The criteria for qualification of a Tier 1 investor visa changed in November of last year; under new guidelines investors are now obliged to invest £2million rather than £1million in the UK to qualify for a visa.
Home Office quarterly immigration statistics show that since the introduction of this change, the number of applications made by investors to the UK has significantly declined. In the first quarter of 2015, a mere 58 visas were issued to Tier 1 investors, compared to 213 in the same period of 2014. This trend also continued in the second quarter, with only 44 visas being issued as opposed to 251 at the same point in 2014.
Head of immigration at Moore Blatch, Simon Kenny comments: “Many people have failed to appreciate the impact of these changes to the investor category. Whilst there was an increase in the amount of money that investors were expected to invest – many investors will have a personal wealth in excess of the minimum required to qualify and therefore this was not seen as a deterrent to potential investors and it was widely believed that applications would continue as usual.
“In fact the changes to the rules regarding calculation of the value of investments were considered to be more important.
“But it is quite significant that three quarters of investors are no longer making these applications.”
So exactly what factors may be putting investors off choosing the UK? Simon explains some reasons below:
- 1. As considered above, it may be that the new level of investment required is too high. There is recent precedent for expensive immigration categories becoming unpopular because of a high initial investment. The recently-introduced Canadian Immigrant Investor Venture Capital plan required a 2 million dollar investment for a visa to be granted; only six people applied for this as at June 2015. It has been so poorly received, that the category is likely to be dropped. All of this information indicates that there is a distinct market in respect of immigration within such categories and a price point beyond which investors are not prepared to go.
- 2. The lack of transferability of funds from China combined with current uncertainty in Chinese financial markets. When Bank of China was stopped from transferring most funds from the mainland to the UK via the You Hui Tong system in July last year, it impacted a large number of potential overseas investors and removed the obvious method of transfer of funds from China to UK. The impact of this can also be seen in the statistics; 102 such visas were granted to Chinese citizens in the second three months of 2014, but only six succeeded in that quarter of 2015. Whilst there are alternative ways to transfer funds from China within the existing currency exchange rules, the fall in levels of Chinese applicants to this programme is the most dramatic and the demise of You Hui Tong must be a logical reason.
- 3. Other overseas investor options in Europe seem to offer better value. Spain and Portugal offer “golden visas”; the right to permanent residence in those countries (which require limited prior presence) in return for property investments to the value of between €350,000 and €500,000. Malta and Cyprus both operate formal economic citizenship programmes, granting citizenship to those countries and therefore freedom of movement within the EEA can be acquired quickly. The former in particular allows those donating €650,000 (when also making other investments) citizenship after one year of suitable connections to Malta. Considered against all the requirements imposed upon potential UK Tier 1 investors, it is easy to see why these schemes attract applicants. The programme in Malta attracted 620 applications in its initial year and appears likely to continue in popularity.
- 4. Discussion about immigration here may be making the UK appear a less attractive destination. The Home Affairs Select Committee has previously suggested the benefit of Tier 1 investors to the UK economy is so negligible it should be suspended. Subjective and illogical “genuineness” tests in immigration applications, proposed abolition of non-domicile taxation status, a new comprehensive criminal record check for investors and careful scrutiny of the use by immigrants of healthcare, accommodation and bank accounts have all recently been proposed or enacted in the UK. Coverage in much of the UK’s press about immigration has been highly negative and many British people now have concerns about greater immigration. All of this may be making the UK seem less “immigration-friendly” by those financially independent immigrants who may choose where to go? Those able to invest at this level would be welcomed in most countries; it would hardly be surprising if the UK now seems less of a safe haven than it once was.
But where are these investors now choosing to go? Assuming there are indeed a similar number of individuals seeking some form of economic residence or citizenship, many potential choices exist. Spain, Portugal, Malta and Cyprus seem potential options for the reasons above.
The fact it is possible to qualify for permanent residence and citizenship without moving permanently to the country, learning to speak the language and then passing an examination about it (all of which are requirements for settlement in the UK) must all increase the popularity of these programmes, with several other European options also available. The EB-5 investor programme in the United States exhausted its limit of 10,000 total visas for the first time in August 2014.
Simon concludes: “Home Office statistics show that the investor immigration category, after years of growth, is in decline in the UK, with applicants choosing other countries for investment.
“Future changes in the quarterly statistics need to be monitored closely, as continuing investments into the UK is vital to the future of our economy, supporting businesses and creating jobs.”