A sign of the times? Barclays shift procurement work to Singapore

When I saw the news that Barclays are planning to move a number of key procurement roles from London to Singapore, (well done to Adam Leach in Supply Management for the story), I confess that the cynic in me immediately kicked in.

I thought back to Vodafone moving their procurement to Luxembourg – purely because it’s such an exciting, vibrant place to be based, and nothing to do with the tax advantages that might accrue through some well-structured, procurement related accounting that might now be possible (!)

So what’s the tax situation in Singapore? Actually, not quite as favourable as you might think, from a cursory glance anyway. Corporation tax is 17% for profits over £300K,  so you can save a few percent over the UK’s rate which is on the way down to 23%.  I suppose a 6% difference is still worthwhile to a big corporation.

The potential benefits of using  procurement to support tax efficient corporate structures is that large sums of money obviously flow through external contracts. So it is relatively easy to turn the procurement operation into a profit centre – through judicious use of rebates, charging internal management fees, or selling on goods and services through internal transfer prices (with a margin attached).

If the procurement operation then makes a profit, that can be taxed at the local rate – which may be lower than that in the UK, Germany, France, the US etc. Nothing wrong with that I guess as long as the profit is not seen to be unreasonable.

It may well be of course that Barclays are doing this for totally different reasons. Here's what their spokesman said:

"This will ensure global procurement teams will have the right locations within the right time zones to serve the business efficiently and in a cost-effective manner across the globe".

Maybe that's true, but banks buy mainly property, IT and people related goods and services, rather than stuff from Chinese factories. So hard to see exactly why they need more folk in Singapore for that reason.

It may be that they feel they can find better procurement people in Singapore? I don’t know enough to comment on that. If it’s true, that’s another worry for employment in Europe and the profession here. (It would also suggest CIPS is being very smart in developing strength in Asia)!

At a recent conference, a Vodafone executive said that their initial move to Luxembourg had gone well, lubricated by generous relocation packages for key staff. But they were now having a few issues with recruitment of new, skilled procurement staff, Luxembourg not being the most interesting place to live. (Mind you, Newbury??)

So, we don’t know if Barclays are planning to relocate or recruit anew, but we’ll watch with interest to see how extensive this initiative is, how it goes, and whether others follow. And if anyone from Barclays would like to give us the inside story, on or off the record, please let me know.

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