London ‘Wealth Drain’ Takes Shape as Starmer Tax Fears Grow

In Mayfair’s financial enclave and the sleek offices of advisers to the ultra-rich, the talk is getting louder: everyone knows someone who's thinking about their exit strategy — or already gone.

Moves that were once confined to whispers and rumors have burst into the open since the Labour Party came into power with promises to clamp down even further on preferential tax treatment for well-heeled foreign residents, known as non-doms, as well as private equity investments and private school fees.

Some are simply cashing in UK investments, but others — from scions of mega-rich families to City of London bosses — have mapped out or already executed departure plans, according to about three dozen wealth advisers and high-net-worth individuals interviewed by Bloomberg, who mostly asked not to be named.

Private equity firm General Atlantic has warned that some staff could leave its London office. UK hedge fund billionaire Alan Howard is considering a move to Geneva from London. Jeremy Coller, a pioneer of Britain’s private equity sector, has already left for Switzerland, according to filings in June, the month before Prime Minister Keir Starmer swept to power.

“People are just leaving,” said Bassim Haidar, a Nigerian-Lebanese entrepreneur who is moving to Greece after two stints living in London. “A brain drain is one thing, but a wealth drain is a completely different game.”

For the wealthiest, the UK’s most contentious plans include 40% inheritance tax on offshore wealth, and having carried interest — a portion of investment returns, shared between fund managers — taxed at a rate as high as 45%, rather than 28% currently.

Starmer won this summer’s election with promises to redistribute wealth and repair public services, following 14 years of Conservative rule. Chancellor Rachel Reeves has argued that a £22 billion black hole in the budget needs to be filled, while the Labour faithful at this week’s party conference are more likely to talk about taxing the rich as a revenue-raiser than the trigger for an exodus.

While the impact and likelihood of such departures are up for debate, the hazard lights are flashing.

Coller, 66, who sold a minority stake in his namesake firm last year, moved to Switzerland for personal reasons, according to a person familiar with the matter, who asked not to be identified discussing personal information. The London-based firm opened a Swiss branch in Zurich during June.

A Coller Capital representative declined to comment.

While Switzerland is a time-honored destination for the rich, Italy is also attracting its fair share of London’s emigrants, other people familiar with the matter have said. Francois De Mitry, who spent more than a decade on French private equity firm Astorg’s London team, is now in Milan after recently relocating.

Ricardo Leiman, who runs London-based hedge fund KLI Asset Management, is also said to be exploring a move to Italy. The 58-year-old Brazilian native previously led commodities trading firm Noble Group.

Italy allows rich migrants to pay a lump sum to avoid taxes on their overseas income and earnings for as long as 15 years, though the annual payment doubled last month to €200,000.

Read More: Where Rich Brits, French Might Go to Escape Higher Taxes

There could be more: General Atlantic wrote to the Treasury last month to warn that some of the US firm’s dozens of dealmakers in London could leave if plans for higher taxes on carried interest go ahead. The firm pointed out that more than half of its roughly 50-strong London investment team are not UK citizens.

A representative for the firm declined to comment.

The UK punches far above its weight when it comes to wealth and has the third-biggest number of dollar millionaires in the world — more than three million people in total, according to UBS Group AG.

The relative overpopulation of wealth is about to start correcting itself. The UK is on track to lose 9,500 millionaires this year, the most in any country except China and more than double the number that left the country in 2023, according to Henley & Partners, which advises rich clients on migration. Their financial clout means that even a small number of the ultra-rich leaving rather than paying more tax has the potential to upset the government’s revenue projections on their new policies.

“The mood music has definitely changed,” said Iain Tait, head of the private investment office at wealth management firm London & Capital. Nearly all of his 30, mostly British, clients are reviewing their assets, with some seeking to sell investments before the Budget next month to have certainty over their tax payments “now we’ve had Keir Starmer’s sermon of doom,” Tait added.

