Thursday, August 27, 2009

Expatriation In Merry Ol'England

Elle Macpherson Can’t Counter London Gloom as Americans Flee

By Tommy Stubbington and Andrew MacAskill
Aug. 26 (Bloomberg) -- Andrew Wesbecher moved to London from New York in 2006 to sell software to banks and hedge funds. This month he joined the exodus of American expatriates fleeing high taxes and the city’s shrinking financial industry.
“I’m the last guy to leave that I know,” said Wesbecher, 29, who worked for Tibco Software Inc. and lived in Notting Hill, the London neighborhood that’s home to billionaire Richard Branson and model Elle Macpherson. “We are all packing up.”
The number of U.S. citizens in Britain fell 3.8 percent to 126,000 in the 12 months through September, according to the Office for National Statistics. The trend probably continued this year, with the Confederation of British Industry estimating the U.K. financial industry will lose about 45,000 jobs in the first nine months of 2009, or 4.3 percent of the total.
Americans are heading home as Britain plans a 50 percent tax rate for those who earn more than 150,000 pounds ($248,000) a year and employers cut benefits for workers living abroad, reducing the allure of London. That comes a year after the U.K. said foreigners who have lived in the country for more than seven years must pay 30,000 pounds annually or give up the special status that shields overseas income from British taxes.
“Expats feel the tone has changed; it’s less welcoming,” said Mark Tilden, a consultant at CRA International Inc. who wrote a report for the City of London last year on the impact of taxation on corporate relocation decisions. “London’s ability to attract talent has gone down.”
‘We Are Fed Up’
The worst recession since World War II has left U.K. residents facing tax increases and spending cuts after Britain’s monthly budget deficit ballooned to a record 8 billion pounds in July. In addition, some employers are reducing benefits such as tax equalization, school tuition for children and cost-of-living allowances that supplement expatriate salaries.
Schools catering to international students report a drop in enrollment for the first time in seven years, and relocation companies say they are moving fewer people to Britain.
Janet Sherbow lives in London’s Chelsea district with her husband, Nikos Mourkogiannis, the former chief executive officer at the European arm of Cambridge, Massachusetts-based management consulting firm Monitor Co. The family plans to move to Greece after their daughter finishes high school next year.
“We are fed up with all the stealth taxes, the non-doms levy, and now the 50 percent tax rate,” Sherbow said. “Six American families have moved from my street in the last six months.”
Quality of Life
Forty-one percent of employers plan to review expatriate programs, according to a study by KPMG International. KPMG surveyed about 100 companies, 60 percent based in the U.S., and found that 22 percent had recalled overseas workers or turned them into local employees in the past 12 months.
Huddling under an umbrella during a July downpour, Wesbecher said he was no longer willing to put up with the frustrations of life in London after his commissions dropped and Palo Alto, California-based Tibco eliminated his expatriate benefits, cutting his take-home pay by 75 percent.
“This is what passes for summer in London,” he said, sipping an iced latte in the city’s main financial district. “The quality of life is a lot harder. Things are more expensive and the houses are smaller. Even public transport is cramped. A New York subway car is like real estate in comparison.”
The economic picture is also gloomier in Britain. The U.K. economy shrank 5.6 percent in the year through June, compared with 3.9 percent in the U.S. London’s financial industry lost 29,371 jobs, or 8.3 percent of the total, last year, according to the Centre for Economic and Business Research. Financial companies in New York cut 20,200 jobs, or 4.3 percent, data from the state Labor Department show.
‘Highly Competitive’
“The U.K. remains a highly competitive center for finance and investment and has excellent infrastructure for businesses,” the Treasury said in an e-mailed response to questions.
The American School in England, based outside London in Thorpe, Surrey, expects enrollment to fall 4 percent this year, the first drop since the Sept. 11 terror attacks, said Karen House, interim admissions director. The school charges about 29,000 pounds for boarders, and 70 percent of its 750 students are American.
ACS International Schools, which has 2,500 students on three campuses in the London area, will see a “small decline” in student numbers, said marketing manager Mark London. Fees for boarding students run about 33,000 pounds a year.
“Overall, this year we won’t be at capacity,” London said. “The majority of our families are expat families who are working in London or the U.K. on an assignment. Undoubtedly, major companies will be cutting back on those.”
‘Anything to Make Money’
Transfers to Britain from the U.S. fell 25 percent in the past year, according to Primacy Relocation LLC, a Memphis, Tennessee-based company that moves more than 50,000 people a year for corporate clients around the world. Repatriations were almost unchanged, suggesting the net American population is declining, said CEO Matt Spinolo.
There are signs of recovery, said Sharon Gulden, co-founder of Basingstoke, England-based Phoenix ARC Corporate Relocation. U.S. to U.K. traffic has increased to about 10 percent of its peak after dropping to “almost zero” 18 months ago, she said.
“It’s just starting,” Gulden said. “Green shoots of recovery, as they say.”
Wesbecher isn’t convinced the boom times will return.
“The ethos of the ambitious, high-earning American is ‘I will do anything to make money, even if it means moving my family,’” he said. “When the performance bonuses go away, the value of being in this country goes away.”

No comments: