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Alec Marsh is a journalist and a writer. He is a contributing editor to Spear’s and was editor of the magazine from 2017 to June 2020.
Even before the starting gun was fired on July 4’s general election in Britain, it’s apparent from Henley & Partner’s findings on global outflows of high-net-worth individuals that the wealthy in the UK were already voting with their feet. The estimate is that the UK will lose 9,500 more millionaires than it gains this year, well over double the outflow of 2023 and almost seven times the actual number that quit the UK in 2022.
In other words, the exodus of wealth is well underway and was doing nicely even before the imminent prospect of a Labour government headed by Sir Keir Starmer, given that the party has a 99% chance of winning the election and forming the next government.
Indeed, the writing was on the wall well before Jeremy Hunt, the Chancellor of the Exchequer, sought to take the wind from the sails of the Labour opposition by announcing in March that he would be scrapping Britain’s 225-year-old non-dom regime, which allows those with extensive wealth overseas not to be taxed on it in the UK.
With Labour long having vowed to drop the non-dom status should they be elected, Hunt did what he regarded as the next best thing by beating them to it — and putting the money towards cutting National Insurance contributions for workers. He also announced that the government would be stripping away protection from inheritance tax for future non-UK domiciled individuals.
While it may have been clever politics, it must have been a red flag — if not literally then in most other respects — for the globally wealthy, who saw Britain’s right-of-center party suddenly prepared to play fast and loose with the established rules affecting them for short-term political gain. I’m told that the day after Hunt’s announcement one billionaire non-dom in Britain promptly loaded himself and family onto the private jet — presumably vowing never to return.
And accordingly Britain is slipping down Henley & Partner’s country wealth rankings. Over the past decade, the number of millionaires in the UK has dropped by 8% — while soaring elsewhere. In Germany, the high-net-worth-individual population has increased by 15% since 2013, in France it’s up 14%, while the number has risen by 35% in Australia, 29% in Canada, and an astonishing 62% in the USA.
Over and above economics, this is to do with the USA’s continued appeal for high-net-worth migrants — the net millionaire inflow is projected to be 3,800 this year compared to 2,200 last year. While not at its pre-pandemic peak of 10,800, it’s moving in the right direction.
Unfortunately, since the Brexit referendum in 2016, Britain has had the reverse Midas touch, struggling to retain its place at the top table for attracting global wealth.
Over that time, sterling has underperformed, but not as much as the country’s prime financial index, the FTSE 100, which until earlier this year was as lackluster as the wider UK economy.
The sad fact for Britain’s wealth management sector is that while many of our fundamentals remain unchanged — the basics such as the English language, the rule of law, time zone, and so on, there is a swathe of disincentives for the wealthiest and most globally mobile, of which the non-dom changes are the final nail in the coffin.
As one private client tax and estate lawyer said to me at the recent Spear’s 500 Live conference in June, when it comes to the internationally wealthy, Britain is closed for business.
That means that Britain — lagging, sadly, in so many international rankings — can at least claim to be close to the top of one: for countries with the highest net high-net-worth-individual outflows for 2024. Henley & Partners puts the UK in 2nd place behind China, and up from 3rd place last year. Oh yes, the Conservative government can boast that Britain has overtaken India in this area.
And, alas, the prospects are, that for all that it has promised not to raise income taxes or corporation tax, things will get worse before they get better under the Labour government that we can expect after July’s poll.
It’s estimated that the incoming Labour government will have to close a GBP 30 billion spending gap to sustain current commitments, even before it turns to other initiatives. As a result, more tax revenue will be needed. And while Labour may have ruled out a wealth tax, its emphasis on worker rights means it’s impossible not to see further costs being loaded onto business as a result, with the concomitant impact on shareholder profits.
We know that Labour will be introducing VAT on private school fees — which, while unlikely to ward off the wealthiest, is indicative of a direction of travel that may well prove antithetical to global ultra-high-net-worth individuals. Moreover, the government has already done its best to harm luxury retailers by scrapping the tax-free shopping regime at the end of 2020 and there’s little chance of this being reversed, despite repeated demands from the sectors. Labour has said it will increase the 2% stamp duty levy paid by overseas buyers of UK property, though it has not indicated by how much.
Perhaps it’s no surprise that the UK is losing globally mobile wealthy families to places such as Italy (which is due to see a net inflow of 2,200 millionaires this year), where a simple and attractive flat fee of EUR 100,000 gives such individuals protection from tax on overseas income, inheritance, or gifts. Intriguingly, Labour has time to adjust the UK’s non-dom regime if it wins and it could even recognize that a regime such as Italy’s could be an attractive way to farm the international wealthy sustainably, if only it had the will to do so.
But for now, it’s hard to see the super-tanker turning around. In addition to Italy, wealthy individuals in the UK are already heading to Singapore (up 3,500 inbound millionaires this year) or the UAE, which is forecast to see a staggering net influx in high-net-worth individuals of 6,700 this year. Already, the UAE has over a quarter as many billionaires as Britain (20 compared to 75) and a fifth the number of millionaires (116,500 versus 602,500), despite having a total population 57 million smaller.
While national policy cannot be determined by the needs of the super-rich, their departure cannot be regarded as a vote of confidence, something that whoever ends up in Downing Street after 4 July ought to consider.
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