The number of applicants to the U.K.’s investor visa has dropped by over 60% latest figures from the U.K. Home Office show.
In the second quarter of 2019, 124 people received the U.K.’s Tier 1 Investor Visa. However, in the third quarter just 49 of these residency visas were given out.
Advisers blame changes to the visa rules that came into effect in March 2019. “It seems the information about the changes has not yet filtered down to the overseas professional community,” says Rafael Steinmetz Leffa, head of the China Desk at Shard Capital Investor Visa.
“Agents in China are still confused what the new rules are”, he adds to explain why so many Chinese investors have turned away from U.K. residency. In the second quarter, 69 Chinese individuals were granted an investor visa. But in the three months to October 2019 this fell to 18.
The data for China includes Hong Kong, where recent protests have caused concern that wealthy individuals might flee to countries such as the U.K. “Other professionals we talk to have great expectations around high net worth individuals immigrating to the U.K. due to the unrest in Hong Kong,” says Steinmetz.
“In recent history, London has been the major destination for outbound capital flows from Hong Kong, and its been that way for the last four years,” says Paul Hart, executive director and head of commercial at Knight Frank Greater China.
However, this recent data from the U.K. Home Office suggests otherwise. Additionally, Knight Frank says just 12% of total Hong Kong outbound capital flowed to London this year, compared with 30% in 2018.
“The reason why it’s dropped is because Brexit has complicated matters on two fronts,” says Hart “Firstly, U.K. landlords are reluctant to sell, because they think they’ll amidst a supply shortage. And secondly, people simply don’t understand Brexit, and their concern is affecting the market outlook.”
Steinmetz says it is a similar case in Hong Kong, where so much private wealth is tied up in real estate. “Hong Kong [property] prices are down so people don’t want to sell”, he says. This means less liquidity available for investor visas. “They can’t just take off any time they want”.
The National Grid has followed other U.K. utility companies in setting up offshore operations to … [+] protect themselves from Labour’s nationalisation plans.
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Brexit and protests in Hong Kong are not the only political issues effecting inbound investment into the U.K. There is, of course, a general election to consider, and this could dramatically change the way Tier 1 Visas are administered.
New rules mean that the £2 million ($2.5 million) required to qualify for a Tier 1 Visa needs to be invested in active and trading U.K. registered companies. However, what if those companies move offshore? Many utility companies have set up offshore operations to protect shareholders from the nationalisation plans of the Labour Party.
“Utilities are normally core holdings in their portfolios”, says Farzin Yazdi, head of Investor Visa at Shard Capital. “So if [utility companies] do move their registered address outside the U.K., shareholders will no longer quantify for investor visas”.
While this is not a factor in the decline in the Tier 1 investor visas it could effect any future growth, he adds. “Its early and it hasn’t happened yet but its on their radar”.