Lloyd's insurers say Budget's 2% tax cut is not enough to halt redomiciling trend

The flow of companies leaving London in favour of Bermuda is set to continue despite efforts by the government to improve the UK's tax regime.

Chancellor Gordon Brown has given into pressure from business leaders by reducing the rate of corporation tax from 30% to 28% in the Budget.

This has resulted in the UK dropping three places to tenth in a table of the highest tax rates in the EU.

But the 2% cut, which represents £2bn in annual tax revenue for the Treasury, will do little to dampen the issue of redomiciling, according to senior industry figures.

Barbara Merry, chief executive of Lloyd's insurer Hardy Underwriting, said: "The discrepancy of tax rates in the UK and Bermuda is too large at 28 points. There would need to be other advantages in UK tax legislation for it to be a compelling argument to come back to London."

In the past six months, three Lloyd's insurers, Hiscox, Omega and Kiln, have all chosen to redomicile to Bermuda, which has a corporation tax rate of 0%.

Stephen Catlin, chief executive of Catlin, which redomiciled to Bermuda in 2002, said that he would only consider moving the Lloyd's insurer back to the UK if the tax rate fell to 20%.