Bloomberg Audio Studios, podcasts, radio news. So Frank, yesterday we did a live recording of Votonomics here at Bloomberg and it was very, very striking because at one point John Michaelswaye, who's the editor in chief, he asked the audience of about one hundred and fifty people in the room, how many of you know somebody who who's thinking of leaving
the UK because of possible changes to taxes. And you know, normally in those kinds of questions, you get a handful of hands go up, but it was it looked to us from the stage like at least three quarters. I don't know whether that's accurate, but it looked it looked like every sort of almost not everybody, but a lot of people put their hands up.
And so I wonder whether it's like non dame rules or people, or whether people actually go through or they're just saying that they know people that are vibes kind of angry, bad vibes, good vibes only on this podcast, so or whether they'll actually follow through totally agree.
Like, firstly, there's there's a number of things being discussed, and each one of them things could be worrying the very well off, but equally it could be the kind of whole package and this sense of is this any more going to be the place to call my home? So this week we're going to unpack all of that what might be driving the very well off or super rich to leave the United Kingdom. I'm Alagri Stratton. I'm Francy Laqua and this is in the City.
Welcome to the City of London, the city of the City of London.
Leave mine a gap between the and the financial heart of the country.
The city, the city.
Welcome to in the city. Then clear of the doors.
Pe okay.
So with us in the studio, we've got City Editor Katherine Griffiths, who's familiar I think to lots of in the city listeners, and reporter Ben Stupples. Now, Ben, you have a brilliant title. You're you're not just a super rich reporter, but you're an ultra rich reporter, ultra wealth reporter.
Forgiven wealth.
Is there a difference.
It sounds really snooty, doesn't it, But it actually does make a difference. If you're a banker and you're a private banker, obviously, if you're serving someone who's worth five hundred thousand. With liquid assets, it's different. You can do you can do a fewer things and say someone who's worth five hundred million and above. So the banker's definition would be thirty million pounds of dollars and above in liquid assets. So that's my game, is above that threshold.
I love it.
Liquid assets is usually worth five percent of their re portfolio.
Yeah, do the math.
So it's basically the billionaires of the world.
Yeah, oh the Yeah, the people who we read about, the newsmakers of this world. People we read about the newspapers are sort of the people I cover. The founders, business founders, all that sort of stuff. They keep me, keep me pretty busy at the moment.
So just quick fire, Catherine. Are the super rich worried right now?
Yeah?
They are.
They are worried, definitely. I think before the election they had been encouraged to get comfortable with Kissed Arma and Rachel Reeves saying that they loved the wealthy, they loved profits, they loved success, wealth creation. Wealth creation was fantastic. There was sort of Tony Blair vibes going on, and now they're hearing is all doom and gloom in the UK and they've heard the Prime Minister talking about those with
the broadest shoulders having to take the biggest burden. So they are somewhat worried.
Yes, and what about your people?
They are? I think it's very safe to say that they are really concerned. There wasn't really a any We have lobby groups for all sorts, but actually the non doms, just to categorize what they are, there's a typically artcha hein not worth individuals the type that I cover, they when they come to the UK obviously the normally from overseas, they don't pay UK tax and that overseas wealth that's their income and earnings. It's a good tax perk in exchange.
Initially they can claim it for free. In the long run it costs them as much as sixty They are worried. They didn't really have a lobby group before. Now they do, which she wrote about this week's Yeah, that's a big deal. So they have broken cover through us to say that they are really concerned, and they actually met for the first time as a group at UK Treasury officials and
HMRC UK tax officials last week. It's a big deal because unlike previous reforms the UK, the government isn't actually offering any official consultation here, so they're really knocking on the door literally.
But then so this is, you know, they have a new government to lobby who've been in power Central lifeifs, but essentially it was actually the previous government that changed, you know, initially the non dom rules. So are they upset now because they don't really know what happens because there's no official consultation or are they upset because they don't understand what labor actually want to do with their group.
Yeah, they've been caught up in a like previous reforms, I would say a bit of cat and mouse between
the Tories and labor. Now, the crucial thing to understand here is that labor have gotten further than the Tories and they have said if you have assets that you held offshore in trusts, so that could be for example, your shares if you're own a clothing business over in India, for example, the shares that you hold in Jersey or guns or maybe even Switzerland, Labor have said that they will impose UK inheritance tax that's forty percent on those assets.
