Hollande’s lost business is London’s capital gain - 13.07.2012

With French nationals and expatriates alike set to celebrate Bastille Day this weekend, now is the time to ask whether France’s new tax system will drive businesses across the channel.

On July 2, the French national auditor announced it would have to save between 6 billion and 10 billion euros in order to meet the target of reducing the deficit to 4.5% of economic output. So, while David Cameron has chosen to follow the path of austerity (a banned word in Hollande’s new government), the French premier has launched a rigorous and systematic overhaul of the tax system, which could lead to marginal rates as high as 90.5% on certain income of the wealthiest individuals and threatens to drive business centres overseas.

This week tax lawyer Jean-Philippe Delsol was the first to speak of the “considerable increase” in business leaders preparing to move their central offices abroad; up from two in the entirety of 2011, to 10 in the previous two months. He went on to single out entrepreneurs aged 35-40, who seem to be developing a penchant for channel hopping, raising the question of whether France’s loss could act as a catalyst to growth in the British office brokering industry. The coalition already recognises the potential for growth as a result of France’s tax hike, with David Cameron stating at he was prepared to “roll out the red carpet” for migrating French businesses.

Unlike any other European nation France already had a smaller wealth tax in place, however the biggest stumbling block to persuading businesses to stay is the one off surcharge on the assets of business leaders which is hoped will raise 2.3 billion euros. It’s therefore unsurprising that the number of overseas buyers entering the French business market dropped by 7% in 2011, despite the average business property purchase price seeing a steady increase of 12%.

Regardless of the much vaulted stereotype of mutual Anglo-French scepticism, our shores have long been a refuge for continental expatriates. The French consulate estimates the number of French nationals currently living in London is between 300,000 and 400,000 – largely focused in the profitable East End creative industries – giving it roughly the same population as Nice (344,000) and making it the sixth largest population of French people in the world. As this population looks set to grow, it will drive up the cost of corporate property in an already competitive market and Search Office Space is perfectly poised to aid them in their business endeavours.