The banker ‘exodus’ that failed to materialise

12:00 pm - October 18th 2010

by Sunny Hundal    

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Earlier this year London Mayor Boris Johnson was full of dire warnings that a tax on bankers bonuses could see up to 9000 bankers leave London for other countries.

It was THE END of the City of London AS WE KNEW IT.

On Friday we reported that people within the city had called such fears ‘over-blown’

Over the weekend an article in the Financial Times confirmed that view.

It says that ten months on from the introduction of the bankers bonus tax, far fewer bankers and traders have left the UK than some tax advisers initially forecast.

What a surprise eh?

From practical concerns over infrastructure and regulation to quality of life issues, executives are proving “stickier” than many feared.

That isn’t to say some didn’t leave. The FT reports that around 1000 hedge fund managers did end up transferring to other countries.

But the vast majority stayed put.

Analysis of the impact of the 50 per cent tax rate on take-home pay reveals that the gap with other jurisdictions may not be wide enough to justify a move out of London, particularly for junior and middle-ranking bankers.

For example, a married banker with two children, one of them aged under six, with gross income of £250,000 and a mortgage of £750,000, would net £141,000 in the UK, after deductions for tax and social security, according to PwC’s calculations. In Geneva, that same employee would take home about £156,000, 11 per cent more.

The gap with other European financial centres and the US is significantly smaller. The same worker would net £150,000 in Paris, £149,000 in Frankfurt and £145,000 in New York.

That was not enough of a difference for many people to relocate their families, Mr Drury said.

Last year, Tullett became one of the first organisations to offer to help relocate teams looking to move out of the UK.

This week it emerged that it has yet to be taken up by a single team. Someone please call Boris and tell him.
[hat-tip The Third Estate]

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments

“a tax on bankers bonuses could see up to 9000 bankers leave London”

Up to 9000 eh? Was Boris Johnson attempting to show off his knowledge of online memes? [NSFW, probably]

Incidentally, what happened to all those people who said they’d leave Britain if Labour got in in 1997? I think there’s a case for chucking out Jim Davidson, for starters…

Incidentally, what happened to all those people who said they’d leave Britain if Labour got in in 1997?

The same thing as happened to those people who said they’d leave London if Boris was elected mayor. I seem to remember Arabella Weir threatening to go on hunger strike.


lol, fair enough.

Message to Londoners: leaving London isn’t the same thing as leaving the country.

What is more relevant and difficult to measure is how much investment did not come to the UK because of the verbal pogroms? The folks in the City just want to be loved like everyone else. Demonising of groups because of their choice of employment can be traumatic for those with sensitive constitutions.

@If you want real commitment to a promise see the self expanatory film Werner Herzog Eats His Shoe, wherein the German director honoured his promise to eat his footwear if another director completed a film

@These sensitive souls didn’t exactly go out of their way to be loved did they? Anyone recall them demanding lower pay and higher taxes? Demonising bankers is simply what they deserve, if they don’t like it they can retrain as something of value to society, give the money back or piss off. Contrast their demonisation with that the poorest are now subjected to and bear in mind that bankers are in this mess through their own fault but the poor are not

My point exactly about all these people saying we shouldn’t have a graduate tax because people will leave the country and not pay it back. No one has any figures to show how big this so called exodus would be yet I don’t hear Ed Miliband or any other prominent Labour politician slapping this non-argument down. What is wrong with the Labour party has the moment? Too many cats have got their tongues!


Aw, the poor little dears! They must be frantic eh, what with nobody loving them and being all nasty to them? Still, a big fat bonus will make it all better I expect. It might even persuade them not to move to whichever characterless tax haven they can bolt to and stick it out here with the rest of us poor unfortunates.

Get real.. telephone figure salaries and bonuses big enough to choke a horse will buy an awful lot of insulation from the effects of the economic meltdown they helped cause!

1000 Hedge fund managers is a lot….given that a huge firm like Bluebay (assets $40bn) emply under 300 people and roughly only 30-50 actual portfolio managers at any one time.

The of course, you have all the various bankers servicing that hedge fund business. I know one (small) bank laying off 200 people in the UK alone because of HFs moving abroad to a location they don’t have operations in. Some of the bigger banks are also gearing up for staff cuts in the UK for the same reasons.

