Legal Briefing

If the price is right, the UK will welcome you with open arms: encouraging business and investment in the UK

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Human resources | 01 February 2014

The last two decades have witnessed migration on a scale not seen in the UK since the 1960s. In recent years the media coverage of immigration policy has grown increasingly negative, with the common perception among the general public that past and present UK governments have allowed immigration to spiral completely out of control. In May 2010 the newly elected coalition government made it clear that they would be concentrating their efforts on reducing net migration from hundreds of thousands to tens of thousands. 


This drive to tighten the UK borders and lower immigrant numbers has seen a raft of changes introduced, with the primary aim of making long-term immigration a far more arduous process for migrants to undertake. Many immigration routes have been impacted by changes in recent years. The current government does, however, remain committed to actually increasing the numbers of one particular group: the ‘high-value’ migrant and the business elite. While it remains to be seen whether there are likely to be changes to the Tier 1 (Investor) route, one thing is for sure: if the price is right, the UK will continue to welcome you with open arms.

China, India and Russia not only account for over one-third of the world’s entire population, they are also home to a rapidly growing segment of ‘nouveau riche’ individuals who have been capitalising on their respective nation’s solid economic growth in recent years. It is no coincidence that these three countries in particular have been of primary focus in the latest raft of pilot schemes aimed at improving the UK entry clearance process. A wide range of services are now available to those wishing to apply to travel to the UK for business. The terminology used by UK Visas and Immigration (UKVI) will vary from ‘primetime’ to ‘premium’, from ‘fast-track’ to ‘VIP’, but the message here is indisputable: for an extra charge, allow these individuals to apply for and obtain a visa as efficiently and smoothly as possible, or they may take their business elsewhere.

Look no further than the recent change of attitude towards Chinese nationals. In September 2013 the chancellor, George Osborne, announced that the UK would be relaxing visa rules for Chinese visitors. A less complicated application form will be made available for ordinary tourists and a fast-track service is available for business visitors. Recent figures suggest that some 1.2 million Chinese tourists visited European countries using the Schengen visa in 2012, compared with fewer than 200,000 flying to the UK.

David Cameron, in his recent visit to China in December on a trade mission with over 100 UK business leaders, promised to create a ‘partnership for growth and reform’. The prime minister, who met Chinese premier Li Keqiang on 2 December, also pledged to put his ‘full political weight’ behind a proposed EU-China trade agreement. He also urged business people at a lunch in Shanghai’s business centre to invest in the UK, claiming that the UK and China had ‘deep complementary economies’. ‘If you are investing in Britain, invest more’, he said. ‘If you are thinking of investing in Britain, come and find us. You will get a warm welcome.’

Whether you are a business visitor, or a high-net-worth individual (HNWI) wishing to spend a small fortune on Bond Street, there is a recurring theme evident: additional fees and charges pose no obstacle. And the UK government know this too well. For an eye-watering surcharge of £600, the new ‘super priority’ visa service being tested in India and China means that a visa can even be obtained on the same day. If deemed a success, this scheme will undoubtedly be rolled out elsewhere. Most notably in China and Russia we have also seen the introduction of the ‘passport pass back’ service. For an extra fee, a business traveller can apply for a UK visa and retain their passport while their application is being considered. Given the high volume of international travel many of these individuals undertake, this facility is particularly appealing.

Additional services are by no means restricted to these countries. Across the US, the Middle East and Asia, at an added cost, visa applications will be considered in days rather than weeks. In fact, by April 2014, the number of countries benefitting from a priority visa service will rise from 67 to 90. The obvious concern here is that if every visa applicant is applying through the fast-track service, it offers no real advantage. Visa issuing posts may either have to increase staff or soon be forced to revise and extend their advertised processing times and the scheme may then lose some of its original appeal.

Tier 1 of the UK’s points-based system (PBS) caters for high-value migrants, and we need look no further than this route for evidence of who the current government is now focused on attracting to the UK. Recent years have seen the closure of the Tier 1 (General) and Tier 1 (Post-study work) routes – both of which effectively allowed individuals to pick and choose where they wished to work, without the need for a sponsor or the need to have access to or possess a significant amount of funds. However, the shutting down of these routes has coincided with a favouring of two different types of migrant – both of whom appear to be of much more value and importance to the UK: investors and entrepreneurs.

