2024 is a year of elections—with seven of the ten most populous countries going to the polls this year. We’ve already had elections in Indonesia, Pakistan, India (the world’s largest democracy) and South Africa. The US has elections in November with even its main presidential candidates in doubt, and French President Macron is halfway through its shock parliamentary elections.
The UK votes today in its general election, with increasing public discourse about the tax plans of the opposition Labour Party—the government in waiting—as it sits comfortably ahead in opinion polls.
The UK political consensus has been changing, with the current Conservative government having announced it would phase out the so-called non-dom tax status over time. About 70,000 non-doms live in the UK but pay little UK tax on money earned overseas. Labour has said it will move even faster in its non-dom crackdown, yielding headlines about “petrified non-doms” getting ready to “flee” the UK.
As the election nears, Labour has gone out of its way to stress which taxes it definitely won’t increase. Vulnerable is capital gains tax (i.e. tax on the profit of the sale of an asset), which hasn’t explicitly been ruled out and is causing more observers to wonder how Labour will fund its expenditure plans. A recent Reuters article headlined—”Super-rich may quit the UK over Labour plans”—noted Labour “is targeting Britain’s wealthiest people to support a public spending programme.” Also, new data in the Henley Private Wealth Migration Report forecasts the UK will lose 9,500 millionaires this year – double the 2023 figures—and the second-highest millionaire exodus in the world.
The knock-on effect and the decision for UK-based UHNWIs remind us that capital can always be internationally mobile.
One country increasingly seen as attractive for mobile family capital is the UAE, which the Henley Private Wealth data also ranks as the top destination for millionaires. The country is a hub of international finance with many highly respected international schools, and its infrastructure, leisure, and hospitality facilities are exceptional. Most importantly, the UAE offers reliable and consistent tax advantages.
The UAE in focus
With 73% of the UAE economy now non-oil and a growing young working population, the UAE is a secure economic landscape for the next generations—which is important for financial predictability and security—especially for families.
The UAE also has extensive expertise in migrating capital, individuals, and families to its shores, with a constant list of arrivals. The Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC) have enabled registered financial institutions, companies, and entities to operate, innovate, and succeed within international regulatory frameworks.
Last year, Ray Dalio—founder of the world’s largest hedge fund (Bridgewater Associates) and ranked as the world’s 79th-wealthiest person—was another high-profile addition, establishing a branch of his family office in Abu Dhabi, a city increasingly known as the “capital of capital” and voted the world’s safest city for the sixth consecutive year in 2022.
Henley data also shows that the number of millionaires living in Dubai, the UAE’s largest city, has risen 78% over the last decade.
Sovereign wealth funds and other major global investors are all in the UAE, seeking fresh ideas and technical innovations and establishing new businesses as the Gulf pivots away from its reliance on natural resources.
Alongside an attractive regulatory regime, the UAE’s appeal stems from the quiet and unassuming wealth management of family offices, which help manage the interests and investments of HNWIs and build strong futures for their families and future generations.
The UAE’s insightful nurturing of capital sources led to c. 4,000 millionaires relocating there in 2022, with a 50% increase expected in the next decade—helping the family office sector (and the advisors that assist it) gain further importance. Such is the growth that new business models, such as an outsourced family office, are appearing in the region to assist those relocating and who don’t already have a family office structure in place.
This migration of millionaires and the anticipated intra-generational transfer of trillions of dollars of wealth over the next decade is already seeing new investment trends driven more by sustainable development and philanthropy. The modern HNW family—while naturally focused on wealth preservation—is starting to consider value creation equally for their family and wider society. HNWIs want to enjoy their wealth, but they also want to put it to good use and see others benefit from their involvement in a country.
As the latest global election of significance draws closer—the UK’s domestic discourse about how future public spending will be financed is already spooking the country’s UHNWIs. Exactly how much and where such capital will move remains to be seen.
However, the UAE is ideally placed in this highly mobile, discerning capital era. As more family money and assets flow there, the country’s existing family offices will play a significant role—and so will the advisors who help them.