The number of people who received the U.K.’s exclusive ‘golden visa’ more than doubled last year, compared to 2018, creating almost $1 billion in foreign direct investment. However, many in the industry believe this money should be better spent.
A total of 360 people payed £2 million ($2.6 million) to receive the U.K.’s Tier 1 Investor Visa in 2019, over double the number that applied in 2018. An increase in both applicants and a doubling in price has meant the visa raised its highest ever investment in 2019: £720 million ($941 million).
However, most people applying to the visa put their £2 million ($2.6 million) into “safe” areas of the U.K. economy. Since the funds need to be invested to qualify for the visa, most opt for corporate or investment-grade bonds.
Last year, the U.K. Home Office excluded government bonds from the program in the hope of sending money to parts of the economy where it was more needed.
But this has not worked as expected says Farzin Yazdi, head of Investor Visa at Shard Capital. “There have not been a shift into high risk, small, or illiquid investments. This is mainly due to the fact that most applicants do not fit the suitability criteria, and the main objective is their visa.”
This is a waste, believes says Chris Kaelin, chairman of Henley & Partners, one of the world’s largest citizenship advisory firms. “This Tier 1 program here doesn’t really make much sense. It could do a lot more for the country.”
Investing in corporate or investment-grade bonds or blue chip companies does little to support deprived areas of the British economy. But what if both the attention and funding of these investors was steered towards poorer areas of the U.K.?
“So you could very easily design a program and say ‘Okay, Mr. Russian and Mr. South African and Mr. American and Mr. Asian can come here, you’re very welcome, and you put two million to Cornwall, to the north and to wherever else we need investment,'” suggests Kaelin.
Middlesbrough, in northeast England, is one of the poorer parts of the U.K. in need of investment.
The U.K. should take a leaf out of the U.S.’s visa book, Kaelin believes. To qualify for a E.B. 5 visa, applicants must create at least 10 new jobs in the U.S. If each applicant of the Tier 1 visa did that, 3,600 new jobs would have been created in the U.K. last year.
Investment Beyond London
Currently London is home to most foreign wealth in the U.K. Not only does much of the Tier 1 funding flow into London-headquartered companies, via London-based wealth managers, but applicants often buy up luxury property in the capital as well.
This is detracting from areas of the U.K. economy that are in dire need of funding. Social mobility has widened between the capital and the regions, a report from the Sutton Trust found last month. It called London the “epicentre of the elites”.
Another report, released on Tuesday February 25, showed how the life expectancy gap has widened between London and the north of England. Healthcare funding is badly needed in some of these regional areas of England, the Health Foundation found.
“Everybody comes to London and its stupid,” says Kaelin. “You should take that out and say ‘foreigners you invest in northern England. You can still have a house [in London] but at least the investment doesn’t compound here where already the prices are high.’
“In the U.K., there is a particular opportunity now thanks to this Brexit.”