Boris’ 9000 number might have been high, but not ridiculously so. Especially if you count the many supprt and back office staff who have also effectively been relocated. How much tax do you think that has cost the UK? I’d guess a number in the billions….

…it’s also worth noting that the 50% top tax rate isn’t the only driver of people to move. It’s probably one of the smaller ones. There is also the threat of arbitrary bonus taxes and the uncertainty of other action (corporate rates, balance sheet taxes etc) which are serving as good reasons to financial institutions to move offshore.

Then Sunny makes some dumb point about Tullets…who are an inter-dealer broker. Not a bank or HF. Staff of these operations broke very specific products in very specific markets, and are pretty much tied to certain locations so it’s hardly surprising they haven’t moved.

I still love the idea though that Sunny speaks with joy about killing goose laying all the golden eggs. Where do you think Labour and Brown got all that lovely tax money he had so much fun spraying around the public sector from????

Tyler, 7% of GDP isn’t a golden egg. If I remember correctly that’s about the contribution the City made to the economy last year. Now it won’t surprise me if you find some Speke Yore Branes statistic from somewhere in an attempt to be Always Right, but I doubt you’ll come up with anything resembling the golden eggs you speak of.

@ Cherub

7% of GDP in a poor year for the financial industry is simply massive. I don’t know what stats were earlier in the decade but I’m sure it was a huge driver of growth and taxes, and also a massive facilitator of other industry, as well as government spending (who do you think financed PFI for the govt?).

Without it (the finance industry) the recession would be even worse. No questions.

9 Tyler

Anecdotal evidence aside (as I’m sure there are examples of particular companies harrumphing around and deciding in a fit of pique to take their ball away and play somewhere else….) the fact still remains that the doom laden predictions that the sky is going to fall down need to be seen for what they are: self serving.

London is, and will remain, a huge financial centre. Companies, just like people, make decisions about where to “live” for a whole host of reasons, not all of them financial. If the cost of “living” here, part of the “social bargain” if you will, is unpalateable to them, then they shouldn’t let the door hit them on the arse as they leave.

The Cassandras predicting melt-down in the City will soon get tired of people ignoring them. It didn’t happen before, and it won’t happen now.

@ Galen10

I work in the banking industry. I’ve very recently moved to South Africa, where I have a better standard of living and pay less tax, and certainly no arbitrary bonus taxes. I now spend my money in the economy here (SA) and contribute nothing to the UK via tax or consumption. There are many more like me. Is it better for the UK economy to have us leave and take our money, tax and businesses abroad?

Of the team at my last bank only a couple are left in London – most now in Zurich, and a couple in Moscow. Three of my largest HF customers have moved much of their operations to Geneva.

It’s all too easy to move things to other countries these days, and though there is definitely some intertia, there has been movement abroad as a reaction to high taxes and high uncertainty – not just in the banking sector. It also makes it ahrder to attract firms, business and people to the UK if your tax rates are high and uncertain.

13 Tyler

Good luck to you; I’m sure it’s a wonderful place. Same goes for all your colleagues. I wouldn’t personally want to live in any of those places, however well rewarded, but that’s a personal choice. If people who earn large salaries want to move out of the country to keep more of their money, and think that is preferable to staying here fair enough.

I don’t work in the banking industry, but I have worked in the city. For every story like yours, there are many others of people from abroad who love to come and work in London, and British people who would rather put up with the vagueries of our system than live abroad.

Of course there is a risk that uncertainty will motivate some companies or individuals to move….. but honestly, the sky isn’t going to fall down as a result. It would be better if people like you stayed here of course, but not at the cost of you riding high on the hog while everyone else less fortunate (and without the option to up-sticks abroad) is expected to just lump it.

@13 don’t let the door hit you in the arse and enjoy the crime in South Africa, second highest murder rate in the world. Pampering a relatively small number of greedy crybabies is no way to run an economy

@14 Galen

I agree it’s peoples individual choices, but incentives do matter. My bro lives in Geneva now, paying very little tax and the lifestyle is great out there. For many of the internationals who work in the finance industry in London, it wouldn’t be much of a tipping point to take their taxpaying ways over there, or other major centres for that matter.

I also think for firms as a whole, uncertainty in the tax system can make it harder to locate in a country.

The long and short of it is that I think disincentivising firms and people to work in the UK through higher taxes is counterproductive – you have to stay competative to .

@15 Schmidt.

