The U.K. has ‘far more millionaires than it deserves’ and will watch 500,000 flee to the likes of Italy and Spain by 2028, UBS says

Hundreds of thousands of the U.K.’s millionaires will flee the country in the next few years, signing off with a desperate message that their departure will mark a severe blow to the finances of the new left-leaning Labour government.

However, crunching the numbers would suggest the departing elites’ absences aren’t likely to be as heavily felt as they would like.

Some 500,000 millionaires will leave the U.K. by 2028, according to UBS’s latest Global Wealth Report, equivalent to a 17% fall, leaving questions about the U.K. and London’s position as a haven for the global elite.

That is the biggest relative fall in the millionaire population among the countries covered by UBS. The Netherlands will also experience a net exodus of millionaires by 2028.

Belgium, Germany, Spain, and Italy are among the European countries that are expected to see their millionaire populations grow. Continental European hotspots, including Milan, are becoming the new stomping ground for millionaires sick of London.

The U.K.’s loss of millionaires is due to a combination of factors, including the redistribution of capital around the globe and non-domiciled millionaires looking for the cheapest place to hold their money.

The continued detangling of Russian money from London has also led to a drip of the country’s millionaires and oligarchs. 

Paul Donovan, chief economist at UBS Global Wealth Management, told a media briefing that the U.K. had the world’s third-highest number of dollar millionaires.

That, Donovan says, is “far more … than it deserves to have as an economy.”

Millionaires vanishing

The predicted exodus of U.K.-based millionaires suggests a severe ramping up in their exits over the coming years. 

Research by Henley & Partners predicted some 9,500 millionaires would leave the U.K. this year, a small share of the estimated 500,000 set to depart by 2028. 

The election of a Labour government is expected to bring higher capital gains tax, which primarily affects the wealthy, while the scrapping of favorable tax breaks for controversial “non-doms” may encourage others to leave.

Advocates for the wealthy have pleaded for more generous tax policies to keep them locked into the U.K., arguing that the taxes and spending they pump into the economy offset any lost income from those tax breaks.

They also argue that the wealthy will simply leave as taxes increase, bringing their contributions to zero. 

Last year, some 74,000 non-doms—U.K. residents whose legal home is in another country for tax reasons—contributed £8.9 billion ($11.5 billion) in taxes to the economy.

Upcoming proposed changes in the law mean several non-doms will now have to pay tax on all worldwide income, possibly increasing contributions while also risking a fresh flight of millionaires.

Trickling down?

The idea that more aggressive taxes against the wealthy could have a severe impact on the U.K. economy has been met with skepticism.

Firstly, the relatively small share of high earners means they don’t have a significant impact on the U.K.’s overall fiscal position. For example, last year’s non-dom tax take represented 0.8% of the U.K.’s total £1.1 trillion haul.

Secondly, only a fraction of the wealthy decide to leave the U.K. when taxes increase, owing to other financial and personal ties they have built up living there over time.

Even then, there is severe skepticism about how the tax breaks they enjoy help the economy.

In 2020, Dr David Hope and Julian Limberg, researchers at the London School of Economics’ International Inequalities Institute, looked at evidence from five decades of tax breaks across 18 countries.

They found that these tax breaks had no impact on economic growth or the unemployment rate. That would appear to clash with the long-held argument of “trickle-down economics” used by proponents of tax breaks for the wealthy. 

The U.K. might be leading the millionaire loser league table. But with its economy barreling ahead at 0.4% in May, the country’s new wealth-cautious government isn’t likely to be too phased.

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