With the gloom of recession showing no sure sign of abating in the UK, what does the future hold for our economy? We have been warned repeatedly that the austerity measures by the UK government will only result in a double dip recession. However, like most governments in Europe, the UK has opted for cutting so fast and so deep neglecting the fact that growth is vital to resuscitate the economy. So with the cuts to the NHS, Police, UK Border Agency and other government departments, what is the government actually doing to help our economy grow?
Well, the government’s attention seems to be on those wealthy businessmen/women abroad. The government believes that investors will be the “knights in shining armor” that will come to invest in the UK and create job opportunities for the 2.65 million unemployed people in the UK.
Prior to the economic meltdown the UK was always open for business and for investors. As an immigration advisor at Saracens Solicitors I dealt with many applications for investment in the UK from people across the world. Generally, the route for investors to come to the UK is not very complex but is a fast changing route.
In November 2010, the Home Secretary announced reforms to the Tier 1 (Entrepreneur) and (Investor) visa routes in order to make them more attractive to investors. So what are the changes introduced by the government and how attractive is Tier 1 (Entrepreneur) and (Investor) routes for investors in 2012? I will go through the key changes introduced and comment on how we can make it even easier for investors to come to the UK.
The red carpet approach – Accelerated route
The government introduced a route for the super rich in which those who invest £5 million in the UK can apply for settlement after 3 years, whereas those who invest £10 million can settle just after 2 years. Although this is an attractive route for those who want a quick settlement in the UK, in the current economic climate investors are not willing to invest £5 or £10 million in an economy that is not growing. Therefore, we do not see investors opting for this option very often.
Absence from the UK
As an immigration advisor most of my clients complain about restriction on absences from the UK. Generally a person who wishes to apply for settlement must not leave the UK for more than 90 days in any 12 calendar months. This was problematic for investors who have business around the world and need to travel outside the UK regularly to deal with their businesses abroad. The government realized that this is a problem and increased the limit on absences from the UK for Entrepreneurs and Investors coming to the UK under Tier 1 of the Point Based System. Investors can now leave the UK for up to 6 months without affecting their right to settle in the UK after they complete the required residential period. In my opinion this has helped many investors who always wanted to come to invest in the UK but hindered by the need to spend 9 months in the UK.
The millionaires budget!!
In an attempt to back businesses and investors George Osborne announced in March that the 50p top rate tax would be cut to 45p giving the “millionaires a tax break”. Many people wondered if this should be a priority in the current climate. We heard the Labour Party’s leader Ed Milband saying that the tax cut brings an end to the ”we are all in it together” campaign by the Conservative Party.
Stepping away from the political games, I wonder if the tax cut will actually attract wealthy businessmen/women to the UK. Frankly, I do not think so. In the current economic meltdown, investors are reluctant to invest money in countries that are facing economic crisis. They are not majorly concerned with the 5p tax cut. If investors are unable to make profit on their investment in the UK as a result of recession they will not come to invest following the 5p cut in tax. In my opinion it is time for the UK government to start looking for a strategy for growth in order to help boost the economy and attract investors from around the world to come and invest in the UK.
What more needs to be done to attract investors?
Well, if we are trying to attract investors in this current economic crisis then we ought to do more to bring them here. As we are in recession investors are not looking to take a great risk with their money and, therefore, the Entrepreneur visa route is the most popular because the investor will only need to invest £200,000.00 as opposed to £1 million, £ 5 million or 10 million required under the Investor visa route.
The main obstacle that stops investors from coming to the UK under the Entrepreneur category is the English Language requirement. The English language requirement for investors under the Entrepreneur route is set at 6.5 ILETS or C1 Level. This basically means that investors have to have a particularly high level of English and for wealthy individuals who are coming to invest and can communicate in English it is by far too onerous and beyond what is required to run a business in the UK.
I agree that anyone who wants to come to the UK should have a requisite level of English but setting the bar very high will stop investors from easily coming to invest in the UK. Looking at the fact that we are now in recession again, in my opinion the government should reduce the level of English required for the Entrepreneur visa, to level B1 rather than C1. If this is done, hopefully we can see an influx of entrepreneurs coming to the UK to invest and create job opportunities for some of the 2.65 million unemployed people in the UK.
Will the government do more? Or will their unrealistic pledge to cut net migration be the obstacle to economic growth?
By Ferial Saada