Keir Starmer's tax rises and drumroll makes relocation a temptation for executives

Britain's business community is braced for what is coming. Bloomberg

The holidays are over, the schools and universities are heading back, Parliament is once again in session. The world, as many in corporate Britain know it, has resumed.

Normally, at this time of year, there is a spring in the step, as people return to their desks re-energised and ready to go. But the mood among the C-suites and ExCo’s is sombre. There is talk of mutiny in the air, not of launching a coup but of disembarking the ship entirely, of relocating.

The number who follow up their words and actually decamp to Dubai, Abu Dhabi, Singapore and elsewhere, of course remains to be seen. Certainly, though, at the moment there is a level of dissatisfaction in the UK’s boardrooms with central government that has not been seen in a while.

That can’t be true. After all, we had the indecisiveness of Theresa May, followed by the gung-ho craziness of Boris Johnson, then Liz Truss, enough said, followed by the emptiness of Rishi Sunak. Businesses like certainty and those latter years offered none of that.

Accompanying the turmoil, too, was Brexit and not only were the City and the biggest corporates opposed to leaving the EU and still are, but they’ve since had to get used to a new, pernickety way of doing things. Meanwhile, the much-vaunted substitute mega trade deals with the US and India, they’ve yet to materialise.

Don't be surprised if relocation to places such as Dubai becomes a consideration for company executives. Getty Images / iStockphoto

Relief deflated by taxes

So, it cannot be right that only three months after bidding farewell to 14 years of Tory rule and welcoming Keir Starmer and his colleagues, business feels so deflated, and worse, angry.

The first reaction to Labour’s victory in July was one of relief. Not only was there an end to the Tory roller-coaster but the thumping majority meant that Britain could look forward to the same government for many years to come. Order and civility had been restored.

As businesses looked to Europe, US and other parts of the world, that provided an additional boost. Germany and France were being torn apart by right-wing unrest and elections; the US seemed to be permanently teetering on the brink of civil war; for once, China had problems. Suddenly, dear old Blighty did not seem such a bad place to be.

No sooner did the celebrations cease, however, than Starmer and his team embarked on a campaign of negativity. Undue caution might be a better way of putting it, but the mood they injected was downbeat. They’d inherited a mess; they said it over and again. That could only mean one thing: brace yourselves for tax increases.

US investor Cathie Wood said: 'In the US, we are big advocates of tax incentives for innovation – encouraging founders to take risks.' Bloomberg

Tempting New York

Business was quick to get the message. This being Labour it was unlikely those rises would come at the expense of ordinary folk; no, the target would be those who, in Labour’s eyes, could afford to pay. Capital Gains Tax, Inheritance Tax – burdens on the wealthiest – are mooted as the probable targets for Rachel Reeves, the new Chancellor.

Perhaps in a bid to address the growing fears, Ms Reeve on Tuesday promised her budget would give businesses certainty over the coming years. “It is vital also that the tax system supports growth, and that’s why today I can confirm that at the budget the government will be outlining a tax road map for business, to offer the certainty that encourages investment and gives business the confidence to grow, including our commitment to cap corporation tax at 25 per cent for the duration of this Parliament, and to retain full expensing.”

But there are other hostile milestones already announced. The imposition of VAT on private school fees from January has served to contribute to the despond in business, home of that richest, executive-level fragment firmly in Labour’s crosshairs. It was petty and ideological, and it hurt.

The business community is braced for what is coming. As if to rub it in, Angela Rayner, Labour’s Deputy Leader, who carries great influence within the party and Cabinet, is making plain her desire for a rewriting of employee rights. They will be heavily skewed towards the unions, lowering the bar for strike votes.

The sense that Labour is in thrall to the unions has been compounded by a series of public sector pay awards. Here is a regime that sold itself on economic responsibility, ascending to power and handing out wage rises without any explanation as to how they’re to be afforded – which only makes business more suspicious that it will end up being the provider, via higher taxes.

Lack of activity in the City does not help. Flotations heading to New York and other businesses moving their registered offices overseas have added to the gloom.

At the weekend, superstar US investor Cathie Wood summed up for many and struck home when she said: “Your educational system is exemplary and yet I think what happens is that your capital markets are not deep enough – or incentivised enough. In the US, we are big advocates of tax incentives for innovation – encouraging founders to take risks.”

Starmer and Reeves are throwing away the trust built during a months-long charm offensive to woo the City. AP

Starmer's licence

Interest rates are falling but that is not down to Starmer. The City craves him to supply good news but there does not appear to be any. Rather, all the discussion is of cutbacks in much-needed infrastructure investment and in departmental budgets.

The EU would like to resurrect the Erasmus scholarship programme – something business welcomes. What does Starmer do? Only kibosh it and say he will come up with an alternative.

Business is desperate for closer trade ties with the EU. Again, Starmer would prefer to focus away from the bloc and promote those trade deals. But so far, they have not occurred. The Tories could not get them over the line and there is no indication that Labour will succeed where they failed.

Some of this would not matter so much if Starmer and Reeves had not spent months on a charm offensive, wooing the City and business, holding countless coffees, breakfasts, lunches, dinners to sell the message that an incoming Labour administration would be on their side.

They pleaded not to be thought of as the same old Labour; this time they would be different and they would be going out of their way to meet business’s wishes.

That hard won trust has all but perished. A strategy of blaming the Tories for everything and trying to say it’s not our fault, while hitting business, is firmly under way.

Faced with that, don’t be surprised if relocation is not the hot topic. Having gone from being relieved at the size of the Labour victory, companies are realising Labour is not going anywhere any time soon and that landslide gives Starmer and his pals all the licence they require.