(Picture by Lewis Whyld/PA Wire)

AN INDEPENDENT review into British offshore financial centres looks likely to recognise their importance to the UK economy.

But it could encourage ‘diversification’ in low-tax regimes in light of the global economic downturn.

The review was ordered by Chancellor Alistair Darling (pictured) and a progress report will feature in today’s Budget speech.

It is being carried out by Michael Foot, who, in a letter to Mr Darling accompanying the report released yesterday, said that despite the difference in their sizes, there were themes that covered all dependencies.

‘Many of the themes revolve around the interdependence between the UK and the financial centres which is manifest, for example, in the substantial flows of business from the UK to many of them and vice versa,’ said Mr Foot. ‘Defining and understanding the implications of these mutual dependencies and any related contingent liabilities would be a key theme of my review.’

He added that the most immediate issue facing the financial centres was how to best deal with the current downturn in financial services business, particularly if it became prolonged.

‘Even in a downturn, new opportunities may arise to offset retraction in certain areas of financial services business. Managing toxic assets from the banking sector may be an example of one such area.’