TAX and regulatory burdens could pose a threat to British position as a leading global centre for asset management, according to a report released today.
Currently the third-largest global centre for fund management, the UK’s £2.8 trillion industry could lose assets and jobs to low-cost rival centres, a study by the Investment Management Association and Corporation of London concluded.
The industry is critical of the “overly rigid” implementation of European Union directives and wary of the competitive threat of offshore financial centres such as Dublin and Luxembourg.
Nearly one in four respondents to the survey said regulatory or tax regimes were the single greatest disadvantage of being located in the UK.
Asset management companies are major UK employers. Staffing levels at fund firms in cities such as London and Edinburgh are expected to grow by 0.2 per cent over the course of 2005 to a total of 37,870, according to the Centre for Economics and Business Research.
Michael Snyder, chairman of the Corporation of London’s policy committee, said: “Attention needs to be turned to what measures can be taken to protect the competitive advantages of this major UK industry.”
Foreign domiciles have narrowed the gap on London in recent years. Assets in Luxembourg-based portfolios, for example, rose to more than £820 million at the end of 2004, according to data from research firm Fitzrovia.
“Luxembourg and Dublin have seen substantial growth in activities associated with support and servicing of funds, and have developed as ‘centres of excellence’ in these activities,” today’s survey said.
VAT is the most significant tax in driving funds to domicile funds outside Britain and capital gains tax and stamp duty were also reasons for basing hedge funds abroad.
Source: Scotsman
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