BRITAIN’S rich claim to be forming contingency plans that would safeguard their wealth in the event of a Jeremy Corbyn-led Labour government.
Asset managers are among those understood to be preparing for a raft of reforms under a socialist cabinet, which could introduce tax hikes on wealth and higher earners, and cancel some bands of tax relief.
Some are reportedly preparing to move cash out of the UK and into Continental Europe in order to prevent themselves being affected by the changes.
Jason Hollands, managing director at Tilney Investment Management Services, said that while Brexit is undoubtedly sparking jitters around UK investments, Labour’s growth in the polls is playing its own part.
“The potential election of a hard-left government led by Jeremy Corbyn and John McDonnell is also a factor creating anxiety towards UK investments amongst many of our clients,” he said.
“Many of them are nervous about [Corbyn] and that’s something that comes up as we go around the country and do client seminars and through Q&A sessions.”
Some investors have already withdrawn from UK equity funds within the last 12 months.
Pension tax reliefs for the better-off are also likely to face eradication under Labour, and Hollands says Tilney has been encouraging clients to take advantage while they can.
“There has been feeling for some while that these generous tax reliefs are on borrowed time,” he said.
“All parties have clearly been eyeing this as an area of potential change, but if we ended up with a Corbyn government – and their instincts are much more in favour of wealth taxes than any governments we’ve seen in the UK for some time – you could quite easily understand why they might be the ones to pull the plug on higher tax relief for pensions contributions.”
Morgan Stanley’s European equity team last year warned investors of the “perceived risks of an incoming Labour administration”.
It said a Labour government could result in a “radical change” in UK policy, making domestic policy a “bigger risk than Brexit”.
But the UK is already facing an economic slowdown under the current Conservative Government, with concerns around Brexit having hammered the pound, and property prices in 2017 experienced their slowest annual growth in five years.
Consumers are also facing inflation at 3.1 per cent, which has squeezed spending and put pressure on businesses across the UK.
A Labour spokesman said: “After seven years of Tory austerity the prospects for economic growth, productivity and people’s living standards have all been revised down.
“The next Labour government will provide the major boost to investment business groups like the CBI and the FSB have been calling for, protect 95 per cent of people from any tax rises and ensure our public services work for people not profiteers. Labour will put an end to the rigged economy that benefits only the super-rich.”
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