If you
analyse the international movement of private wealth and its
owners, London ranks among the most attractive destinations for the
world’s billionaires and multimillionaires – and the UK government
wants to keep it that way.
It has overhauled the UK
immigration system to promote the UK as a destination for
HNWIs.
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In the face of criticism
that its policy unfairly favours the wealthy, it says that
entrepreneurs and investors can play a major part in the UK’s
economic recovery and it wants to do everything it can to ensure
that Britain remains an attractive destination for the “right kind
of people”.
So what are the benefits
that wealthy individuals bring? Why do countries want to attract
them?
We estimate that an HNWI
immigrant who comes to the UK on an investor visa will typically
inject at least £2m into the UK economy during their time here,
through investment in UK assets, school fees, UK tax, employing
staff, and general spending.
The longer they stay, the
higher an HNWI’s value to the economy. Many will choose to stay for
at least five years, the earliest point at which they can qualify
for a UK passport.
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By GlobalDataThis is an economic
stimulus that the government is keen to increase.
Of course policy and
politics can collide. Approaches to immigration and tax in
particular sometimes send different messages.
This year’s budget
targeted the kinds of residential property that “the right kind of
people” typically buy, with an increase in Stamp Duty Land Tax
(SDLT) on properties worth over £2m ($3.1m).
Will this put off the
world’s wealthy from coming to London? It seems unlikely. Wealthy
migrants to London come for many reasons and are unlikely to be
driven away by a 2% increase in a one-off tax charge.
Given the buoyant prime
property market, the additional SDLT charge will probably be
swallowed up by the rising value of the property they buy.
So why do HNWIs want to
move to a different country? The reasons are numerous and complex,
but most will find themselves ‘pushed’, for example by instability
or conflict at home, or ‘pulled’, because another country maybe
offers a better lifestyle. The UK is successful as it attracts both
sets of people.
For those who are pushed,
there are specific visa routes designed for them, no UK
restrictions on movement of capital and the likelihood of finding a
community from their own country, whether it be Eritrea, Peru or
anywhere in between.
London also has a strong
pull for HNWIs; for example, the French population of London is
greater than that of Lille.
French HNWIs use London
to access the global marketplace and find greater financial
opportunities and a different lifestyle without going too far from
home.
After the French
election, tax may also become a motivation.
The UK is not the only
place that bids for HNWIs. Switzerland, the US and a number of
island jurisdictions offer specific visa programmes and tax breaks
to the same end. When HNWIs are assessing a country they might move
to, there tend to be four key considerations.
In no particular order,
they are: Can they go there easily? (i.e. Do they have, or can they
get, a right of residence there?), Is the lifestyle good? What are
the business opportunities? And will there be high taxes?
The UK tends to come near
the top of the list for lifestyle and business opportunities.
It has the City, an
excellent education system, international accessibility and a high
standard of living.
Switzerland or Monaco are
high up the tree in taxation terms, although the UK can be a tax
haven for non-domiciled people.
Different jurisdictions
also appeal to different demographics; Canada, for example, has a
large ex-Hong Kong Chinese community.
As the economies of many
developed countries falter, competition amongst different
jurisdictions to attract HNWIs is increasing. Given the wealth that
they can bring to their chosen countries, it is little wonder.
Alex Ruffel is a partner at Berkeley Law
