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UAE and Australia Witness Surge in HNWIs, While UK Faces Significant Wealth Outflow in 2023

June 19, 2023

According to the recently published Henley Private Wealth Migration Report 2023, the UK is projected to experience a net outflow of 3,200 high-net-worth individuals (HNWIs) in the coming year. This number surpasses the expected net loss of 3,000 HNWIs for Russia. Consequently, the UK will rank as the third-largest contributor to the global decline in millionaires, following China with a net loss of 13,500 and India with a net loss of 6,500.

The report, released on June 13, highlights that the anticipated departure of HNWIs from the UK had doubled since the previous year when it witnessed a net outflow of 1,600 millionaires. These findings are based on data from New World Wealth, a renowned global wealth intelligence firm that has been monitoring wealth migration patterns for over a decade. The figures in the report focus exclusively on HNWIs who have truly relocated, spending at least six months per year in their new country. It is important to note that all HNWI figures have been rounded to the nearest 100.

In contrast, Australia is projected to attract the highest net inflow of HNWIs in 2023, with an estimated 5,200 individuals seeking to establish residence there. While the UAE drops to second place following its unprecedented influx of HNWIs in 2022, it is still expected to experience a substantial net arrival of 4,500 new millionaires this year. Singapore ranks third, experiencing its highest recorded net inflow of 3,200 HNWIs, followed by the United States with an expected net influx of 2,100 millionaires.

Switzerland (1,800 net inflow) and Canada (1,600 net inflow) secure the fifth and sixth positions on the list. Greece (1,200), France (1,000, doubling last year's net intake of 500 millionaires), Portugal (800), and New Zealand (700) also make it onto this year's top ten countries with the highest net inflow of HNWIs. Conversely, Israel is predicted to drop out of the top ten, with its net inflow of millionaires nearly halving to just 600, compared to 1,100 in 2022.

According to Dr. Juerg Steffen, the CEO of Henley & Partners, there has been a consistent increase in millionaire migration over the past decade. Global projections for 2023 and 2024 anticipate figures of 122,000 and 128,000 millionaires, respectively. Dr. Steffen noted that wealth migration patterns would return to pre-pandemic norms this year. Australia is set to regain its position as the top destination for net inflows, a status it held for five years before the Covid-19 outbreak. Conversely, China is predicted to experience the most significant net outflows, as it has consistently over the past decade. Notably, the UK and the US are exceptions to these patterns, as they were previously top destinations for wealthy individuals but are now witnessing significant outflows.

The UK experienced its highest net outflow of millionaires in 2017 following the Brexit referendum 2016. Before that, the country had enjoyed net positive inflows of high-net-worth individuals. While net losses decreased slightly between 2017 and 2019, the forecast for 2023 indicates a more substantial exodus of millionaires currently underway.

Prof. Trevor Williams, the former chief economist at Lloyds Bank Commercial, sees the data as independent confirmation of the trend of HNWIs leaving the UK. He states that regardless of individual opinions about Brexit, this group demonstrates their preference through their actions. The removal of permanent non-domiciled taxpayer status and the impact of Brexit have made the UK a less welcoming environment for high-net-worth individuals, making it more challenging to move between the UK and EU countries. Evidence also suggests that the UK's share of inward investment into Europe has declined since it departed from the EU, with countries like Germany and France benefiting instead.

Sunita Singh-Dalal, Partner, Private Wealth & Family Offices at Hourani, commenting on the Henley Private Wealth Migration Report 2023, agrees that recent debates surrounding non-domiciled status in the UK, coupled with political volatility, rising debt, a strained healthcare system, high crime rates, and a general sense of dissatisfaction, have diminished the appeal of London as a desirable destination for wealthy individuals.

The United States, another prominent financial powerhouse, is currently witnessing a decline in its attractiveness to migrating millionaires compared to pre-Covid times. This could be attributed to the potential threat of higher taxes. Although the country still manages to attract more high-net-worth individuals (HNWIs) than it loses through emigration, the projected net inflow for 2023 stands at 2,100, which is a significant drop from the levels seen in 2019 when there was a net inflow of 10,800 millionaires.

Jeff D. Opdyke, a renowned personal finance columnist, author, and investment expert, highlights in the report that in the past, the United States was the obvious choice for wealth migration due to its technological advancements, leadership, and renowned freedoms. However, there is a possibility that the US may soon resemble the UK, which was traditionally a top destination for migrating wealth but is now experiencing a net exodus of HNWI migrants due to the economic repercussions brought about by Brexit, which has been likened to scoring a goal against oneself.

