Global Competitiveness Report says tax rates, regulation and government bureaucracy hamper the UK
Top executives from the London insurance market are meeting with the Treasury today (Wednesday 7 November) to discuss the competitiveness of the UK insurance market, and the findings of the World Economic Forum in its Global Competitiveness Report – placing the UK at number nine in the world table, down seven places – may well figure in the discussions.
A panel of businessmen and women, as well as economists, were consulted on over 100 economic variables for 131 countries in order to compile the report. At the top sits the US, followed by Switzerland and Denmark. China weighed in with an impressive 14th place in the table, the highest placed developing economy, and its performance will probably not surprise insurers who have built Lloyd’s Asia platforms.
According to the report, one of the key areas in which the UK is struggling to compete is tax rates and regulations. An inadequately educated workforce, as well as an inefficient and bureaucratic government, were also given as reasons for the drop.
But the overall picture presented of the UK is a good one – the sophistication of its financial markets is ranked second in the world, and the efficacy of corporate boards, strength of auditing and reporting standards, and business sophistication are ranked in the top ten.
Nevertheless, it is interesting that the panel looked at the UK market and highlighted tax issues as the major problem. Tax is something the London market has long complained about, lobbying for reductions and lighter regulation, in order to better compete with the emerging foreign markets – even though the UK has the lowest corporation tax rate in the G7.
The government has already agreed to cut corporation tax from 30% to 28% from April 2008, so it is unlikely that the London insurance market will be allowed to benefit from an even lower rate.
But the cut will certainly make the market more attractive for new start-ups. Add to this the strengths of the UK market in other fields, and by this time next year, the UK could be moving back up the competitiveness table.
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