Start installing planetary defense systems, (Missile bases and the like), onto the UPA planets, around 10 per planet should do it.
If more businesses start going over to the other empire start seizing their assets.
Though by all means let the spies get us some more. Also let the spies blackmail some corporation back into joining the UPA and steal some funds form the Other Empire.
I know this is the second time I quoted this post but I was just reading more of it, and several things struck me.
I've had to research every single improvement in my army/navy/defensive capabilities, I highly suggest to Aklyon that the missle bases must be researched as well.
Second, for a government that promotes freedom and such, like yours, seizing the assets of corporations who are voluntarily leaving is rather heavy handed, and lacks in characterness.
Third, similar to the point above that it lacks in characterness, but what on Earth are you going to blackmail them with, you need some sort of "dirt" in order to properly blackmail somebody. If you're going to become an evil empire to fight my free-market loving empire, at least do it right and make sure you have dirt on people before you blackmail them. Presumably most corporations don't have much to hide, but I'll leave that to Aklyon's discretion. Also, directly stealing funds from me is basically an act of war. You do that, there will be war, just a warning.
Edit: I just thought some more about it, you're making my propaganda from me, go ahead and steal from corporations leaving your space, we'll see if your people like a repressive regime *evil smirk*