17 Feb 2011

British bankers head to Switzerland

There has been a 28 per cent increase in the number of British bankers and financial services workers migrating to Switzerland, writes Business Producer Ben King.

Skiers in Switzerland (Getty)

Financial institutions and politicians have lobbied government against increased taxation, arguing that the changes would drive the banking industry overseas. Switzerland, with its low personal and business taxes, is a favoured destination.

Figures from the Swiss Federal Migration Office show that 383 British citizens working in banking and financial services moved to Switzerland in 2010, an increase of 28 per cent on the previous year.

Under the broader rubric of banking, insurance and consulting, which includes IT, 1379 Britons were given permission to work long-term in Switzerland in 2010. This is an increase of 29 per cent over the 2009 figure.

These figures sound very plausible Matthaeus Den Otter, Swiss Funds Association

Matthaeus Den Otter, of the Swiss Funds Association, said: “These figures sound very plausible. There has been a steady influx of skilled workers. We estimate that some 20 to 25 firms of UK hedge funds have set up offices in Switzerland over the past year, and the banks will have sent over some specialised staff as well.”

Unofficial estimates from the hedge fund industry in the UK put the number leaving for Switzerland at about 100 per year, though those would be very high net worth individuals such as the founders of funds, so their departure would represent a significant loss to the exchequer.

The Federal Migration Office points out that the economic recovery is a factor in the increased migration rate. But the increase in the rate of immigration of British bankers exceeds that of other nationalities. Excluding Britons, the increase in banker migration was 14 per cent.

These numbers do not give a complete picture of the pattern of migration. Many of the financial experts working in the UK are not British citizens – so their migration would not show up in these figures. If they have been leaving London at a similar rate to British bankers, the true extent of talent flight from the City could be greater than these figures suggest.

The 50p rate of tax will have to remain in place for the time being Treasury spokesperson

Political debate

There is a fierce political debate about whether increased taxation and threatened regulation will drive financiers out of London. The Labour government introduced a 50p top rate of tax on earnings above £150,000 and a one-off bonus tax, paid at 50 per cent on amounts above £25,000.

The Coalition Government has retained the 50p rate, but the bonus tax, which raised £3.5bn gross, has been replaced by a levy on bank balance sheets.

A Treasury spokesperson said: “The Government’s first priority is to bring down the deficit and ensure that the UK lives within its means. While we believe that high marginal tax rates are not good for the UK, the 50p rate of tax will have to remain in place for the time being and play its part in bringing down the deficit.”

Bank bonuses

Britain’s biggest banks have agreed to pay their staff less in bonuses this year than in 2010, but the total bonus pot is still expected to equal about £6bn this year.

Last year’s figures from the Federal Migration Office showed a decline of just over 7 per cent in the number of British bankers moving to Switzerland. They were widely quoted by proponents of higher taxation as evidence that threats to move abroad were unfounded.

Business Secretary Vince Cable, then Liberal Democrat Treasury spokesman, cited Swiss migration figures in Channel 4’s Ask the Chancellors pre-election debate in March last year.

“We … need to take with a pinch of salt these threats from the super-rich to flee the country. I checked the figures for British rich people applying to live in Switzerland the number actually went down last year,” he said.