn – when the airport's fixed assets are worth £8bn.

One source told us it was potentially "one of the greatest steals in corporate raiding history". At the very least, say others, the Del Pino family – led by Rafael – which controls Ferrovial, always had a Plan B to sell. Whether Plan A or B, Manchester Airports Group's comments last week that there was "no way" it will pay the sums quoted for Gatwick and Glasgow (which the commission also wants BAA to sell), will cause serious problems. BAA would like to sell when the debt markets have returned, maximising the amount buyers could bid. Christopher Clarke, head of the commission's investigation, has shown no sympathy in that he could be forcing Ferrovial to sell at a time when it would get the least possible money for its assets. That will force down the price.

Manchester is exerting more pressure, benchmarking the prices for the two it is interested in – Gatwick at less than £2bn, rather than £3bn; £700m for Glasgow, about £300m lower than the highest expectation. These prices – attributed to Manchester's external affairs director Jonathan Bailey – have effectively started an open auction. There will be far less wriggle room for Ferrovial's bankers when they value the airports. If they slap an indicative price of £3bn on Gatwick, bidders are likely to laugh it off. And then, one of the great corporate steals might become one of the great failed corporate gambles.

Good innings helps move LV up the batting order

Most people will know LV – the "trendy" moniker for the mutual that went by the title of Liverpool Victoria for more than 150 years – for its sponsorship of cricket's county championship. But that will soon change if its aspirations are realised. Since 2006, under the stewardship of Mike Rogers, the former Barclays retail banking managing director, the company has moved quickly to transform itself from ugly duckling to financial swan. When he took over, LV was in the doldrums, known among boy racers and petrol heads for its absurdly cheap deals on car insurance. He soon put paid to that. Last week the company took out AIM-listed rival Highway in a buyout worth £150m. It's the latest in a string of deals that Rogers hopes will make LV a top-five player in the coming years. In a sector that is often derided, it's great to see Rogers and his team making a fist of the turnaround. Bigger rivals, beware.

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