Other countries experiencing significant losses of millionaires in 2023

China continues to face the highest net outflow of dollar millionaires each year, a trend that has persisted for the past decade. Andrew Amoils, Head of Research at New World Wealth, explains that China's wealth growth has been slowing in recent years, making the recent outflows potentially more detrimental. Although China experienced strong economic growth from 2000 to 2017, wealth and millionaire growth in the country has been minimal since then when measured in US-dollar terms.

India, the second-largest global loser, is projected to have a reduced net outflow of 6,500 millionaires in 2023 compared to the previous year's figure of 7,500. Amoils highlights that these outflows could be more concerning as India continues to produce many new millionaires, outweighing the loss due to migration. Singh-Dalal adds that restrictive tax legislation and complicated rules regarding outbound remittances, prone to misinterpretation and abuse, have contributed to the trend of investment migration from India.

The UK (3,200) and Russia (3,000, down from 8,500 in 2022 following the Ukraine invasion) rank third and fourth, respectively, as major countries experiencing millionaire outflows. Brazil (1,200), Hong Kong (SAR China) (1,000, less than half of the net outflow in 2022), South Korea (800, double the net outflow in 2022), Mexico (700), South Africa (500), and Japan (300, compared to a net loss of 100 in the previous year) complete the top ten countries with the most considerable projected net losses of millionaires in 2023.

Misha Glenny, an award-winning journalist and Rector of the Institute for Human Sciences in Vienna, emphasises the lessons for countries aspiring to attract high-net-worth individuals. He states that political stability is a crucial factor for individuals when selecting their desired place of residence, along with low taxation systems and personal freedom. Glenny also suggests that until the Russo-Ukrainian war concludes, both countries will continue to experience an outflow of HNWIs, which remains the primary driver for relocation. Furthermore, he notes that other HNWIs may choose to wait until the outcome of upcoming elections, particularly in the US and the UK, before making their decisions on migration.

Growing demand fueled by persistent uncertainty

Henley & Partners experienced an unprecedented surge in enquiries for investment migration programs in the first quarter of 2023, reaching the highest number on record. This marked a 36% increase compared to the previous quarter and a remarkable 47% rise from the same period in 2022, which set a record. Among the nationalities driving this demand, Indians and Americans take the lead, while Brits and South Africans continue to feature in the top ten, as they have for the past five years.

Dr. Areef Suleman, Director of Economic Research and Statistics at the Islamic Development Bank (IsDB) Institute, highlights in the report that the impact of HNWI migration on destination countries extends beyond the initial investment itself due to a multiplier effect. When the USD 1 million contributed by HNWIs is invested in a business, it generates employment opportunities and additional demand from local producers, multiplying its impact beyond the initial investment. On the other hand, for source countries, the loss of opportunities is offset by the inflow of remittances and international connections in the form of trade, foreign direct investments, and technological transfers from the destination countries.

Preferred routes for investment migration

The Golden Residence Permit Program in Portugal continues to be the most sought-after pathway for investment migration in 2023. It is closely followed by Austria's Citizenship by Investment Program and the Citizenship by Investment Program offered by St. Kitts and Nevis. Another popular option is Canada's Start-Up Visa Program, which provides entrepreneurs and affluent individuals quick access to Canadian residency and the North American market. Italy's Residence by Investment Program has been gaining popularity in recent years. It secures a place in the top five, alongside Greece's Golden Visa Program and Spain's Residence by Investment Program, which is in close pursuit.

Dominic Volek, Group Head of Private Clients at Henley & Partners, notes that historically, many wealthy individuals obtained residence rights or citizenship without physically relocating to those countries. However, due to recent and persistent uncertainties, there has been a shift in mindset. More investors are considering relocating with their families for various reasons, including safety, security, education, healthcare, climate change resilience, and crypto-friendliness. Volek emphasises that nine out of the top ten countries predicted to experience net inflows of HNWIs in 2023 have formal residence-by-investment programs, which incentivise foreign direct investment in exchange for residency rights, and in some cases, citizenship. Investors recognise the value of diversifying their domicile portfolios to hedge against regional and global volatility, both now and in the future.

Opdyke concurs with this perspective, highlighting that wealth migration has always been driven by pursuing more excellent opportunities while safeguarding wealth. However, he emphasises that the landscape of preferred destinations for wealth migration is changing and will continue to evolve. Wealth demands mobility as an option, providing high-net-worth individuals with an escape route from deteriorating situations, allowing them to reestablish themselves in economies more accommodating to their wealth or business objectives.

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