London, Sept. 2: The world’s largest advertising company has said it will return to Britain, four years after it led an exodus of businesses to lower-tax countries.
WPP will hold a shareholder meeting in December to rubber-stamp its move from Dublin back to London. Its decision will be a substantial boost to UK chancellor George Osborne, who hopes to encourage business back to Britain with a corporate-friendly tax regime.
The group moved its headquarters and a handful of staff to Dublin in protest against the previous government’s decision to levy a tax on foreign profits. Sir Martin Sorrell, founder and chief executive of WPP, argued that the tax would cost the business £80 million.
“We are pleased that the government has responded to our concerns and that our unremitted profits won’t be taxed twice,” he said. He added that the homecoming was not prompted by the government’s move to lower corporation tax.
The chancellor welcomed WPP’s return as proof that amendments to the tax regime had paid off. “International companies used to leave Britain. Now they are coming here because we have made this country, with its tax system, a competitive place to do business,” he said.
Sir Martin suffered an ignominious summer after investors representing 60 per cent of the company’s shares voted against a 30 per cent pay rise for the chief executive on top of a generous share award. Institutional shareholders argued that WPP had ignored their concerns and criticised it for abandoning talks over the remuneration. “It was a mistake to discontinue negotiations,” reflected Sir Martin, who said that talks with shareholders had been reactivated. “It’s difficult because nobody has a uniform view. We have to be competitive.”
He reiterated that WPP needed to match the higher remuneration paid in the US, where its rivals Omnicom and Interpublic operate.
The return to Britain was overshadowed by a tweak in the company’s full-year growth forecast from more than 4 per cent to 3.5 per cent as some larger clients reduced spending. The cut, which reversed the raising of its growth outlook in May, led to the shares closing 13 pence lower at 818 and a half pence.
The company has benefited this year from the “triple whammy” effect of the European football championships, the Olympic Games and the US presidential elections. Pre-tax profit rose 7 per cent to £358 million in the first half, but like-for-like sales growth of 3.6 per cent missed market forecasts.
Revenues in Britain rose 3.5 per cent, which offset slow progress in southern Europe and North America. The company lifted its interim dividend by 18 per cent to 8.8 pence.
WPP, which owns the J.Walter Thompson, Young & Rubicam and Grey Group agencies, is a bellwether for the health of the global economy as it tracks what corporations are willing to spend.
Sir Martin told The Times that he was pleased to see Paul Ryan named as the Republican vice-presidential candidate but emphasised that a reduction in the US deficit remained a concern.
“The choice of Ryan was a surprising one but a good one. He is immensely impressive but I don’t think the electorate wants to hear about haircuts and reductions in spending. The real danger is the US deficit,” he said.