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Why Apple Won’t Relocate to the U.K., However ‘Welcome’ It Is

It’s an episode best understood as an example of how febrile the climate in Europe is getting post-Brexit.

The desperation of some elements of the British press to present a rosy view of the U.K.’s future outside the EU and its Single Market at any cost made it inevitable that the EU’s instruction to Ireland to recover over $14 billion in back taxes from Apple Inc (AAPL) was immediately recast as a comparison of the investment climate either side of the Brexit divide.

As Fleet St. tradition dictates, the EU must be cast as the overbearing, excessively taxing superstate, in contrast to the light-touch, pragmatic idyll that is Shakespeare’s sceptr’d isle.

Thus, when The Daily Telegraph, loyal to a fault to the ruling Conservative Party, pressed the government on whether it would like Apple to relocate its global sales operations to the U.K., outside the EU’s grasping reach, it got the absolutely standard answer:

“The narrative of the Government has been well set out. Britain is open for business, we welcome any company wishing to invest in Britain and Britain’s workforce.”

More specifically, the spokesman said the dispute was “clearly an issue for the Irish government, Apple and the European Commission.”

But why let that get in the way of the agenda? Cue the headline: “Apple tax: Downing Street says tech giant ‘welcome’ to come to U.K. after EU orders Ireland to claw back £11bn.”

In fairness, Apple CEO Tim Cook did appear to be inviting Euroskeptics of all shades to rally round his company when he described the ruling as “a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe.”

But the eagle-eyed may have spotted that the letter lacked anything that came close to saying: “Get everybody in Cork a one-way ticket to London/Stoke-on-Trent/Aberystwyth, now!”

For one thing, Ireland’s standard corporate income tax rate, at 12.5%, is considerably below the U.K.’s. 20%. Even if the new U.K. government under Theresa May goes through with a mooted cut to 17% (proposed in panic by the last Treasury chief George Osborne in the immediate wake of the Brexit vote), it’s still 4.5 percentage points higher.

Then there’s the small matter of Brexit itself. The U.K. is likely to exit the Single Market under its Brexit settlement (given that the government appears to be bending to populist demands for immigration curbs, which are incompatible with Single Market status). If Apple re-domiciles in the U.K., it will most likely still need a taxable entity through which to route its sales in the EU. So, no great savings to be had there. And in case there’s any doubt about which market is more valuable: EU GDP (excluding the U.K.) is over four and a half times that of the U.K. Which one would you rather have unlimited access to?

Ah, say the Brexiters, but what about the “certainty of law” that is so important to Mr. Cook? Is the U.K. not a much more predictable partner? That is a question better addressed to the banks or the operators of the North Sea oil and gas fields: both of them have more than enough recent experience of arbitrary, short-term raises in tax rates by Westminster.

The question might be even better addressed to Google Inc. (GOOG), which will be nervously watching the new government’s response to attempted tax claw-backs in France and Italy. If France succeeds in exacting the desired 1.6 billion euros ($1.8 billion) it wants, then the pressure on PM May will increase sharply to revise a deal with the company that only brought in 130 million pounds ($170 million). Google does much more business in the U.K. than in France.

The last factor is that the U.K. itself has so much at stake as it negotiates its divorce settlement from the EU that it can ill afford to make a blatant “race-to-the-bottom” play for Apple’s international taxes at the expense of the people across the negotiating table. Especially if the reward is as limp and inadequate as the one it got from Google. Such a provocation would be bound to reap a response from resentful Eurocrats.

There are plenty of good reason for Apple, or any other country, to invest in the U.K. (official data from the Department of International Trade out Tuesday showed plenty of other international companies doing just that: the number of foreign-backed projects rose 11% last year, creating over 82,000 new jobs). But spite at a ruling that will be appealed over years and may never be paid anyway isn’t one of them.