Why Britain should embrace its islands

Britain plays down its strengths, emphasises its weaknesses, and ignores its possibilities. Nowhere is this more obvious than in relation to the UK’s network of Crown Dependencies and Overseas Territories (CDOTs). Insofar as the CDOTs are considered at all in British life, it is via the prism of tax evasion and financial crime. A widespread perception exists that CDOT jurisdictions are tax havens, enablers of financial malpractice, or that they are in some sense morally ‘problematic’ reminders of the imperialist past. This perception is largely wrong, undermining their economic value and reflecting a strategic shortsightedness. 

CDOTs include 17 separate jurisdictions scattered across the globe, all of which ultimately sit under the sovereign authority of the British Crown. They are a disparate grouping, combining globally-prominent financial centres such as Jersey and the Cayman Islands with military bases, uninhabited nature reserves, and the barren expanses of South Georgia and the British Antarctic Territory. That they exist is an accident of history - the commingled legacy of Britain’s feudal heritage, and of her once far-flung empire. That they persist highlights Britain’s role in financial globalisation, and affords it a new set of opportunities in an era of accelerating change. 

The CDOT network is a bulwark of the British economy and a testament to British soft power. Trillions of dollars pass through these jurisdictions each year, attracted by the reliability of the common law, the stability of British-associated institutions, and the tax-neutral positioning offered by key CDOTs. The opportunity to serve these capital flows means that the CDOTs collectively represent the UK’s 9th largest export market - thus providing jobs and taxes for the British home economy. 

The CDOT network also increases the size, success, and competitiveness of the British services sector. Consider the British Virgin Island and the Cayman Islands. Both of these Overseas Territories are situated in the Caribbean, with an ocean separating them from the UK. The BVI is a major centre for international company formation; the Cayman islands are a leading jurisdiction for hedge funds.  Much of the capital that is attracted to these jurisdictions has little to do with the UK; it originates elsewhere, and is then reinvested in overseas jurisdictions. If the CDOTs did not exist, and if they did not have such strong ties to the UK, then British businesses would have often had little reason to serve these financial flows. Given they do, however, British firms - and thus the British tax authorities - are able to derive revenue from serving them. 

Being smaller, individual CDOT jurisdictions can also more more swiftly. This means that they can experiment with new rules in advance of the UK, and that the UK can use them to test out policies it might later want to implement at home. So, as well as attracting investment to the UK, they also act as policy laboratories. 

In an age of dizzying strategic and technological change, the network now offers the UK an additional opportunity - one of creative adaptation and experimentation

To find out how to embrace CDOTs, check out James Kingston’s research paper ‘Profitable Peripherals: Maximising the potential of British CDOTs’.