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
