UK millionaire exodus is more drip than flood

The UK has a disproportionate number of dollar millionaires relative to its population.

An estimated 10,800 dollar millionaires left the UK last year, according to an updated statistic that has given fresh impetus for fulmination against the Labour government’s tax policies. The figure, produced by Johannesburg-based New World Wealth for British migration advisers Henley & Partners, is a potentially grim indicator — a 157% increase over the previous year and the world’s second-largest outflow after China. But for all that, there’s less here than meets the eye.

The departures, including 78 centi-millionaires and 12 billionaires, provided fuel for a lineup of the usual suspects to assert that Labour is driving away wealth creators; to critics, the culprit was Chancellor of the Exchequer Rachel Reeves’ October budget, which raised capital-gains tax rates, broadened the reach of inheritance duty and abolished the non-domiciled status that granted favourable treatment to temporary foreign residents. The detractors included non-dom lobby group Foreign Investors for Britain, which bemoaned a “monumental act of national self-harm,” and Charlie Mullins, a celebrity plumber with a Rod Stewart-lookalike haircut.

Mullins, who sold his Pimlico Plumbers Ltd. for $178 million in 2021, took to the airwaves to say that Labour has “always despised wealthy people” and would bankrupt the country. The businessman, who moved to Spain following the July general election, also said he will stand for Nigel Farage’s populist Reform party, which wants to cut tax rates.

Zoom out a bit and this is not quite the stampede for the exits that it might appear. There were 602,500 high-net-worth individuals (defined as those with investable assets of at least $1 million) in the UK at the end of 2023, according to New World Wealth, so a net outflow of 10,800 amounts to less than 2%. The South African intelligence firm tracks the movements of more than 150,000 individuals using public sources such as LinkedIn to check city locations. The confidence interval for its data is 90% and its estimates are conservative, with real flows likely to be slightly higher, Head of Research Andrew Amoils told me.

This isn’t an argument for complacency; rich people heading for the door is unhelpful for the UK’s economic prospects and certainly not to be welcomed. Being in the neighbourhood of China — which has cracked down on financial-sector earnings and ostentatious displays of wealth — and Russia as the countries rich people are most keen to leave isn’t a comfortable place to be. But it’s important to note that the estimate reported this week is an update to a report that was first issued in June last year — before the general election. At that point, New World Wealth forecast the UK would lose 9,500 millionaires in 2024. So the increase that can be attributed solely to Reeves’ budget has a ceiling of about 1,300.

Labour’s abolition of non-dom status and its replacement with a residence-based system (something the former Conservative government had also pledged to do) has spurred much debate over whether it will drive away the ultra-rich. There are many more factors contributing to relocation trends than tax rates, though. New World Wealth lists tax only after a number of other reasons for the UK’s outflows, including: a deteriorating health system; increasing safety concerns in big cities such as London; the growing dominance of the US and Asia in technology; and the dwindling importance of the London Stock Exchange as a capital-raising venue.

The critical issue for the government is not whether some wealthy residents will leave, which was always inevitable to some extent, but whether its changes will lead to a net gain or loss in tax revenue. The independent Office for Budget Responsibility estimates scrapping the non-dom regime will bring in £12.7 billion through 2029-30; Oxford Economics, in a study for Foreign Investors for Britain, said it might cost the Treasury £1.3 billion. Take your pick. The fact is that no one really knows. HM Revenue & Customs tax data will tell the story in the end.

Global shifts may swamp the effects of the UK’s tax adjustments in any case. Britain will lose 17% of its millionaires in the five years through 2028, the biggest drop forecast among 36 countries in the UBS Global Wealth Report 2024. That would mean a decline of more than half a million (using a wider definition of millionaires that includes real estate holdings), according to the report.

The figure, which comes from a PwC model based on research from the first half of 2024, has to be considered an outlier, Paul Donovan, chief economist of UBS Global Wealth Management, told me. Nevertheless, the UK does have a disproportionate number of dollar millionaires relative to its population, and more “nomadic” millionaires than most countries who might leave a time of higher churn in these communities, he said. The rise of economic nationalism may be diminishing the appeal of the ultra-rich nomadic lifestyle.

Labour’s tax critics should keep some powder dry. They may have much more to complain about soon enough.

Credit: Bloomberg