There’s no shortage of French people in London. Last year, the French Consulate estimated that around 400,000 French citizens live in the city. Many of them are inhabitants of South Kensington; many of them work in banking.
As we’ve noted before, non-British financial services professionals have a tendency to be both better paid and better educated than their local counterparts. Our own research last year suggested pay for international bankers was 33% higher than for Britons. This applies particularly to French bankers, renowned for their supreme quantitative skills.
To the benefit of the City of London and to the detriment of La Défense, these highly paid, highly educated, French bankers are about to gain an important financial incentive to remain in the UK.
The incentive is emanating from François Hollande, the French socialist presidential candidate. As part of his package to raise an additional €29bn euros a year in taxation, Hollande intends to put a stop to the favourable tax treatment of France’s expats.
Introduced in August 2008, the current system allows French nationals who’ve spent the previous five years abroad working to return home to various tax breaks, including 3-5 years’ exemption from French wealth tax, which is payable on all assets above €1.3m, plus favourable tax treatment for expat bonuses and capital gains.
The reimposition of wealth tax is the particular sticking point. A French banker with assets of €3.2m (£2.7m) could find himself eligible for wealth tax of €16k a year, an additional €80k over a five year period.
This is apparently sufficient to be causing consternation in Kensington, where senior French bankers are wondering about relocating before Holland’s elected in order to avail themselves of the current tax break. If not, they will have a major financial incentive to stay forever, or until the wealth tax is lifted. And that would surely be a good thing for the City.