Venture firms ready to quit UK

Britain's venture capital industry is being threatened by Gordon Brown's Budget proposals on controlled foreign companies and double taxation, the City is warning.

The moves, which have already drawn criticism from multinationals such as Anglo American and South African Breweries, look likely to force big venture capital firms to relocate their operations from the UK to the Continent.

London is currently the centre of the European private capital industry. In recent months two giant US groups - Kohlberg Kravis Robert and Hicks, Muse, Tate, Furst - have raised over £3bn for their London operations to invest in Europe.

However, accountants at Deloitte & Touche are warning that these fund-raising efforts could be the last unless the Chancellor changes his mind on his tax changes, which are aimed at stopping multinational groups artificially reducing their tax bills.

"These plans play into the hands of our European competitors," Gordon Dootson, a tax partner at Deloitte, told the Independent on Sunday. "Recently Spain, Denmark and Germany have all improved their position in the taxation of holding companies, yet our government appears to be going the other way."

The venture capital industry is one of the great successes of the City, generating £15bn worth of deals last year, an all-time record.

Its attack on the double tax plans comes at the end of a week when the Treasury has been under fire from leading accountants, and went to the extreme of calling into question figures produced by PricewaterhouseCoopers claiming the Budget move would cost multinationals £10bn a year.

Opponents of the change have until 17 April to lodge their objections to the Treasury.