There has been much coverage of the latest annual net migration figures, which showed a record high of 330,000 in the year to March. However, there has been little, if any, comment on the fact that the latest Home Office Quarterly Migration Statistics, published on the same day, revealed a worrying drop in the number of investors being granted visas to enter the UK.
The figures are buried in one of the data tables. They show that in the first quarter of 2015, only 58 Tier 1 Investor visas were issued and only 44 were issued in the second quarter. This compares to 213 grants in the first quarter and 251 grants in the second quarter of 2014.
One reason, which may appear obvious, is that on 16 October 2014, the Government announced that the initial investment threshold for Tier 1 (Investor) visas would increase from £1 million to £2 million from 6 November 2014. This led to a surge in applications before that date to avoid the increased investment requirement. The figures for the last quarter of 2014 show that there were 471 Tier 1 (Investor) visas granted in that period, about 200-250 more than might otherwise have been expected. However, in reality two of the main concerns expressed by clients were speculation regarding the potential introduction of the ‘mansion tax’ and uncertainty over the potential abolition of the Non-Dom status.
It is possibly still to early to tell whether the latest drop in the number of investor visas is a temporary compensation for the surge at the end of 2014 – this will probably not become clear until the end of the year. However, it is of concern that the number dropped further in the second quarter, suggesting that the increase in the threshold is now acting as a permanent deterrent to many new investors, who may now be considering investing in other European countries such as Cyprus or Malta where less investment is required in order to obtain residence.
It is also possible that the increasing restrictions being placed upon non-doms, including the forthcoming abolition of permanent non-dom status, are acting as a further deterrent to potential Tier 1 (Investors). In addition, the seemingly never-ending anti-immigration rhetoric stemming from the major political parties and the popular press, including the Government’s stated aim of creating a “hostile environment” for illegal migrants, runs the risk of also creating such an environment for the so-called brightest and the best, including high net worth individuals who wish to invest in the UK, whom the Government maintains it wishes to attract to the UK.
719 Tier 1 (Investors) came to the UK in the 12 months prior to the announcement of the increase in the initial investment threshold. In the 6 months since the introduction of the new threshold, only 102 Tier 1 (Investors) have come to the UK. On that basis, only about 200 Tier 1 (Investor) visas will be issued in 2015, bringing a minimum investment of £400m. Under the old rules, a minimum of £719m would have been brought to the UK in a similar period (we have deliberately omitted the last quarter of 2014 from this comparison in an attempt to avoid distortion).
As we have already stated, it is probably still too early to tell whether the current drop in Investor visas is permanent or temporary. Nevertheless, there are worrying indications that the increase in the threshold has had the effect of significantly reducing investment in the UK by Tier 1 (Investors). The figures for the next few quarters should be watched closely.