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IPS129 Claudia V. et al.
An area for future consideration is the sensitivity of the thresholds used.
The TFSPE classifies entities as SPEs based on assumptions regarding their
characteristics – particularly employment and physical presence. To illustrate
the sensitivity of these assumptions, Chart 5 presents the cumulative value of
UK inward FDI positions attributable to businesses by employment size. As
shown, enterprise groups meeting the employment threshold of up to two
employees accounted for £57 billion of the UK’s inward FDI position in 2016.
Increasing the threshold to five employees raises this to £82 billion, to £86
billion for six employees, and £103 billion when the threshold is set to ten.

Chart 5: Sensitivity of employment thresholds, cumulative £ billion, 2016

A further consideration was that, using the data sources available at the
time the research, it was not possible to separate enterprises that met the
definition of a SPE but were also part of a wider enterprise group that had
operations in the UK through other enterprises. For example, an enterprise
group may control a special purpose entity in the UK to manage their
international finances; however, they may also control a number of other
enterprises undertaking economic output. Of approximately 19,000 groups
analysed, slightly over 1,400 had an aggregate employment level that
exceeded five when combining all their enterprises, but also had at least one
enterprise meeting the employment threshold. Inclusion of these other
enterprises would likely increase the value of inward FDI positions; however, it
is unclear whether they should be considered SPEs.
A further area is the use of balance sheet information as part of the
decision tree. Balance sheet data is not currently available via the IDBR,
therefore the decision tree developed was arguably less sophisticated than
that developed by the Task Force. Utilising wider data sources in future would
allow for better measurement of UK physical presence, rather than the use of
turnover as a proxy.
A further consideration was that, given resident SPEs are not currently
identified, the FDI sample design and estimation methods do not currently
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