The Tier 1 (Investor) category provides a route into the UK for those who are able to make substantial financial investment in the country. There is no need for an investor to have an offer of employment here, and the application will be based on an ability to invest a minimum of £1m in the UK. All of the £1m funds must be freely transferable to the UK and the investor will need to show that the money is being invested in ways that help to stimulate growth in the UK as directly as possible. The figure of £1m is relatively small in the eyes of many of the aforementioned super rich, so this route is proving a popular way of gaining entry to the UK.

The government is acutely aware of the positive impact on the UK economy that foreign investment can have. The desire to attract foreign investors was further boosted in recent years with the introduction of an accelerated route to permanent residency through substantial investment. Those investing £10m or more may apply for settlement after two years; and those investing £5m or more may apply after three years. Given that regular applicants for settlement require a minimum of five years continuous residency here in the UK, this is clearly an approach which rewards those who flex their financial muscle in a way which benefits our country.

The government has recently asked the Migration Advisory Committee (MAC) to advise on whether the current investment limits required under the Tier 1 (Investor) route are appropriate to deliver significant economic benefits for the UK.

The government has asked that the MAC examine the following issues:

‘At present, the minimum level of investment for the Investor category is £1m but accelerated settlement status can be achieved by investing either £5m or £10m. Migrants may use money loaned to them by UK banks when making their investment. The MAC is asked to consider whether the investment thresholds are appropriate to deliver significant economic benefits for the UK, in particular the minimum £1m threshold?’

The MAC has been asked to report to the government by 7 February 2014; however there are rumours that the MAC considers the route being too generous, with a possibility that they may recommend restrictions or a narrowing of the route in some shape or form. It will certainly be interesting to see how this tallies with the government’s approach to encouraging foreign investment in the UK.

Also falling within the high-value categories is the Tier 1 (Entrepreneur) route. This is designed for non-EEA nationals who wish to set up a new business or join an existing business in the UK. This route requires a fresh injection of capital into new or existing UK business and the requirements are that you have access to £200,000, or access to not less than £50,000 from:

  • One or more registered venture capital firms regulated by the Financial Conduct Authority.
  • One or more UK entrepreneurial seed funding competitions which are listed as endorsed on the UK Trade and Investment website.
  • One or more UK government departments, and made available by the departments for the specific purpose of establishing or expanding in business in the UK.

The funds must be held in one or more regulated financial institutions, be disposable in the UK. In addition, the application must meet the ‘genuine entrepreneur test.’

This test was introduced by the Home Office in January 2013, to tackle apparent abuse of the system, whereby the Home Office will now consider whether there is a ‘genuine intention’ to establish a business in the UK. Applicants are now advised to provide additional information, for example business plans and evidence of market research, to confirm the genuineness of their application; and to demonstrate that they continue to have access to the funds prior to making investments in a UK business. The Home Office have and are conducting interviews of migrants wishing to enter/remain in the UK under this route and figures show that there have been a large percentage of refusals since this test came in.

What was therefore an objective, points-based application has now become an arguably very subjective and arbitrary one, which again is at odds with the general and much publicised perception of the UK being much open to business and investment.

An article on the UK’s desire to encourage trade and investment would not be complete without mentioning the very new and interesting scheme introduced by the government of Malta, whereby citizenship is granted to HNWIs in return for a significant contribution to a national development fund to be invested in social and national projects.

Applicants must qualify under a strict due diligence regime and contribute as follows:

  • €650,000 for the main applicant;
  • €25,000 for a spouse or partner in an established relationship;
  • €25,000 for each minor child;
  • €50,000 for each adult dependent child, aged 18 to 25 years or dependent parents above 55 years.

There will also be fees payable for the due diligence process:

  • €7,500 for main applicant;
  • €5,000 for spouses, adult children and parents;
  • €3,000 for children between 13 and 18 years of age.

The pilot scheme is now operational and reports suggest that there may be initially about 60 applicants raising around €30m in revenues, with up to 300 applicants in a full year.

An EU Commission spokesperson has been quoted as declaring that EU member states had full sovereignty on how, and to whom, they granted citizenship, adding that:

‘The European Court of Justice has in several cases, confirmed the principle of international law, that it is for each member state to lay down their own conditions for the acquisition of nationality’.