Been watching too many BBC docu-horrors about SA haven’t you.

The way NOT to run an economy is push the top 10% of earners, who pay roughly 40% of taxes, out of the country. Unless of course all the socialist workers fancy paying more taxes, or losing their generous pensions, or maybe jsut losing their jobs as government revenues go down? Your choice buddy.

“Is it better for the UK economy to have us leave and take our money, tax and businesses abroad?”

In the long run yes. It means we become less dependent on a volatile industry continuing to defraud pensioners for our income, house prices in cornwall will become realistic and we don’t lose our best companies to leveraged buy outs and asset stripping. However there is a negative; we lose our cocaine industry and London’s strip clubs will become more tacky.

16 Tyler

The things you say can all be true at the same time as the doom laden stories of a flight of capital and/or higher taxpayers being false.

Of course some people will be motivated to move, but many more won’t. Similarly plenty of rich people will still want to come here becuase they actually quite LIKE the idea of living in the UK, for all it’s faults. I wouldn’t even consider moving to SA to live, however beautiful it is as a holiday destination; same goes for Switzerland.

Also, it’s not as if other countries won’t be going through difficult times either is it? Companies and people need to weigh up a variety of factors… it’s not ALL about the things you mention. Plenty of companies and rich individuals still located in the UK in the bad old days don’t forget; given the choice between London and Zurich, Frankfurt, Geneva, Dubai, Singapore, Jo’burg I’d choose London everytime (or even Edinburgh come to that).

You don’t have to be a socialist worker to agree that the wealthy should pay more in taxes, that regulation of the financial sector needs to be much tighter than heretofore, and particularly that the many prophesies that the sky is going to fall are largely from those with an axe to grind, and that the threats are largely bluster.

@ Planeshift

Grow up. Maybe open your eyes. Perhaps learn to hold a discourse or argument liek Galen – we disagree but can understand points the other makes. Failing all that jsut stop being such a muppet.

UK is a service based economy now, especially after the massive drop in manufacturing (11%) over their reign….compared to the 3.6% drop under the last Tory govt.

@Galen 10

Agreed. The doom laden stories that the whole city will move are untrue (though clearlly planeshift above wishes it were so) but there still is a fairly large exodus. Which in my view is not good for the economy, and certianly not good for tax revenues when we are fighting a deficit.

People do like living in the UK, but many foreigners come just for the job. If the job was in Geneva, joburg or NYC…they’d do it there instead. Personally I love living in JHB. Better weather, nicer lifestyle, lower cost of living and none of the crap you have to put up with in London. In the role i do here, amongst the 8 banks with proper operations here, 3 (inc my own) employ expats recently moved from London in my specific role.

Likewise, many foreigners come to the UK but pay no tax in the UK thanks to specific tax loopholes.

I would say again, the “rich” already pay most of the tax….top 10% pay 40% of all taxes.

Tyler, city traders are not the most important group of professionals in the UK. Certainly not more so than doctors, engineers, scientists etc (all professions containing higher rate taxpayers). Yet is only they who are threatening to leave over the entirely reasonable principle that as they are now effectively in an industry only existing due to a bailout it is only fair they contribute a bit more to the costs of that bailout. I’m more worried about scientists leaving because of lack of funding for research than I am a few hedge funds and traders.

In the long term the financial industry will decline regardless of what any government does – as soon as banks and institutions realise that India is churning out Maths graduates by the bucketload operations will be outsourced. People who will do the work for a fraction of the salary and will regard bonus payments as something you don’t automatically get. So lets just milk what we have now and begin the transition away from a financial services based economy.

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  1. Liberal Conspiracy

    The banker ‘exodus’ that failed to materialise

  2. Max

    RT @libcon: The banker ‘exodus’ that failed to materialise

  3. Melissa Nicole Harry

    RT @libcon: The banker ‘exodus’ that failed to materialise

  4. Brian Moylan

    RT @libcon: The banker ‘exodus’ that failed to materialise by @sunny_hundal

  5. Andrew Ducker

    The banker exodus that failed to materialise

  6. David Skelton

    The banker ‘exodus’ that failed to materialise | Liberal Conspiracy via @libcon

  7. Allan Siegel

    The banker "exodus" that failed to materialise | Liberal Conspiracy

  8. sunny hundal

    @mattwardman @ssap9rulesok most of that is speculation… and contradicted by what actually happened

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