Law firm Fragomen explores the investor migration perspective of a potential UK exit from the European Union.
Tomorrow, the UK will vote to remain in or leave the European Union, of which it has been a member since 1973. The referendum will spell the end of an uncertain period for wealth managers and their clients, who are hoping for some clarity on an array of issues including investor migration. In this article, Nadine Goldfoot, partner at Fragomen Worldwide, considers the likely impact for high net worth individuals and investor migrants. As always, the views expressed are not necessarily shared by the editors of this publication but we are pleased to share them and invite readers to respond.
The UK has long been among the world’s most appealing destinations for high net worth individuals and their families looking to secure their personal and financial futures and ensure their continued prosperity for future generations. The stable political and economic climate, world-class private education system, adherence to the principles of the rule of law, and favourable tax regimes have firmly established Britain as a safe haven of choice for many of the world’s wealthiest investors. The attraction is reinforced by the appeal of a stable and rewarding lifestyle, with a sophisticated cultural scene and all the benefits of London’s status as an international travel hub.
The UK’s place in the EU is also attractive for those looking for alternative residency and citizenship. Those settled in the UK with British citizenship can benefit from the UK’s membership by establishing themselves elsewhere in the EU. By the same token, citizenship of other member states, such as economic citizenship options in Malta and Cyprus allow beneficiaries to enjoy free movement to and establishment in the UK, without meeting any additional UK immigration requirements under the Tier 1 Investor and Entrepreneur routes or otherwise.
Thursday’s referendum on Britain’s membership of the EU has forced HNWIs and their advisors to consider their long-term options in the UK and elsewhere in Europe. Questions have arisen around Britain’s financial future outside of the Union, and the continued success of the financial and real estate sectors, both prime investment options for HNWIs.
The UK’s membership of the EU forms a significant part of the country’s appeal for HNWI investors. As a member of the EU, British companies and residents enjoy easy access to the Union and its single market, despite the UK remaining outside the Schengen agreement. In addition to freedom of movement within the EU and its markets, Britain has benefited from the economic stability and prosperity of the EU, establishing itself as a perfect hub for multi-national organisations looking to reap pro-business economic rewards.
Whatever outcome we awake to on Friday 24 June, Britain remains a highly attractive destination for HNWIs looking to diversify their wealth whilst acquiring residence rights in a jurisdiction of economic and political stability. Britain’s private education system remains one of the most highly sought-after in the world. The British passport will continue to open doors (and borders) across the globe, regardless of any re-structuring of the UK’s relationship with the EU. The ESTA arrangement with the USA will continue to appeal to HNWIs from Africa, Asia, the CIS countries and the Middle East, who are already flocking to the UK for enhanced security and wealth planning. Britain’s history of cultivating the rule of law and its reputation for personal safety and security is likely to endure long after the issue of Brexit has receded.
A more important question from an investor migration perspective, is whether, in the event that Britain votes ‘leave’ on Thursday, investor migrants who have acquired citizenship in other EU member states will continue to benefit from rights of free movement and establishment into and out of the UK. If they do not, will these citizenship options maintain their attractiveness? In the event of a no vote what rights will HNWIs settled in the UK have around the EU? What rights would HNWIs who have chosen Maltese or Cypriot citizenship programmes have to reside or settle in the UK and how will this impact investor migrant choices in the future? These are all questions on which HNWI will need sound counsel.
Other countries too may be impacted. Switzerland has until February 2017 to implement a domestic referendum vote limiting the influx of foreigner nationals (Switzerland’s Bilateral Free Movement of Persons Agreement with the EU removes restrictions on EU citizens wishing to live or work in the country) and it is seeking to negotiate a compromise with Brussels, which has insisted it cannot brook any impediments to the free movement of people enshrined in bilateral accords. Talks have been on hold until Thursday’s vote and foreign minister Didier Burkhalter has said that Switzerland's bid to persuade EU’s partners to let it curb immigration from the EU “could be doomed” should Britons vote for Brexit.
Whatever the outcome of the referendum, the impact of the broader migrant crisis across Europe will continue to reverberate, with concerns over the long-term future of the Schengen zone certainly worth bearing in mind when considering the value of investor migration programs in countries such as Portugal and Hungry for example where access to the Schengen zone reinforces its appeal.
Britain’s overall appeal to HNWI investors is likely to endure in the face of the threat to its membership of the EU. Britain continues to attract wealthy investors from all over the world for myriad reasons, including access to education, a flourishing property market, and personal and legal security of assets. Britain, however, is only one of several jurisdictions in the EU that offers appealing residence and citizenship options for HNWI. In the event of a no vote on Thursday, the impact of Brexit on HNWIs who have opted for one of the alternative solutions will remain to be seen, if they can no longer enjoy unfettered access to Britain – by no means certain at this point.