Monday 25 January 2010

China’s ultra rich lift the spirits of London bankers

The fear that established clients will flee rising taxes in Britain might be giving London’s private bankers sleepless nights, but a Chinese remedy is at hand, in the shape of a growing colony of super-rich clients from Asia.

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Guanyu said...

China’s ultra rich lift the spirits of London bankers

Arrivals ease fears of wealth exodus

Reuters in London
09 December 2009

The fear that established clients will flee rising taxes in Britain might be giving London’s private bankers sleepless nights, but a Chinese remedy is at hand, in the shape of a growing colony of super-rich clients from Asia.

Signs from high-end jewellers, real estate brokers and law firms are signalling the arrival of the Chinese ultra wealthy in London, following in the footsteps of older billionaire enclaves from Russia, India and the Middle East.

“The Chinese haven’t arrived in London en masse yet, but they’re going to be the next big act in town,” said James Fleming, a private banker at Coutts, the wealth management arm of Royal Bank of Scotland.

China’s population of wealthy, defined as having more than US$1 million in investible assets, surpassed that of Britain last year, according to a survey by Merrill Lynch, and it now ranks fourth in the world. In Asia, the number of ultra rich, with at least US$30 million, stands at 14,300, compared with 18,000 in Europe.

Signs that London retains its allure to the world’s super wealthy will come as a relief to a British private banking industry made increasingly nervous by the threats from high earners to leave in large numbers.

A recent poll conducted by law firm Withers of 151 high net worth individuals and their advisers found 64 per cent of rich British residents are considering leaving, with Switzerland, Hong Kong and Monaco cited as likely destinations.

But traders on London’s Bond Street, a shopping strip of exclusive jewellers, art dealers and fashion retailers that bisects the elite Mayfair district, report Chinese shoppers now outspend their Russian and Arab counterparts.

Chinese shoppers spent more than £3 million (HK$38.2 million) on Bond Street during the six months to September, more than double the previous period, according to figures from the Bond Street Association of traders on the street.

London’s upmarket estate agents also report a surge in interest from Asian, particularly Chinese, buyers of properties in the prime districts of Mayfair and Belgravia, where little sells for less than £1 million.

Immigration lawyers servicing rich visa applicants also report growing demand, with no noticeable drop in inquiries since the government revealed plans to raise tax rates.

Samar Shams, an associate specialising in immigration at lawyer Lewis Silkin, said inquiries into the expensive Tier 1 Investor category visa were accelerating. To qualify, a prospective migrant must have funds of at least £1 million, and once accepted must invest at least £750,000 in government debt, shares in British companies or British corporate bonds.

Despite reports that planned tax increases would lead to an exodus among Britain’s wealthy, people working in the wealth industry say London remains an attractive tax haven, and enough of its non-domiciled residents may stay.

Global income and capital gains of a non-domiciled resident are not currently taxable in Britain unless remitted, and plans to levy a yearly £30,000 charge on overseas income after seven years will for many of them cause no serious pain.

According to Duncan Scott, a private client tax specialist at wealth manager Kleinwort Benson, a non-domiciled individual’s exposure to inheritance tax could also be minimised through the use of an overseas trust.

Moreover, London has more to offer than just low taxes. “London is an iconic place to buy property, but this demand is also strongly related to education. My perception is as countries make money, they put their children in London schools,” said Naomi Heaton at London Central Portfolio, which represents rich clients wanting to buy London property.