Business Exodus Warning

More companies are considering jumping ship to Switzerland, as the "quiet drain" of money and personnel from Bermuda appears to be gathering pace. Industry insiders said yesterday most Bermuda-based insurance firms have one eye on moving their headquarters to Europe - following the route taken by three separate companies on Wednesday. The news comes as the industry continues to digest the "implosion" of XL, a company once considered a barometer for the health of Bermuda's economy as a whole. XL's share price crashed through the floor on Wednesday amid rumours the company is up for sale. And the Bermuda Sun has learned that the company has already shed up to 70 jobs - far higher than the official number of layoffs. Golden era over?Former premier Sir John Swan said yesterday that the "golden era" of international business on the island now appears to be over. He said even a modest decline in big business will affect every Bermudian, with taxi drivers, restaurateurs, house painters and anyone with an apartment to rent feeling the "trickle down effect." Minister of Finance Paula Cox struck a calmer note, saying recent developments are "cause for close monitoring" but insisting the island is in a strong position to endure economic turbulence. (See page 6 for Ms Cox's comments). Sir John urged all Bermudians, from the man on the street to the leaders of the country, to try harder to make international business feel welcome. "Unfortunately, when things were going really well, when things were at their best, we were at our worse: making more noise about race and about term limits," Sir John said. "We thought: 'we don't need to think about these people; they [international big business] will always be here.'" Referring to Government's announcement this week that they will review the six-year work permit limit law that proved so unpopular with big business, Sir John said: "Now things have started to slow down we are thinking about those things. Six months ago you couldn't get anyone to talk about work permit limits. But now it may be too late; you have to make your friends before you need them."Changes to tax lawsSir John said many of the factors affecting big business are out of the island's hands, including the global economic downturn and moves in the U.S. to change offshore tax laws. However, making the island more welcoming is up to everyone. He said: "It requires a sacrifice from all Bermudians. If you want to have a loose tongue and tell people [ex-pats] where to get off; if you want to think only what is best for you; if you want to be that arrogant then we all suffer the consequences." Don Kramer, head of Ariel Re, is an ex-pat and long term resident. He agrees that subtle messages have been sent out making international business leaders feel less welcome. He said: "For example, at the airport, there used to be a line for residents and non-residents. Now it is Bermudians and non-Bermudians. The Government is in a difficult position: it has to pander to a segment of their constituency that considers ex-pats a waste of oxygen on their island. On the other hand, I have to believe that Government is intelligent enough to know where the wealth comes from." Mr. Kramer - who oversees around 60 employees at Ariel Re - said he has had a serious look at moving his own headquarters to Switzerland, although he has decided that option is currently "not on the radar." He believes all insurance firms have been obliged to consider such a move. The reason is increasing "aggression" from lawmakers and tax inspectors in the U.S. No longer preferredShadow Finance Minister Grant Gibbons said that recent moves to Switzerland are symbolic and prove Bermuda is no longer the "preferred jurisdiction" for companies considering a move. He said: "There should be serious concern in the community about the health of our international business." Mr. Gibbons believes Government has squandered its goodwill with big business by obsessing about race. He said Premier Ewart Brown's recent remarks in Parliament about white Bermudians not supporting Barack Obama was just the latest example of Dr. Brown sending out the wrong message. Mr. Gibbons said: "The PLP needs to think long and hard about its leadership at this present time." Describing the consequences to the country if big business declines, Mr. Gibbons said: "Most directly, 60 per cent of employees in those companies are Bermudians. If jobs are lost, Bermudian families suddenly find themselves without a breadwinner. Then there is the huge amount of money Government makes directly from payroll tax - that goes. Business people take taxis, eat at restaurants; they work in offices that have to be built and maintained. They stay in apartments that will soon be empty if we are not careful." Officially, XL announced it had shed 47 jobs. However, insiders say at least 70 of around 320 staff have moved on, with many jumping ship before being pushed. One insider said parts of XL's offices now resemble "a ghost town" with desks empty and morale low. The entire operation could fit inside one of the company's two towers and XL has lobbied Government to try to rent out its second tower, the insider said. However, when XL and ACE were granted special permission to buy property in Bermuda it was done on the proviso they would not rent out any office space.The Bermuda Sun called XL spokeswoman Carol Parker-Trott for comment yesterday but received no reply by press time.XL’s decline: should you be worried?As a long-standing powerhouse of Bermuda's insurance industry, XL has long been seen as a barometer for the health of the economy. So does its rapid decline forebode a similar collapse for the island's other firms? No, experts say; XL's problems are individual and tied to specific investments. Peter Everson, a consultant for Schroeder's asset management, said: "The factors affecting XL are related to that company and that company alone. General Motors, one of the most prestigious companies in America, has had to go to the Government for help; that does not mean all American automotive companies are in trouble." David Ezekiel, chairman of the Association of Bermuda International Companies, agrees XL's problems are specific. However, he said the decline of such an "iconic" local company was still a psychological blow for everyone in the industry. Mr. Ezekiel said: "The [local] industry has been defined by Ace and XL. It's a blow to the psyche."by Tim Hall