Economy

Britain lures the ultra-rich

Vidya Ram London | Updated on February 17, 2011 Published on February 17, 2011


Britain is preparing to change the immigration rules for wealthy non-EU nationals in a bid to lure more foreign cash into the country.

The government is expected to announce changes to investor visas in mid March, which will cut the time high net worth individuals have to spend in the country, beginning April. People who come on the visa will have to spend just six months in the UK, rather than a previous limit of nine. Depending on the amount they invest in Britain, they will be able to qualify for permanent residency in as little as two years and none will be subject to the immigration cap being introduced.

The changes are part of the Conservative-Liberal Democrat strategy to increase foreign investment into the UK, staving off criticisms that tightening up the immigration system will starve the British economy of the much needed funds.

Investment needs

Under the current regulations, investors bringing £1 million into the UK must put at least 75 per cent of it into government bonds or equity, and its likely that the changes will also include requirements on similar investment requirements.

Law firms dealing with high net worth individuals say there has been a surge in interest in an immigration route that has been underused to date. “It's not about the amount of money they have to invest; these high net worth individuals are short of time, so having to spend nine months a year in the UK, has always been a sticking point,” says Mr Kamal Rahman, immigration specialist and partner at London-based law firm Mishcon de Reya. “If we had reduced this earlier, we'd have had many more people bringing funds in.”

Permanent residency

Since the changes were made, the law firm has received considerable new interest from potential investors in India, and the other BRICS, as well as from North Africa and South-East Asia.

The government will also graduate the time it takes an investor to gain permanent residency based on the size of the investment, replacing the single rule that required all investors to stay for at least five years. Though that rule will be maintained for those bringing in 1 million pounds, people willing to put £5 million into British investments such as government bonds, equity and real estate will qualify for permanent residency in just three years, with those bringing in at least £10 million eligible in two years. While rules for acquiring British citizenship will remain the same for now, the government has indicated that it will be consulting on potential changes to this too.

The investor route has, so far, accounted for a tiny proportion of non-EU migration to the UK. In 2009, just 155 investors entered the UK through that route, bringing with them 280 dependents, according to Home Office figures – a sharp increase on the 45 that used it the year earlier, but still a fraction of what the government believes is the potential 1,000 a year who could enter by that route.

Surge in interest

The tightening up of the British system, over the past couple of years, has led to more interest in this route from high net worth individuals, though the time requirements meant it was often families, rather than the investors themselves who entered the UK, says Ms Ceris Gardner, a partner at law firm Maurice Turnor Gardner. She believes that easing the time requirements will make it more attractive to investors. In the past few weeks, for example, the company has seen a surge in interest from wealthy Egyptians looking for options abroad.

However, Britain's very reason for relaxing the rules on this new route could play against it when it comes to major investments. Concerns about the British economy could prove a disincentive to potential investors looking at where to put their money. “We have seen a lot of scepticism about the economy,” says Ms Gardner. “People may be willing to bring in a million [pounds] but they balk at the idea of bringing £5 or £10 million into the UK.”

Published on February 17, 2011
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