Brit Insurance, the Lloyd's of London underwriter, will decide within the next six months whether to move its tax headquarters away from Britain, increasing pressure on the Government to act to stem a potential wave of corporate departures.

Dane Douetil, Brit's chief executive and a leading figure on the Lloyd's market, said that the insurer was serious about the prospect of quitting Britain for a more competitive tax regime, such as Dublin or Geneva.

He said that Brit had hired advisers to examine its options. As well as Ernst & Young, the auditor, a banking adviser and other corporate consultants have been retained.

“We are taking this very, very seriously,” Mr Douetil said. “We believe that we need to have some certainty. It is not just a tax question for us, but also a matter of where we hold our capital. We expect to reach an overall definitive decision in about six months.”

As chairman of the Lloyd's Market Reform Group, Mr Douetil is charged with modernising practices on the world's largest insurance market.

A move by Brit could prompt copycat departures among other disgruntled Lloyd's firms. Indeed, some of Britain's highest-profile companies, including WPP, the advertising giant, have threatened to leave Britain in frustration at what they see as Treasury tinkering with the tax system

and its unfriendliness towards British business. GlaxoSmithKline, the phar- maceuticals group, has also suggested that it could follow a lead set by Shire, another drugs group, and United Business Media.

The introduction of a flat rate capital gains tax, a levy on non-domiciled workers and the potential for a tax on foreign profits have incensed business groups in Britain, particularly in the pharmaceuticals, fund management and insurance sectors.

Yesterday, Henderson, the fund manager that had refused to rule out such a move, formally stated that it was actively considering relocating to the Republic of Ireland. Henderson is likely to be pressed further on the issue at its first-half results today.

John Cridland, deputy director-general of the CBI, said: “The UK's uncompetitive corporate tax system is driving firms overseas and, until this is recognised and tackled, we fear more internationally mobile firms will follow this path.”

Hostility from the business community has led to a string of government concessions on tax. The Treasury has established a high-level working group to explore ways of ensuring that Britain remains competitive and it has consulted extensively on ways to improve the tax system. It has also pledged not to introduce fresh tax measures without gaining a consensus in corporate Britain.

Brit's tough tax line came as sliding returns on its investment portfolio halved pre-tax profits for the first half at the underwriter from £106.8 million to £49.9 million. Unrealised losses of £63.7 million, largely as a result of falling equity values and declining debt yields, wiped out gains of £65.8 million.

Brit holds about £2 billion in reserves, partly to cover the liabilities that it underwrites in its three business areas: global markets, reinsurance and the UK.

Mr Douetil said that the losses were largely an accounting issue. He said that he was pleased with the performance of the business and was convinced that it was well placed to withstand tougher market conditions in the months ahead.

The insurer held its interim dividend at 7p a share. Shares were down p at 185p.

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