Last week I called Hollande a “socialist idiot.” I did not know he had gone this far. It’s sort of the equivalent of Obama referring to his grandmother as a “typical white person.” No, it’s worse.
The annual mass exodus from the French capital sees the city’s inhabitants while away the August heat in the countryside.
But this week many of the biggest earners across the Channel have been mulling a départ which could be rather more permanent.
The toppling of Nicolas Sarkozy by François Hollande, the first socialist president to lead the country in 17 years, has sent ripples of fear through the wealthier arrondissements of Paris.
Their new president may block the eurozone austerity advocated by Germany’s Angela Merkel, but he is not opposed to his richer citizens feeling the squeeze.
Mr Hollande plans to implement a 75pc tax rate on earnings over €1m (£800m), on top of a 45pc rate for people making €150,000 or more. He is also expected to raise “wealth taxes” on property assets and end his predecessor’s tax incentives to lure bankers back home.
In addition, France’s high earners feel increasingly unwelcome in a country now led by a man who has admitted: “I don’t like the rich.” So where are they looking? London. It comes as no surprise—while Hollande prepares to raise taxes, over here David Cameron is cutting the 50pc tax rate for income above £150,000 to 45pc. “I have already worked in London and lived in South Kensington,” said one French banker who expects to return to the UK over the next three months. “The question is how much of Hollande’s rhetoric will materialise into policy.”
Few are keen to find out. Private equity firms and American banks in Paris have already begun making arrangements for their top executives to set up office in London, amid widespread concern about changes to the French income tax regime.
High-earners are changing their behaviour so they appear safely based in London before any painful crackdown. “Partners are coming over to establish a track record of behaviour that is outside tax, from an early stage, so that they can respond quickly to what is coming down the track,” said a senior source at one private equity firm.
“The exodus will mean a lot of France’s biggest earners relocate to London,” said a hedge fund manager. “It won’t be possible for everyone, but those who can make the switch will definitely be working on a contingency plan.”
One U.S. bank was organising tax advice for its Paris-based staff, said a source: “Naturally people are concerned, and we are just trying to make sure we address those concerns.”
The source insisted that it would not mean a wholesale exit from France, but rather that employees would be offered options. However, some staff have already formally asked for transfers, with most plumping for London.
London, of course, already has a French population in the hundreds of thousands, with Chelsea and South Kensington—dubbed the unofficial 21st arrondissement of Paris—packed with French bankers and their families. All of France’s major banks have subsidiaries in the UK.
But now the floodgates are creaking open. Estate agents report a spike in interest over the past few weeks as Hollande’s victory seemed certain, with people specifically citing the election as a reason to start looking.
Winkworth in South Kensington said it has seen a 50pc increase in inquiries from French buyers since the election last weekend and has even hired a fluent French speaker to help deal with the interest.
Rival agents tell the same story. Noel de Keyzer, at the Sloane Street branch of Savills, said: “Even before the French election, I spoke to several affluent French nationals about their fears of what Hollande proposed, and they all said that we will see an increase in French nationals buying during the next quarter in prime central London.”
James Pace, head of Knight Frank’s Chelsea and South Kensington offices, said one French financier told him Hollande’s arrival would mark “the third biggest exodus from France—the first being the Revolution and the second when Mitterrand [the last socialist president] got into power.” Having so far rented, this client is now looking to put down more permanent roots in London by buying.
But not all the concern is about a punishing tax regime, according to those French already here in London. Stéphane Rambosson, managing partner at consultants Veni Partners, argues Hollande’s arrival bodes ill for business.
“You have to have a very specific reason to have a business in France instead of the UK, for example access to skilled workers or the need to be very close to clients,” he said. “Sarkozy had implemented reduction in social changes to increase competitiveness in France. Such changes will disappear and labour costs, which are huge, are likely to rise.
“If you pay an employee say £100,000 in London the equivalent in France is already over £170,000, simply due to costs. Administration and the regulatory framework is also very complicated.”
While he does not anticipate big business pulling out of France, he confirmed top earners are definitely considering relocating—especially those in finance who can work from a trading floor in any country. “Such moves will be carried out very discreetly,” he said. “What Hollande described as its enemies, financiers, will find themselves exiled in the UK and taking, for different reasons, the steps of the Huguenots who helped create the Bank of England.”
The cry of “Bienvenue à Londres” from Boris Johnson, Mayor of London, made earlier this year as France embraced the financial transaction tax—hated by the City—has been heard loud and clear.
While Switzerland, Belgium and the UK have traditionally been the first countries considered by those leaving France, London is increasingly attractive compared to its rivals, according to David Blanc, a partner at wealth managers Vestra Wealth.
“In the UK you have the largest community of French people outside France and this is getting bigger every year as it is becoming easier to settle in the UK for a French family,” he said.
“London is becoming the number one choice for relocating French people for many reasons,” said Blanc. “A very welcoming business and tax environment, a vibrant international city, great entertainment, very good French and international schools, and other services targeted at the French community like French doctors, French food.”
There is another factor. With the new president in vocal opposition to Germany’s efforts to impose harsh austerity measures, the prospect of more turmoil in the eurozone climbs.