Unilever has abandoned a controversial plan to move its headquarters from London to Rotterdam in the face of an unprecedented rebellion from its British shareholders.

The climbdown, only three weeks before the shareholder votes, is a major blow to the credibility of its top executives, the chairman, Marijn Dekkers, and the chief executive, Paul Polman, both Dutchmen who had lobbied hard for a relocation they insisted was not linked to Brexit.

The decision was met with a chorus of approval from shareholders. “We are pleased they have abandoned the plan to ‘go Dutch’,” said Ali Miremadi, portfolio manager at Swiss asset manager GAM, who intended to vote against the move. “Now the company can put its focus into the core job, driving long-term shareholder value.”

Unilever board cannot wash its hands of Rotterdam HQ mistake Read more

Iain Richards, the head of responsible investment at Columbia Threadneedle Investments, which was also against the move, welcomed the change of heart: “Better approaches are possible and the problems for shareholders were foreseeable.”

Mike Fox at Royal London Asset Management said the board had “listened to shareholder concerns. We are pleased we and other UK investors can now share in the future growth of the company.”

British investors were worried that once Unilever, which is Britain’s fourth-largest company, shifted its domicile to the Netherlands, it would have been ejected from the FTSE 100. That would have forced funds that track the FTSE 100, and funds that buy only UK stocks, to sell their shares. At least 10 shareholders, who together owned a 12% stake in Unilever, publicly spoke out against the move.

Unilever went to great lengths to sell the plan, holding more than 200 meetings with investors and taking out full-page adverts in the press. In a statement the company said that after extensive consultation the proposal had not received support from a significant group of shareholders and therefore it was “appropriate to withdraw”.

Dekkers said the board continued to believe overhauling the complicated structure – which is a hangover from Unilever’s formation through the merger of a Dutch margarine producer and a British soap maker 89 years ago – was in the firm’s best interests.

“The board continues to believe that simplifying our dual-headed structure would, over time, provide opportunities to further accelerate value creation and serve the best long-term interests of Unilever,” Dekkers said. “The board will now consider its next steps and will continue to engage with our shareholders.”

Unilever spent a year reviewing its dual structure and announced its plan to switch from two legal entities into a single one, incorporated in Rotterdam, in March. It dealt a major blow to the UK government and its efforts to uphold Britain’s status as a centre for business after Brexit.

Unilever has consistently insisted the move to Rotterdam was “nothing to do with Brexit”. It also said at the time that its 7,300 workers in the UK and 3,100 in the Netherlands would remain unaffected by the changes.

Last year Unilever knocked back a shock £115bn bid from Kraft and although the stated aim of the move was to make it more efficient and agile in a consumer market rocked by e-commerce and upstart rivals, the Netherlands appeared to offer a safer harbour from corporate raiders. The debacle means question marks hang over the future of Polman, who is due to step down next year, and Dekkers, who is two years into his stint as chairman.

Unilever needed a 75% majority of the UK votes cast at this month’s poll but also a simple majority among all UK shareholders by number. However, with the chorus of disapproval growing louder by the day, Polman is said to have agreed to scrap the plan during a call early on Friday after it became clear that it could fall short of the approval needed.

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“There was a real suspicion that … part of the motive for the move was that UK rules too easily allow takeovers,” Rachel Reeves, Labour MP and the chair of the business, energy and industrial strategy committee, said. “As a committee, we will want to consider looking at the government’s white paper on foreign takeovers to see whether the new regime should include additional safeguards.”

Unilever, which also owns Ben & Jerry’s ice-cream, Persil and Lipton teas, employs about 169,000 people worldwide. The business secretary, Greg Clark, welcomed the decision to scrap the move. “Unilever has a long and proud history in the UK and I welcome this decision by Unilever’s board, having listened to its shareholders.

Clark said: “The UK is one of the best places in the world to grow a business and our modern industrial strategy commits us to being an open and competitive economy, and a great place to locate global headquarters.”