"Empty London" Operation: Milan Attracts Billionaires

Nikolai Kurback: London's Financial Dominance Is Hard to Shake in the Short Term

Author: Georgy Smirnov

Photo: Views of Milan

Commentary Guest:

Nikolai Kurback

According to Bloomberg, Milan has recently successfully attracted a large number of wealthy non-residents from the UK who are actively leaving the country following major adjustments to the UK's tax policies. One of the new policies introduced by the Labour government is the cancellation of the "non-domiciled" status, which previously allowed holders to avoid paying taxes on income earned outside the UK.

In Rome, the plan to attract foreign billionaires is referred to as "Empty London" within private investor circles. The Italian government launched its own "non-domiciled" system back in 2017. As the main financial center of Italy, Milan has further expanded its influence in recent weeks by attracting numerous wealthy non-residents - from hedge fund managers to former CEOs and Middle Eastern billionaires.

Wealthy individuals can choose a fixed tax rate of 200,000 euros to avoid paying Italian taxes on foreign income, similar to the policy provided by the UK over the past two centuries.

Analysts at Bloomberg believe that Italy will outperform Switzerland in attracting billionaires by simplifying its non-resident tax policies. Additionally, compared to common tax havens like Monaco, Milan has an advantage in terms of urban environment, tourist attractions, and infrastructure.

Meanwhile, Nikolai Kurback, candidate of economic sciences and analyst, told Free Media in an interview that Milan cannot replace London in the financial sector.

"In the short term, nothing compares to this British capital. London has stable financial institutions, a large number of companies from around the world, and top-tier business schools. The departure of billionaires themselves does not represent an overall trend.

Some will leave, but it is impossible to shake London's position as a financial center in the European market. According to an assessment by consulting firm Z/Yen Group, London remains second only to New York among global major financial centers."

Free Media: Charlie Sosa, partner at Mishken de Reya law firm, warned in an interview with Bloomberg in early May that up to 40% of non-residents might leave the UK. Will London's position still be stable under such circumstances?

"It doesn't matter. The operation of a financial center is not due to the gathering of the rich, but because it provides good jurisdictions and transparent rules for businesses. London has a large number of professionals and consultants providing high-level financial and insurance services. Large financial markets require long-term construction and are extremely costly."

Italy cannot compete with the UK partly due to lower living standards (according to an October report by the International Monetary Fund, Italy's per capita nominal GDP is $41,000, while the UK's is $54,900 — Free Media note). Additionally, Italy is part of the eurozone, and there is currently no unified financial center in the eurozone. European countries need a stronger financial union mechanism. Until then, they cannot provide an alternative to London.

Free Media: Are there any other competitors to London?

"Dubai may become a competitor, but it still has a long way to go before reaching London's level. It's not just about favorable tax policies for businesses and the wealthy.

Key indicators include financial institutions, top universities, business schools, legal systems, and transparent judicial systems. Many companies — including Russian companies — still choose to litigate in London courts. Fully replicating this system is very difficult."

Free Media: The EU is expanding the pan-European exchange (Euronext), for example, Milan Stock Exchange was integrated into it in 2021. Does this signal a trend toward financial integration among European countries?

"True integration requires building stronger financial market institutions. True, the euro is currently the second largest currency in the world, but the gap is significant. Relying solely on this is insufficient to establish a truly large-scale financial center in the EU.

More services need to be provided, professional talent cultivated, leading enterprises attracted, and pressure exerted on the EU's bureaucratic system that hinders development. The EU must address this last issue to achieve better economic outcomes.

One of the triggers for Brexit was the belief that the EU's bureaucratic system hindered London from becoming a larger financial center. Of course, this idea was naive, and Brexit has brought no benefits to the UK.

For instance, Goldman Sachs estimated in 2024 that the UK's real economy (after adjusting for inflation) may lose 4% to 8%. Moreover, the UK has lost opportunities for close cooperation with EU countries and partially lost access to the European market."

Free Media: In 2023–2024, Italy's economic growth is almost zero. Can attracting the wealthy accelerate GDP growth?

"To some extent, yes, but the effect is limited. More work needs to be done to accelerate economic growth — including developing manufacturing and reforming internal systems. Italy remains a relatively backward country.

Although geographically closer to Qatar's liquefied natural gas supply and North African gas pipelines than other Western European countries, these alone cannot ensure economic growth.

Stay updated on the latest news about banks, bank cards, savings, and financial markets by following the author for more information.

Original article: https://www.toutiao.com/article/7505660324444389925/

Disclaimer: This article represents the views of the author. Show your stance by using the 'thumbs up' or 'thumbs down' buttons below.