Government should penalise UK start-ups that list abroad – City lobby group

An influential City lobby group has urged the next government to explore methods of penalising start-ups that receive taxpayer-funded support if they later opt to list or move valuable operations outside the UK.

UK Finance, which represents more than 300 banks, payment companies and other financial firms, said in a briefing pack this week that although most UK firms that opt to list do so in the UK, there was “no question that competition from overseas venues is increasing”.

It added that, as a result, the government should “consider ways in which an expanded set of taxpayer-funded supports for early-stage growth companies involve a two-way commitment and would become repayable in part or full if a recipient ultimately chooses to list, or move valuable operations, outside the UK”.

The group added that while choosing where to list or locate was a matter for a company to decide, “there is a strong case for linking taxpayer supports to future commitments to using UK public markets and operating in the UK”.

Any scaling back of tax breaks or other state support for companies that list abroad would mark an escalation compared to most other efforts to boost Britain’s capital markets, which have focused on reducing perceived regulatory burdens and boosting investment from UK pension funds.

UK Finance also recommended more generous government support for high-growth firms and expanded funding of existing schemes to include regulated fintechs.

Moves to reduce the rate of companies floating overseas come after a slew of UK firms have snubbed London’s stock market for IPOs in New York or moved their listings overseas, with fears that jobs and operations could subsequently move abroad.

Conor Lawlor, a managing director at UK Finance, told the Financial Times that the UK should take notice of “much more interventionist” countries like the US and France and consider “tax penalties” for firms that benefit from UK taxpayer support but then leave within a period of five-to-seven years. 

Still, he added that more work would be needed to examine how much government support had been accepted by these companies and ensure any intervention would not push companies to begin life in the US and bypass the UK.

UK Finance’s recommendations came ahead of the general election on Thursday, which polls widely expect Keir Starmer’s Labour party to win.