That is massive, So that's making a lot of families go hang on. I love the UK. I love living in the UK, my kids are here, I've been living here for the last ten years. Yeah yeah, yeah, yeah, stable climate whatever. I love the political stability. That's why they came here in the first place. Suddenly all those reasons have washed away like the Thailand Sea for them.
Is it actually mission critical or is it, Oh, I'm going to be a little bit less ultra wealthy than I was before, or is it? You know, when you talk about these inheritance tax bills that could be quite kind of game changing.
That is a game changer. The inheritance tax factism is the game changer because it's not just the founder or the patriarchs and matriarchs of the family anymore. It's the it's the planning about life for the next twenty years. That's a massive decision that's making people think, Okay, where I want to settle myself and my family for the next ten years at.
Least, Catherine, how does the labor government actually think of this? So that they want and they've said this, you know repeatedly, they want a fair of society, but they're also they want to be seen as pro business friendly. What does that mean for the ultra wealthy.
Yeah. I think, well, we'll find out a lot more with the budget which is coming very soon on October the thirtieth. I think Labor is keen to say that it wants to promote wealth creation. It wants to create, you know, the sort of the NASDAC of Europe. It wants to sort of have startups. It's very conscious of how Britain's big companies are all created probably one hundred
or more years ago. It wants to sort of have these new vibrant companies which begins with entrepreneurs and startups, and it wants to sort of through that help the whole country create growth, which wants to sort of see
filtering down to communities around the country. But at the same time, I think people take the view that Kiss Starmer and maybe Rachel Reeves are definitely more left leaning, certainly Kiss Starmer than the previous Labor government and probably does in a more fundamental sense believe in a fairer society, and probably is less sympathetic therefore to some of these people and some of these arguments than they would like.
And there's something particularly going on with private equity, isn't there, Catherine, which you follow a.
Lot, yes, so, as well as the inheritance tax issue for non doms, as Ben has been highlighting, which seems to be a massive sort of hot rod that everyone is very worried about. On private equity, Labor has said that it's going to close what it's calling the loophole, which is at the moment private equity people pay carried interest tax relief at capital gains tax rate of twenty eight percent. Labor is going to change that. We don't
know what to. Potentially, they could raise the rate up to forty five percent, the top rate of income tax. They could go somewhere in the middle. We don't know whether they will make a distinction between people who put their own money into funds and those who don't. They probably will make that distinction, but then it's really not very clear at all how they will exactly define the rules. And then there's a big issue as to when the
rules will start. They could start immediately with the budget, maybe in January, or maybe with the tax year.
You speak to the big bankers and they say, well, rightly, so private equity to be taxed, right, do they have a fair advantage? And actually, you know, some of the big banks and asset managers don't. Does the city of London actually lose a lot if private equity either has to pay this extra, will they actually leave or do they just suck it up?
I think I think a lot of the senior private equity people in London will suck it up. I think that, you know, there's a sort of a tranch of them at the top of the big firms who have already made an absolute king's ransom and have their lives in London, have their very nice Kensington homes, and who don't want to leave for other countries. They may well be from other countries, but they've chosen to live in London for
certain reasons. There's a whole load of other people who work for those firms, who are younger, who may well be more mobile, and who may well think about other countries. But it's really very unclear, I think, as to what that will really mean for investment in the UK, because there will still be big funds that are looking at opportunities in the UK. Some of private equity's biggest investments in this country are actually run out of funds that are not based here in London. They may be global
funds or US funds. So there's an awful lot of sort of threats and warnings, but the reality could be quite different.
But the fundamental thing, right is, do you two, as people who cover this stuff day and day out, we have a government that came in saying they want to be on the side of wealth creation. It's kind of one of their top three points they were making. Do you think right now they're getting the balance right?
Well? I think no. I think is at the moment because it's all this kind of rhetoric and we don't really know what they're going to do in any of these areas. I think we're sort of massively waiting for the budget.
It is this period which is quite familiar preer brudshet where they know they scare the horses, they make everyone think it's going to be terrible, and then in the end it's not as bad as all that. But I'm getting some vibes from yourselves but also your colleagues in the Bloomberg newsroom that actually this period is damaging too.
Yeah.
I think definitely. People in the city do feel it's damaging. People who have been pretty interested and supportive of the kids. Arma Rachel Reeves Project are now quite cross.
