Shell's move to London is a vote of confidence in Brexit Britain

Shell and Unilever have upped sticks and moved to the UK. The City should tempt more corporate giants in, says Matthew Lynn.

It hasn’t been a good couple of weeks for those who predicted the City would be turned into a wasteland if we left the EU. First Brussels decided that clearing of trades, a key piece of the plumbing of the financial system, can carry on in London for euro-denominated assets, even though a succession of European leaders vowed that it would have to move to financial centres on the continent. Now companies are shifting to a sole listing in London as well. 

There were lots of warnings that dual-listed companies such as Unilever and Shell would ditch their British arms and choose to be headquartered inside the single market instead. And yet first Unilever, admittedly under pressure from its shareholders, and now Shell, the two great Anglo-Dutch corporate giants, have decided to consolidate in London instead. Shell is even dropping the Royal Dutch from its name.  

The City should blow its own trumpet

There is, of course, a lot more to Shell’s decision than just Brexit. It is much more about simplifying its ownership structure so that it can increase payouts to shareholders. The oil giant is under intense pressure from the activist investor Daniel Loeb to split itself up into a legacy fossil-fuel business and a faster-growing renewables unit, and the only way it can resist that is to get its share price moving back up again. By shifting its tax residency to Britain it will be easier for it to buy back its shares, improve returns and maintain independence. The important point for the UK, and even more for the City, however, is that Unilever and Shell are both huge companies and the bragging rights over their decision to base themselves in Britain are worth having. The City should capitalise on this and work out how to attract yet more multinationals.  

First, it could promote itself better. The City should be making a big deal of the fact that two of the biggest companies in the world, faced with a choice between basing themselves in London or Amsterdam, have chosen the British capital. A one-line statement from the business secretary is not really enough. The City should be shouting about it, so that the rest of the world gets the message. That’s what the French and the Dutch would be doing. 

Next, ensure our tax structures make it simple to base a multinational in the UK, and, perhaps more importantly, make sure they are flexible. The Dutch have been scrambling around this week trying to streamline the tax on buybacks that helped persuade Shell to shift its base, but it would have been better if it had made that change in advance. There is no harm in the UK tweaking its tax code from time to time if it helps convince some of the biggest companies in the world to move here. 

Finally, offer a five-year tax break for any company moving a listing to the UK. The planned rise in corporation tax to 25% already looks like a big mistake, but even if that is not reversed there is no reason why there could not be an exemption for major firms that decided to switch their domicile to Britain. It would cost the Treasury some revenues; but it would also attract new businesses and their staff would pay plenty of tax. The UK would come out ahead – even before adding the value of the prestige that comes from hosting giant corporations. 

Let’s open our arms to American giants

Plenty of the mining conglomerates also have dual listings as do some of the tech companies. More importantly, there are lots of firms that will be pondering shifting their main base over the next few years. Ireland will have to raise its corporate taxes to meet the global minimum rate it has signed up to and that will make it a lot less attractive as a base.

US president Joe Biden has already raised corporation taxes, and has had a go at a billionaire’s tax that could drive many American giants out of the country. The EU is increasing the levels of regulation and needs to come up with new taxes to pay for all its debts.

As the decade unfolds, lots of major businesses may be looking for a more business-friendly place to base themselves in. The UK needs to lure them in.  

Recommended

NFTs: what are they and why are they so popular?
Bitcoin & crypto

NFTs: what are they and why are they so popular?

The NFT market has been on a rollercoaster ride in 2021 starting with the $69m sale of a digital artwork backed by a cryptographic token known as an “…
8 Dec 2021
We’re at another turning point in the 100-year cycle of money – here’s what to do
Currencies

We’re at another turning point in the 100-year cycle of money – here’s what to do

Money has always moved in 100-year cycles. And we’re at another turning point now, says Dominic Frisby – money has gone from gold to government-backed…
8 Dec 2021
I wish I knew what a bond was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what a bond was, but I’m too embarrassed to ask

When thinking of investing many people automatically think of the stockmarket. But there is another market – the bond market. So what exactly is a bon…
7 Dec 2021
Cryptocurrency roundup: Black Friday crypto crash
Bitcoin & crypto

Cryptocurrency roundup: Black Friday crypto crash

Bitcoin fell to a six-week low today as wider markets sold off. Saloni Sardana looks at the stories that caught our eye this week.
7 Dec 2021

Most Popular

Three safe bets on the growing online gambling sector
Share tips

Three safe bets on the growing online gambling sector

Professional investor Aaron Fischer, creator of the Fischer Sports Betting and iGaming ETF, picks three of his favourite online gambling stocks.
29 Nov 2021
Bubbles grow in global property markets as house prices continue to rise
Property

Bubbles grow in global property markets as house prices continue to rise

House prices grew by 6% in the year to mid-2021 in 25 global cities, with the German property market in particular showing signs of overheating.
3 Dec 2021
Making sense of the new minimum pension age rules
Pensions

Making sense of the new minimum pension age rules

The rules surrounding the minimum age at which you can start tapping into your retirement savings have been tweaked, but are still confusing. David Pr…
23 Nov 2021