The Big Question: Why do the world's super-rich live in Britain - and do we want them here?

Hamish McRae
Tuesday 25 April 2006 00:00

How rich is rich nowadays?

There are many gradations of rich, for not only are the rich not like us, in Scott Fitzgerald's phrase - they are not like each other. They come from different countries, they make their money in different ways and they spend it in different ways.

The "wealth management industry" has divided them into four grades of wealth. At the top are the super-rich, the top 1,000 in Britain. The Sunday Times Rich List says these people have a total wealth of £300bn. To scrape into the club you must have assets of £60m and each year the bar is raised higher: a year ago £50m got you in. But even that grade is not the top of the tree, for the super-super-rich are as different from the £60m crew as those people are from the £5m crew.

Next are the ultra-high net-worth individuals. There are 135,000 people in this category according to Tulip Financial Research - people with a clear £6.6m (or $10m), not counting their homes. Below that come the high-net-worth people, with a clear £660,000 (or $1m), and finally at the bottom are the mass affluent, people who have at least £150,000 to invest over and above the value of their homes. Most professional Britons would enter that category in middle age, and it is 4 per cent of the population.

Where do these super-rich come from?

At the bottom end they are mainly British, at the top almost entirely foreign. Thus out of the top 10 people in London and the South-east, only one - Sir Richard Branson - is British. Of the top 10 richest in Britain, as revealed in the latest Sunday Times survey, only three are British. The three richest - Lakshmi Mittal, Roman Abramovich and Hans Rausing - are Indian, Russian and Swedish.

At the top the rich fall into two main groups: global entrepreneurs who chose to relocate to Britain and tax exiles from continental Europe, in particular Scandinavia. Further down there are larger numbers of people who have come to London to make money, mostly in financial services, including many Americans and Britons.

What attracts them to Britain?

Initially mostly tax. It is all to do with the distinction between residence and domicile. Britain has an unusually favourable tax regime for people who come to live here. We Britons are taxed on our worldwide income, so if a Briton has property abroad, any rents have to be declared and tax paid. Foreigners, however, are taxed only on the money they bring to Britain and spend here.

Many of the richest Britons, by contrast, technically live abroad (typically in a tax haven such as Monaco or the Channel Islands) and are just visitors when they come here.

So is it just tax?

No, it is also job opportunities, services and political stability. There are more jobs in London paying more than £1m a year after tax than in the whole of the rest of Europe put together. Most of these are in financial services. Many young Europeans want a spell in the UK, partly for experience, partly to build up capital. Some European companies even agree to post their brightest young people to London to give them the opportunity to make money, before transferring them back. The mass of rich and quite rich has led to a surge in services for them, of which the most important are legal and financial, but which also includes restaurants and entertainment and schools for children and access to the UK university system.

Political stability is also important, particularly for migrants from Asia and the Middle East. Perceived hostility in the US towards Middle Eastern migrants has probably raised UK attractiveness vis-à-vis the US.

What do we get out of it?

Three things. First we get jobs. Wealth demands services at all levels, from housekeeping to investment management. That economic activity spreads outwards through the economy and is one of the reasons why inner London is Europe's wealthiest region. Thanks to the growth of service industries and international finance, the UK is now the second-richest country of the G7 developed nations, second only to the US, as measured by gross national income per head.

Second, we get skills. The mass of talented people should help secure this position as a top-end global service provider for another generation.

Third, we get influence. Because global talent chooses to locate in the United Kingdom for a period, Britain will have people who know it (and hopefully like it) in key positions around the world in the future.

But there must be a downside?

There is. We have become a less equal nation and that might increase social strains. If a billionaire moves from, say, Sweden to the UK, the UK has a less equal income distribution and Sweden has a more equal one. There are costs to that, for not only does it increase inequality within Britain as a whole - which has already been rising thanks to demand for higher skills - it also increases regional pressures.

The South-east is growing more quickly and its population rising faster than the rest of the UK, and that creates a challenge for government - how best can it lift the lagging regions? A visible effect of this migration of wealthy people has been the rise in property prices in the South-east, with the danger being that British people are priced out of living in areas popular with foreigners. On the other hand, there does not seem to be much anti-immigration pressure against the rich: insofar as there is anti-immigration concern it seems to be directed more against poor migrants.

Isn't there a danger that they might just leave and take their money with them?

Yes. You could envisage circumstances in which Britain could become hostile to wealth in general and foreign wealth in particular. But were that to happen the problem would be much bigger than some rich foreigners leaving. A lot of rich (or should we say mass-affluent) Britons might well choose to leave as well.

The ultimate rich list: our 10 wealthiest people

1. Lakshmi Mittal, Indian, £14.88bn

Steel magnate, born in Rajasthan, now residing in Kensington Palace Gardens, London.

2. Roman & Irina Abramovich, Russian, £10.80bn

Born in 1966 in Saratov, Russia, Roman began his commercial life in his home country in the 1980s when reforms made private enterprise possible. Now an oil billionaire, he is best known for owning Chelsea football club, which he bought in June, 2003.

3. Duke of Westminster, British, £6.60bn

Known for his Mayfair properties, but also has extensive interests abroad.

4. Hans Rausing, Swedish, £4.95bn

Sussex-based packaging manufacturer, has an honorary knighthood for his charity work.

5. Philip & Tina Green, British, £4.90bn

Both are involved in running a retail empire that includes the BHS department stores.

6. Leonard Blavatnik, Russian, £4.67bn

Oil, plastics and metals oligarch who set up TNK-BP, Russia's second-largest oil firm.

7. Sri & Gopi Hinduja, Indian, £3.6bn

Oil, banking, telecommunications and trucking concerns in India, Europe and Middle East.

8. Simon & David Reuben, British, £3.25bn

Property and metal-processing magnates who were born in Bombay.

9. Sir Richard Branson, British, £3.06bn

Owner of Virgin brand that includes trains, planes, mobile phones and music interests.

10. John Fredriksen, Norwegian, £2.86bn

An oil tanker- and-shipping tycoon. The owner of the world's largest oil tanker fleet.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies


Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in