Waves of Emigrants Leaving Britain

Recently, the UK newspapers have been full of pieces about emigration from the country. This is in sharp contrast to the normal focus on immigration to the UK. Emigration is at its highest level since right after World War II. To quote a recent Telegraph piece on the subject:

We now learn from the Organization for Economic Cooperation and Development (OECD) that we lead the world in exporting talent, with a higher proportion of highly skilled professionals emigrating from this country than from any other (except Mexico). The OECD estimates that 1.1 million highly skilled Britons — more than one in ten of the total — are now living overseas. That 1960s phenomenon, the Brain Drain, is back.

It is estimated that two million UK residents will leave the UK in the next ten years. Add to this the statistic that one in ten British citizens is currently living outside the UK, and an interesting picture begins to emerge. This situation is not so surprising given that the UK is an island nation and its major export has been human capital for many centuries.

What is striking is the number of people that one encounters every day, whether acquaintances or people met in casual situations, for instance in taxis, who readily discuss emigration.

I do understand that my having a North American accent might prompt such discussions. However, I find in chatting with friends that this subject is regularly on everyone’s lips. Of course, there are lots of reasons to emigrate, ranging from romance to the search for new challenges and the desire to be properly compensated for one’s efforts.

There is a significant number of 30- and 40-something educated professionals who increasingly find that their income is not keeping up with their expenses. The official government line is that inflation is 3%, but everyone knows from personal experience that it is closer to 8% if food, transport, fuel, and taxes are included.

For practical purposes, there has been a pay freeze in many sectors of the economy due to negative or flat future growth expectations.

Despite talk of recession in the U.S., even though it has perhaps not occurred yet, most of these individuals are either aiming to move to the U.S., looking into it, or would like to. Because of the favorable exchange rates with the dollar in contrast to weakening economies on the continent, there seems to be little interest in a move to Spain or to France. Of course, Australia gets a look from many.

Referring to my recent piece on new regulations requiring annual payment of $60,000 (£30,000) for each non-domiciliary, the resulting exodus of non-domiciliaries from the UK is hindering financial services growth. Perhaps even more important is that the basic unfairness of this and many other similarly targeted regulations from the current government leads the highly educated and experienced to seek the certainty of a job in another country. After all, if the government is targeting the most productive foreigners, certainly the most productive residents are next on their list. (Indeed the recent change in capital gains taxation hits at productive investment in new companies.)

Companies have gotten the message too. Several large companies have announced headquarters moves to Ireland. This situation is eloquently described by Guido Fox as “taxodus.” He even has a clever logo for it. As Gordon Brown desperately seeks more sources of income in the faltering economy, this company exodus is only set to increase.

This time, with the ease of travel and easy transfer of universal skills, it is possible that the numbers will outdo the previous exodus. UK professionals continue to work for UK-based businesses and individuals while living a much less expensive lifestyle in another part of the world — not a loss of standard of living, but a substantial reduction in costs. The UK is educating people only to have them leave the country and pay taxes somewhere else.

One has to wonder if those who wish to retain the taxes of those emigrating might find more devious ways of making sure that the government continues to benefit from their earning potential by taxing them for the provided education. Some decades ago, the Soviet Union pioneered a method to tax people emigrating.

It will be interesting to see how government handles the increasingly mobile and flexible professional workforce. If past experience — specifically the 1970s — is anything to go by, these efforts may increase the flow rather than stop it. Handled badly it may simply increase the number of people giving up their citizenship for that of a foreign land. And a trickle may become a solid trend.