I have no doubt actually that labor will create British wealth out of the UK. What labor court in here is two different worlds. We've got British businesses, British business owners creating businesses, jobs great. What labor maybe haven't factored in as much is that in this global world where we have offshore wealth, there's existing wealth that exists globally. It's a global market and London, well, the UK in particular, London is part of that market. For a long time
we've been number one. We haven't really had to look over our shoulders so much. But now we've got other territories actively courting London algehin at Worth individuals who do create wealth here because they come here, they set up businesses, because they've been here for tenth for the last ten years. But that's the difference that labour caught between two different types of old I think they haven't quite got it.
I think to get over the line. For the UK election, it was a good pitch to say we want to get UK wealth's creation because a lot of them were voters. Now that they're in government, they're having to reconcile with the fact that to keep the wheels turning for the UK. There's this other part where they may not be voters, but their UK residents and they do contribute a big part of the UK economy.
But haven't we lost so many people in high finance in these type of jobs with gregsit anyway, I mean, there were so many relocations right in the last couple of years. I don't know what's left. I know, I've been speaking to you know, contacts and sources, and for years I didn't even know they were nondumb because they were here for such a long time, or you know, so often that they took every meeting in London. Then when they you know, when they were angry about some
of the proposals, Wait, wait, you're NONDMB. So it's difficult to see how many have already gone in these high finance jobs, and actually how many non doms are left here in London and the UK.
We have about seventy five thousand at the moment. That's already halved from a bad a decade ago. But that's partly because if you remember, don't go into the weeds too much. But Edmond abandoned, George Osborne traded blows and eventually George Osborne stopped permanent use of NONDMN status. But I think what's happening here is Yeah. I think it is difficult to quantify exactly how damaging this is going to be, but there's still seventy five thousand people who are paying.
Yeah psychologically And this always fascinates me because you speak to a lot of these high flyers and I think there's there's a deep wanting to be almost loved or cared for in the country, and so I wonder again whether they just need to get used to that things are changing. I know I've had conversations with you know, very ultra high networth that feel slighted.
Do they think it's fast and in that context do they think, hold on a second, this is my wealth from outside the UK, so of course I would keep it text elsewhere. Do they do they actually have a kind of intellectual response to it or is it just a kind of I've been getting away with it for a long time, Just let me carry.
On getting away with it. I think it sends a message. I think if you feel like you're you know, you're at the top of your game because you've made a lot of money and manage a lot of money. You maybe just want that level of respect, respect or just a little bit of love right from the people in charge. But I don't know then whether it really translates into people packing and leaving right.
What's so?
There is a nondum who we've reported on who has left or finalized his plans ready to leave the UK. He said he'd be willing to pay more than double the cost it was taking him to claim non non status in the UK. He was actually saying I'd go above and beyond rival regimes in Italy and in Greece one hundred thousand years a year to claim that effectively non non status there now just to circle back on.
So that rather than the inheritance tax.
But the inheritance tax thing is to kill a blow for him. It's a case study and literally why people are going this is an art China Worth, who's a business founder, He's got international assets and the IHT forty percent inheritance tax on his global assets. I'm going to go, but just to circle them back on the other regimes. Non norms are often caught between these worlds in politics. Italy has just doubled the amount it's going to cost for those coming to Italy to claim non non status.
So you've already got a pushback folks or wanting to leave the UK going gosh, okay, where do I go? Suddenly their opportunities, if they're factoring in politics as an issue, then their options are far narrower.
Well where do they go? I mean again, these are countries or you don't think they do well? I mean, you know, it has a huge budget hall. I mean every country is going to try and find money, and so they're easy targets.
That is the problem, and it's forcing non norms to go. Okay, I don't Monico is great for the tax, but hey it's a bit smaller than Central Park and I've got up my wife and kids to go, you know what, my husband and kids to get to this place. It's making them make uncomfortable choices. Do they go to Dubai? Okay, yeah, they can go to Dubai, but it's actually so hot for them in the summer, and you know, their children like the friends that they have in London or or
elsewhere in Europe. So it's making non norms really compromise on some key parts of their lifestyles.
In a way, it sounds like they've given them the off ramp, which is the flat tax. What's the chances do you think of this treasury and this chancellor. It would look like a climb down, wouldn't it.
I think, I mean, I think they will possibly tweak both on the carried interest for private equity people and maybe on the inheritance tax, maybe on things like amounts of time or sort of certain details. They won't want to completely climb down, even though maybe in both cases actually they may end up not raising you know, in both cases possibly it might be sort of a counterintuitive measure in terms of how much tax is actually coming
in through the door. Which is how we get back to this point that there is an ideological argument that this labor government probably does feel there's a sort of a fairness point at stake. But I do think Roan, you are absolutely right. And it's the same with Brexit. There's a lot of people in the city and in the in the sort of wealthy financial world who do just want to feel loved and if they want the red carpet, they just want warm words, They want to be invited.
