Will the last ISP to leave the EU not switch off the Net?

The news that Yahoo is to move its European Headquarters from London to Geneva, following the location of Google’s European Engineering headquarters in Zurich (as opposed to London or Cambridge), confirms the fears I have long expressed over the impact of what is now the Audio-Visual Media Services Directive.

The headline excuse for Operation Toblerone is to improve efficiency while the Swiss say this means tax efficiency. However in January I blogged on the potential impact of EU regulatory initiatives on funding the creation and distribution of innovative, advertising-funded, multi-media content. They strike at the very heart of the business models of players like Yahoo and Google, or of those who would seek to produce content for them, let alone of those who would seek to leapfrog them.

It looks as though the top management of Google and Yahoo came to the same conclusion, after consulting their very expensive legal advisors.

During the original debate over RIPA I recollect Ministers denying that business would move its data and communications centres off shore rather than incurr the risks and overheads of ill-judged legislation and regulation. But even before the legislation was passed the emigration had begun.

Given the recently demonstrated vulnerability of the long-haul internet ( The day the Internet stopped was my blog on the subject), the attractions of Switzerland as a secure, but not inexpensive, location for surveillance free communications and processing centres and their related head offices are becoming increasingly apparent.

It is also apparent that the widely welcomed EURIM paper on the locational factors for knowledge based industries was far too polite.

So too was the EURIM submission to the recent DIUS consultation on which I asked readers to comment

The DIUS White Paper The Innovation Nation released yesterday is well worth reading but misses the point.

The Governments of Europe, as well as that of the UK, have to learn that they are competing for the wealth creating, tax paying, knowledge industries of the Information Society: industries that can locate anywhere in the world and can also move at short notice.

Yahoo is giving its key employees time to choose and the news has leaked. Others have moved rather faster and more quietly.

Who will be next to go?

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We are currently living through the EU's 5-year plan, i2010, according to which "differences in economic performances between industrialised countries are largely explained by the level of ICT investment, research, and use, and by the competitiveness of information society and media industries".

Based on that analysis, "the Commission intends to use all its instruments to foster technologies that communicate, through research, promotion of open standards, support for stakeholder dialogue and, where needed, mandatory instruments". Not doing very well, are they, judging by Philip's article.

Neither are the UK. Last year Great Universal Stores demerged and some bits of it, at least, ended up in Ireland, with its more conducive tax regime.

Those bits include Experian, the credit referencing agency, whose role in ID assurance will be crucial, along with the banks, the phone companies and the utilities.

That's two companies that didn't come to the UK and one that's gone.

As Ed Balls might say, so what?

I'll tell you so what. It came to my attention in January, two months ago, that a senior tax partner at one of the big five accountancy firms had been approached by x members of the FTSE-100 to investigate the feasibility of migrating their companies. Want a guess at the value of x? 30!

Mr Balls, if you're reading this, the UK's accountants and lawyers are currently working full time thanks to the Treasury, your Treasury, where you were so endogenous, on shipping out our companies and their bankers and our people and on repelling companies and people who might otherwise come here.

The lights are going out here. The party is in Switzerland. Roll on the next five-year plan.

As someone who participated in the EURIM exercise in 2006 to prepare a briefing paper on UK Competitiveness entitled "A Flourishing Innovation Economy:- How the UK must attract and retain knowledge-based businesses" (available here) the warning signs were evident to me even then.

The abstract paragraph summarizes the situation well:

"Attracting innovative businesses is rather like gardening – creating an environment in which plants can flourish over the long term. A buddleia bush is a butterfly magnet, attracting not only insects but supporting a whole food-chain. Cutting it down will not give rise to angry butterfly demonstrations; instead they will simply vanish, along with a host of other creatures, to the garden of a more enlightened neighbour. Similarly, knowledge businesses, footloose and global in outlook, can quietly and quickly abandon locations that cease to be advantageous for them."

Why were the warnings ignored?