Mirroring a Labour policy under Ed Miliband, David Cameron’s Tory government scrapped permanent use of “non-dom” status, which allows residents to avoid UK taxes on overseas earnings for as long as 15 years. They can initially claim the status without any extra charges, but eventually face annual costs of as much as £60,000 ($79,000) if they continue to reside in Britain.

The most recent Conservative government led by Rishi Sunak, whose wife was formerly a non-dom, bowed to pressure in March by requiring wealthy foreigners to pay tax on overseas earnings after living in the UK for four years. In its election manifesto, Labour then vowed to go further and eliminate inheritance tax breaks on assets held in overseas trusts.

Read More: London’s Prime Mansions Aren’t Selling Amidst UK Budget Worries

In response, members of Britain’s private wealth sector, including non-doms, are supporting a newly created lobby group called Foreign Investors for Britain. A report commissioned by the group found that more than 80% of non-doms cited Labour’s inheritance tax changes as a major reason they’re likely to leave the UK.

This contrasts with a 2022 research paper that said fewer than 100 of those with the status would exit if the UK scrapped its non-dom regime altogether. The number of non-doms has already declined by almost half to 74,000 in the decade to April 5, 2023, partly from the 2017 changes curbing permanent use of the benefit. It’s not clear how many people who gave up the status have left the country.

To be sure, Labour has supporters among the wealthiest. The party’s outreach efforts to business leaders in recent years led to UK billionaires including Jim Ratcliffe and John Caudwell voicing support for the party before its election victory.

Advisers, though, say they’re already feeling the impact of rich individuals leaving Britain. Marcelo Goulart, a Zurich-based managing partner of financial services firm First Alliance Group, said most of his roughly 40 clients based in the UK are making plans to exit. “It’s really happening,” he said.

The prospect of paying the UK’s 40% inheritance tax on offshore wealth was a major factor for the departure of Haidar, the founder of Dubai-based financial services firm Optasia and African telecommunications venture Channel IT, who first claimed the status in 2010.

“That is the brunt of the matter,” said Haidar, 53, citing peers who have exited the UK in recent months to territories including Spain, Dubai and Monaco. It “adds another barrier.”

Even the classic anchors of education and lifestyle in Britain may be less compelling than they were. Many families with children at elite schools are about to face 20% value-added sales tax on top of education costs that can already reach more than £55,000 a year.

At least one global operator of private schools, though, has a solution.

Inspired Education Group wrote to parents reminding them of its presence in more than two dozen nations, many of which are “known for their favourable lifestyle and tax conditions,” in a Sept. 12 email, a copy of which was seen by Bloomberg. Nicholas Wergan, Inspired UK CEO, said in a statement the firm had seen an increase in enquiries about schools in Portugal and Italy.

Personal safety is another factor, with territories such as Dubai, Monaco or Abu Dhabi looking relatively attractive. Crimes involving violence against a person in Westminster, the London borough that includes the glitzy Mayfair district, have risen every year since 2021, according to official data. A spate of watch thefts is causing concern among those who can afford a Rolex.

Many of Britain's wealthy residents hailing from India often claim non-dom status, but some are leaving too.

Anand Nadathur, the 50-year-old son of Infosys Ltd. co-founder Nadathur Raghavan, has decided to leave the UK, according to a person with direct knowledge of the matter. The Nadathur family’s investment firm didn’t respond to emails and a call requesting comment.

The median investment in the UK of almost 75 non-doms recently surveyed for the research commissioned by Foreign Investors for Britain was between £10 million and £30 million. They “are a tiny sector of the population, but they are economically significant,” said Dominic Lawrance, a London-based partner at global law firm Charles Russell Speechlys.

Efforts to push back against at least part of Labour’s proposals are set to intensify in the build up to next month's budget. UK officials met about 40 members of the nation's private wealth community — including almost a dozen non-doms — earlier this month. As well as General Atlantic, several private equity firms have made their own submissions to the Treasury as the industry seeks to water down proposals.

“A lot of people in the sector are waiting to see what happens,” said Claire Madden, a managing director at London-based private equity firm Connection Capital. But some executives “at the back end of their career, who are in funds quite pregnant with carry, are not waiting around.”