By Jenny Gross
LONDON -- British Prime Minister Theresa May pledged to increase spending on science and technology and committed to cutting the corporate-tax rate to the lowest level of the world's top 20 economies, trying to head off uncertainty stemming from the U.K.'s decision to leave the European Union.
In unveiling the strategy, she warned business leaders that she planned to tighten corporate-governance rules, including over executive pay and accountability to shareholders.
"Just as government must open its mind to a new approach, so the business community must, too," Mrs. May said in a speech to the Confederation of British Industry, an umbrella group that represents 190,000 businesses. She said the plan was about the government helping Britain overcome the "longstanding challenges in our economy that have held us back for too long."
Following Britain's vote in June to leave the EU, Mrs. May is seeking to attract foreign investment while reaching out to voters in Britain's struggling industrial heartland who are angry about inequality and skeptical about the benefits of globalization.
Mrs. May has given few details about how she sees the U.K.'s relationship with the bloc once it leaves, except that she wants to curb migration while maintaining free trade with the EU. Her European counterparts have said the U.K. can't cherry pick what it likes while opting out of other requirements, such as the principle of free movement of people that allows EU citizens to live and work anywhere in the bloc.
She said her "aim is not simply for the U.K. to have the lowest corporate tax rate in the G-20, but also a tax system that is profoundly pro-innovation."
Mrs. May didn't specify what tax rate she foresaw, but an aide to Mrs. May said she was committed to plans already in place to cut the rate by 2020 to 17%, which would bring rates to the lowest in the Group of 20 major economies. In July, then-Treasury chief George Osborne announced that he planned to cut the corporate tax to 15% or lower.
In the U.S., the federal government taxes corporate profits at 35%, although Donald Trump's victory is expected to embolden Republicans to reduce taxes for individuals and businesses. He has said he would cut the corporate-tax rate to 15%.
Any further tax cuts in the U.K. could complicate Britain's upcoming negotiations with the EU over its departure from the bloc, raising concerns about competition to go lower. A European Commission spokeswoman noted that each member has a right to set its own corporate-tax rate as long as EU rules are respected.
Mrs. May said she recognized that leaving the EU brought uncertainty for business, but that the right approach was to set out Britain's negotiating position on extricating itself from the bloc and not rush ahead without doing the groundwork.
She said the government later this week would commit to investing an extra GBP2 billion ($2.5 billion) a year by 2020 in research and development that would put Britain at the forefront of cutting edge science and technology.
Rajesh Agrawal, the deputy mayor of London responsible for business, said companies in the British capital wanted continued access to the European single market firms and an open immigration policy.
"Let's not rush this because of party pressures or whatever -- because it is perhaps the most important political decision of our lifetime, and it is very important to get it right," he said. "The stakes are very high."
Nicholas Winning in London, Andrea Thomas in Berlin and Viktoria Dendrinou contributed to this article
Write to Jenny Gross at email@example.com
(END) Dow Jones Newswires
November 21, 2016 12:37 ET (17:37 GMT)
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