UK – High Pension Protection Fund levies and the “illogical and unfair” risk assessment calculations could drive multinational companies out of the UK, according to market commentators.
“Multinationals have more options than purely domestic companies about choosing where they do business. It is possible that if such companies are faced with high PPF levies they will take action,” said Stephen Yeo, a senior consultant at Watson Wyatt.
Yeo was commenting on weekend reports that Nestlé chief executive Peter Brabeck-Letmathe was considering moving the food giant’s KitKat and Smarties manufacturing operations from York to the Czech Republic.
This threat reportedly followed PPF instructions for Nestlé to pay a £12m (€17.5m) annual PPF levy – significantly higher than the expected £300,000 contribution.
A move to the Czech Republic would cost an estimated 1,600 jobs, the reports said.
However, Nestlé today dismissed this. It said: “Nestlé is concerned about the Pension Protection Fund proposals, however, we are not considering UK job cuts.
“It is our belief that if UK labour costs for any manufacturer get out of line because of increased costs, including pension provision, then this could result in jobs being moved to more competitive locations. It would also cause companies to reconsider their current pension scheme offerings, which could lead to further scheme closures.”
It added that while the group was not against the concept of the PPF, it should be affordable and fair with contributions to the fund capped.
The risk-based levy - calculated by Dun & Bradstreet – lies at the heart of the matter, and has resulted in several disputes with the PPF, said reports.
"While the concept of the levy is understandable, the proposed use of Dun & Bradstreet's 'Failure Scores' to assess insolvency risk are both illogical and unfair as they currently discount intangibles," said a statement from media group Trinity Mirror.
Trinity Mirror, a newspaper publisher with more than 260 national, regional and sports titles, has an estimated PPF levy of £10m – five times higher than expected.
Yeo stated: “The current PPF Board proposals for the risk-based levy take no account of parental guarantees and do not take proper account of the strength of the corporate group in supporting schemes of the 'last man standing' variety.
“This will result in levies that are too high for many schemes.”
However, he added that as long as companies are allocated to the correct risk band, the risk-based levy proposals “are broadly fair”.