UK-headquartered medical supplies and microbiology testing firm Steris has announced that it plans to redomicile to Ireland.
The company, which operates globally, has an annual turnover of around $2.72bn and is currently headquartered in Derby, England. It says it wants to avoid losing financial benefits of being inside the European Union after Brexit.
In redomiciling, the company isn’t moving its physical operations out of the UK into Ireland, but merely moving its registered headquarters.
The company has been based in the UK for tax purposes since November 2015, when it completed a $1.9bn ‘tax inversion’ takeover of British firm Synergy Health.
CEO Walt Rosebrough announced the news yesterday on an investor call, and said that remaining headquartered in the UK could cost the company $50m. It says the decision won’t materially change the day-to-day operations of its business, but estimated the change would cost around $10m.
The news is a worrying sign for the UK government, which is entering a true ‘make or break’ period for its Brexit plans, with the chances of a no deal Brexit growing daily.
It has just weeks to agree a final ‘divorce settlement’ with the EU – and then get this deal through the House of Commons – a feat which many political commentators say could be impossible given deep divisions in the ruling Conservative party.
Against this background of uncertainty and threat to trade and regulation alignment, business leaders have grown increasingly unhappy with the Brexit process, but few companies have made firm decisions to relocate.
This includes the life sciences sector – but Steris has joined a handful of firms looking to remain in the EU and opting to relocate.
The company said in a Q2 statement yesterday that it made the decision “given the protracted uncertainty surrounding the outcome of negotiations” around Brexit.
It said that after having examined its alternatives, it had decided that redomiciling to Ireland was the best way to hold on to “certain financial benefits it currently enjoys as a company domiciled in a European Union member country, including preserving the benefits of certain treaty arrangements”.
If approved by the company’s shareholders, the proposed legal changeover would see Steris shareholders receive one ordinary share in the new Irish parent company for each ordinary share of the current UK parent that they hold.
It didn’t comment further on whether it would consider relocating physical operations, such as its lab testing services facility in Swindon in southern England, which serves the medical devices and pharma sectors.
Commentary
The news of Steris’ plans for redomiciling were picked up yesterday by the staunchly anti-Brexit Evening Standard (its editor-in-chief being ex-Chancellor of the Exchequer George Osborne).
It ran the news amid its coverage of the continuing crisis in Theresa May’s cabinet, but its characterisation of Steris as ‘a major pharmaceutical company’ was wide of the mark.
Nevertheless, the news is a worrying development for the UK government, and other multinational life sciences firms will undoubtedly be weighing up shifting investment out of the UK in response to Brexit. However, moving physical locations such as R&D facilities and manufacturing plants is a much longer-term decision than the relatively easy swapping of tax domiciles.
One life sciences firm that made a wholesale relocation was MeddiQuest, a regulatory affairs management company which moved operations to the Republic of Ireland in 2017 to avoid the complications of Brexit.
The UK government life science leaders have hinted that there are a number of companies waiting to announce major investments in the country once the Brexit deal is done.
AstraZeneca, one of the UK’s two big pharma companies, recently reiterated that it was suspending any decision about its investments until after Brexit, due to take place on Friday, 29 March 2019.
However the mood in the sector is low, with Brexit’s many downsides combining with market access restrictions to make the UK unattractive compared to other locations.