For those HNWIs who are seeking entry into Europe, this may be a potential in-road into all that Europe has to offer.

UKVI’s adopted policy of charging extra for an increased service is by no means restricted to just individuals. The Tier 2 route has also seen significant changes in the past year aimed at improving service for businesses and corporations. The long-awaited Tier 2 premium sponsor service was introduced in 2012. This service is available to sponsors under the PBS that are willing to pay extra to more easily accommodate their often vast numbers of skilled migrant workers. A yearly fee of £25,000 now guarantees access to appointments at public enquiry offices and priority visa services overseas. Throw in direct access to a designated licence manager within UKVI who will deal with all your queries and prioritise treatment on all changes to your sponsor licence. The service is particularly popular with financial institutions and IT companies across the UK. Given their often huge turnover, the sum of £25,000 for such luxuries is already proving to be money well spent. It will be interesting to see if the annual subscription fees increase significantly in the coming years as the government look to capitalise on the popularity of the scheme.

This increase in customer focus was taken up another notch on 6 November 2013 when the home secretary Theresa May announced a new invitation-only account management service, known as the ‘GREAT Club’:

‘We will continue to listen and respond to the needs of high-value and high-priority businesses so that we can provide them with a service that supports economic growth, while at the same time maintains the security of our borders.’

This pilot scheme promises to offer a personalised, bespoke service for the very highest value customers who want to visit, invest or work in the UK.

The GREAT Club has been described as a ‘prestigious club being designed for business elite who are regarded as highly desirable to the UK’. Perks are set to include next-day services for visa applications made overseas, access to a 24/7 emergency contact unit, fast-tracking to the border and expedited applications in-country. While the Home Office have confirmed that this will initially be free of charge, we already know that an increase in consumer attention ultimately goes hand-in-hand with added costs to the applicant. Should the GREAT Club be a roaring success, future users will potentially have a price to pay.

In any event, early reports indicate that only around 100 individuals will be able to benefit from GREAT Club membership. If the government is serious about this scheme attracting ultra high-net-worth individuals, then surely this figure must be expanded. Given the number of potential investors in China and Russia alone – and estimates suggest we have only seen the tip of the iceberg – this figure is arguably not high enough, but, at the same time, permitting a significant increase in numbers may reduce its appeal.

The GREAT Club is supposedly targeting the wealthiest tycoons with the strongest links to Britain. Presumably though not all overseas investors actually have strong links to Britain – they are investing in Britain in order to establish such associations and build these relationships upon arrival. Let us not also forget that many of these ‘high value’ business elite will have their own staff and advisors to handle their immigration concerns. They will be attracted to the UK by the culture, the schools, the history and the entertainment on offer here. It is difficult to imagine they will feel a wish to invest money purely because they will have a designated immigration case manager to pander to their needs for a week or two.

CONCLUSION

In recent years the government has made it clear who they are most eager to attract to the UK. Following the global recession triggered in 2008, it is only natural that they should wish to kick-start the UK economy and boost our trade and investment. We have seen clear evidence of this in the explosion of additional services available throughout the entry clearance process. There is a clear shift in thinking within the Home Office. In general, waiting times are getting shorter, and most applicants are now travelling shorter distances to submit biometrics. Of course, nobody is obligated to avail of these extra services and incur further cost. However, we are already seeing signs that they may be biting off more than they can chew. Where will it end? Extra-Special-Super-Premium-Priority Service? It would be a shame for the visa process to ultimately resemble a budget-airline type situation, with a seemingly endless number of added costs and optional extras being plugged from start to finish.

With the MAC currently consulting on the Tier 1 (Investor) route, it remains to be seen whether this will continue to attract HNWIs to the UK, and there is a concern that restricting the route further will only detract from UK trade and investment. Similarly, while the genuine entrepreneur test is in theory a sensible move, if in practice there appears to be no objective, uniform approach to decision making, this also sits at odds with the UK’s drive to promote business here. Perhaps those HNWIs seeking to enter the UK may be better placed to apply through gaining entry into Malta (and thereby to the European Union)?

As for the GREAT Club – only time will tell. It is essential that the Home Office ensures that the selectivity and elitism that this whole scheme promotes does not in fact deter potential investors rather than provide a reason for investing here in the first place.