Sir James Dyson’s decision to move his corporate HQ from the UK to Singapore has unleashed a storm of Brexit-related comment. Sir James, one of the UK’s most successful inventors, is a prominent Brexit supporter, and he has been widely criticised as hypocritical on social media and in the MSM.
Sir James has hit back, noting a distinguished track record of investing in the UK, including founding the Dyson Institute of Technology and Engineering “to nurture the engineers who will form a vital part of our long-term future in the UK,” as he put it.
His ambition is to develop a meaningfully different electric car. Writing in the Daily Telegraph he described the project as “highly complex and expensive engineering, but we have amassed great manufacturing and operations knowledge over time in Singapore, and we have a motivated and ambitious global team there.”
Amidst all the Brexit sound and fury, a few commentators are analysing why he chose Singapore as his HQ. The City State is a global hub for technology companies. It isn’t just the rule of law, low political risk, and a highly educated (though ageing) workforce – all essential requirements for successful inward investment – it’s also the generous corporation tax regime, and in particular, a sophisticated incentive programme for research and development.
Sir James estimates the development costs for his new electric car to be £1.5bn, and the batteries an additional billion. “That is our own money,” he said.
Innovation was the centrepiece of the Singapore government’s 2018 Budget (and how often could you say that about the UK?), providing help for firms to innovate across the entire value chain, be it to buy new solutions, build their own, or partner others to co-innovate.
On IP, the Singapore government doubled the tax deduction on licensing payments for the commercial use of intellectual property (IP), to 200%. For R&D, the tax deduction for qualifying expenses incurred on R&D done in Singapore increased from 150% to 250%, and is likely to move to 300% in time.
In the UK, we’re not far behind on R&D tax credits: SME R&D relief allows companies to: deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230%. But Singapore offers a broader package of incentives, such as lower personal taxes and 17% corporation tax at 17%, 2.5% lower than the EU average, which trump our domestic offer. It’s a compelling offer for Sir James Dyson.
Some politicians have trumpeted the virtues of Singapore as an economic model for the UK to follow after Brexit. There are of course huge social differences between the UK and Singapore, but policymakers need to look beyond the Brexit rhetoric and properly assess the implications of Sir James’ decision.
In the global economy capital is super-fluid, but so is IP. If new technology – such as the electric car – is the engine of the UK’s future economic growth, we need a far more comprehensive, and generous, tax and incentive regime to champion our own home-grown R&D, but also attract James Dyson-types from other parts of the world to our shores.