High-tax Britain is losing the race for global talent
High taxes, fiscal drag and the cost of living mean London is no longer the destination of choice for skilled employees – and competitors like the Basque Country are feeling the benefits, says Ivan Jimenez
I’m a proud native of the Basque Country in northern Spain, but having spent a lot of time in the UK consider myself very much an Anglophile.
So I sympathise with the 2m Brits that have been sucked into higher tax brackets as a result of years of fiscal drag policies, as a new report by finance specialists Rift shows. Rift found that the average high earner will see 21 per cent of their total income subject to the higher rate of tax in 2025, a figure which has climbed consistently since the freeze was implemented.
Indeed, the view of many from abroad is that the UK is gaining a reputation as a high tax economy. Overall, tax as a share of UK GDP is forecast to rise from 35.3 per cent this year to a historic high of 37.7 per cent in 2027/28, according to the Office for Budget Responsibility (OBR). It means London and other leading UK cities will no longer be a destination of choice not only for inward investment and leading international companies, but also for skilled employees across the globe. At a time when three quarters of UK firms are reporting skills shortages, that will do nothing for UK growth and competitiveness.
That means opportunities for the UK’s competitors.
The best careers are in the Basque Country
In the Basque Country, for example, the UK used to have a reputation of being the place to go for the best career opportunities. When the 2008 financial crisis hit, the Basque region was impacted more than most, and many high-skilled employees relocated to the UK because of the quality of jobs offered as well as relatively low tax rates.
But now the roles are reversing. While in 2019 around 4,000 Basques lived in the UK, last year only 79 migrated from the region to Britain. That same year, 93 Britons decided to make the leap to the Basque Country.
Biscay offers a 30 per cent tax reduction to those securing a job in technology, science, finance, commercial or management, or launching a start-up
Why? In the Basque region’s Biscay (Bizkaia) province, the provincial government recognised that attracting and retaining high quality talent was critical to fostering growth. A few years ago, the government introduced a 30 per cent tax reduction to those relocating to Biscay and securing a job in technology, science, finance, commercial or management, or launching a start-up. This is no short-term gimmick either: the tax break runs for 11 years and applies to anyone who has worked outside Spain for five years. There’s also a 20 per cent tax-free allowance for spending associated with the costs of moving to and living in the Basque region, so fees such as private school costs can also be declared in tax returns.
A worker earning £67,907 in Britain – the equivalent of €80,000 – would take home £49,947 after paying income taxes. In the Basque Country, they would earn £56,209 after tax under the 30 per cent rule.
The Biscay government also established Bizkaia Talent, a public-private organisation to act as talent recruitment agency, with the aim of attracting highly qualified people from across the world. To date, since the tax incentives were introduced and the global talent attraction programme established, more than 500 people have relocated to the province.
As someone with a strong affection for the UK, I worry about how a high tax economy will damage its international standing. Britain should have a reputation for job creation and in turn wealth creation: NI rises and fiscal drag will do little to encourage that. Perhaps the Chancellor, Rachel Reeves, could take a leaf out of Biscay’s book if she wants to see one way to achieve it. Until then, the best of British talent will be very welcome in the Basque Country.
Ivan Jimenez is director of Bizkaia Talent