They are welcoming on the in the City podcast.
They can come in and tell us their waes. But I think if so, to that point about the rhetoric at the moment from this government, a lot more kind of rhetoric about opportunity and positivity and going back to those sorts of phrases will go a long way.
Do we know how much you know, these seventy five thousand actually contribute. I mean I've heard from like you know, it's difficult to say if you're again ultra hight do you give.
Back to the law.
We do have some sense of the h MRC UK Tax Authority publishers and your data. They have pretty big figure. It's more than ten more than ten billion pounds and that's just in employment taxes, capital gains obviously not inheritance tax for the moment, but we don't know, for example, and this is a crucial point, how much they're spending in the at and you know, these aren't people who sit at home making cups of tea all day. They
are going out in Mayfair, Chelsea, Westminster. They're going and that these are the folks that are in top restaurants really keeping key parts of you think about who serves you at the table and when you go to a high end restaurant. There is a trickle down effect in
terms of the economics that is impossible to quantify. You can make broader points about the fact whether the trickle down economics works or not, but there is this sort of part that we can't quantify that fits into what when people think about London, it's it's the glips and the glamour. To an extent, non doms do contribute to sort of keeping the cocks turning, the wheel's turning, and that's part of society.
So I haven't figured out on the school fees that will go up for private schools by twenty percent, Catherine, whether you know some people say well they will, whether actually it's counterproductive because it means that more foreigners will put their kids less in UK educated you know school, or that the kids will end up not being UK educated, which goes to like the soft power of you know,
money around the world. Or whether again it's just a fairness and people suck it up and just pay that twenty percent extra as long as they can.
I think they've sucked that one up. Actually, I think on the whole, you know, very broadly speaking, they're sort of in a category of people who can afford that twenty percent and they pay it, and I don't think it sort of goes to their feeling of not being loved and being rejected because because of course there's anyone paying those school fees British or from any other country compared to these other points where they are feeling a bit targeted.
Yeah, just to chime in there, that's not a big deal really for the UK China Worth individual It sounds really sorry, it's snooty to say that, but I've spoken to private bankers who've just scoffed at that and gone, they just pay them upfront. And we've seen that with We've actually reported that parents you know, with children are eating on the UK's top schools. They've seen an increase in parents paying fees upfront, and that's maybe one way labor.
I've got one actually over there that as a policy does bring in fairness when you compare it to other sectors, and does contribute towards the UK's education's education system. It's more issue for lower down the ranks of the well spectrum people who you know, Tony Blow once upon a time called you know the strivers, you know that sort of part of the UK population.
How much is Labor getting the vibes wrong on CGT and so on for the kind of small and medium sized enterprises, for the kind of you know, back the small British business rather than the titans of the City of London.
Well, I think that Labor will probably seek to make sure that those people are not hit by changes a CGT or ones. But I think the reality surely is that somewhat sadly perhaps you know those folks, you know, they just stuck here doing their thing in London. They can't really do very much. So we hear the people from the people who have leverage that at the higher end of the spectrum.
I think it's a really interesting point. People are catching in capital gains now in anticipation of an increase in capital gains at the budget, which is weeks of in our October thirtieth. I think lab and really needs Rachel Reeves and Kissed Armor probably do need to sit down and think what sort of Britain do we want to want to create. If you come into ten Downing Streets saying or you want to have the wealth creation for UK
businesses great and UK entrepreneurs wonderful that's great. But then when they want to crystallize that game and they've built a business that employs hundreds of people, thousands, and they've seld it to a private equity firm, let's say US private equity firm sells it for a hundred million or maybe even billions, but the founders cashing out and they're British. Okay, Now are they going to be happy about the fact that the Ratiaris raised capital gains at that budget their
first one? I don't think so.
Thank you very much, Katherine Griffiths and Ben Stubbers. Have I pronounced your sign him correctly?
The only one who does? Thank you?
I've thought it could be stupid. I'm doing. Thanks for listening to this week's In the City from Bloomberg. This episode was hosted by me Allegri Stratton and Francine Laqua. It was produced by Someasadi, production support from Moses and Am, and special thanks to Katherine Griffiths and Ben Stuffles. Please subscribe, rate, and review wherever you listen to podcasts.