In the looming uncertainty of Brexit shadowed by Britons possibly losing passport power, concerns might arise to what extent citizenship by investment schemes could be put off by the United Kingdom leaving the European Union. Henley & Partners Group Public Relations Director Paddy Blewer discusses the current situation with Business Malta, trying to give a prognosis on how the vertical could shape up post-Brexit.
As voicing uncertainty around Brexit is almost becoming a weary commonplace, nearing UK Prime Minister Boris Johnson’s 31 October deadline for leaving the bloc at any cost — at least for the time being —, Brits are becoming increasingly concerned about the potential decline in their passport power, rightfully so. As an outcast to the European Union, global mobility and settlement freedom of British citizens can suffer a severe blow.
With strong ties to the United Kingdom, Malta — the island nation that has generated considerable attention for investors interested in CBI schemes — lies in anticipation to see how Brexit could affect the Mediterranean nation’s attraction power for CBI investors.
“Whatever happens with Brexit, the United Kingdom looks set to remain a key financial, commercial, and lifestyle hub for the world’s HNWIs [high-net-worth individual], at least for the foreseeable future. If UK access is compromised for Maltese citizens post-Brexit, this would undoubtedly be a shame — but it would not necessarily be a deal-breaker,” says Paddy Blewer, Group Public Relations Director, Henley & Partners. Henley & Partners focuses on aiding investors with residence and citizenship planning, working in 30 offices worldwide.
“To our mind, any market disruption such as Brexit leads to obstacles and opportunities. The clients we deal with are largely entrepreneurs and innovators, who are very much used to spotting the opportunities that others may not. How this influences their investment decision, however, will vary on a case by case basis,” Mr Blewer adds.
Malta sets CBI bar high
Malta is widely considered to have set the benchmark for citizenship-by-investment in Europe. Since the launch of its Individual Investor Program (IIP) in 2014, the island nation has generated around €200m annually, amounting to over €1b in total that has gone into the country’s National Development and Social Fund, according to figures cited by Henley & Partners.
Five years after the launch of the IIP, Malta has one of the highest GDP growth rates — and one of the lowest unemployment rates — of any European Union member state, Henley & Partners adds. Malta registered a €251m budget surplus — the nation’s third consecutive surplus — in 2018, some 76% of which can be seen to derive from the IIP program. Anticipation says that the Maltese government could post its fourth fiscal surplus in 2019.
Henley & Partners says that in addition to reducing the overall debt level by 28%, the surpluses enable large-scale infrastructure projects in the health, tourism, and real estate sectors. Economic growth in 2019 is expected to remain robust, after a slight slowing of 6.2% GDP growth in 2018, making Malta one of the most dynamic countries in the European Union, according to many.
On that note, however, Brexit should not shake the markets considerably. “From the perspective of investment migration, we do not foresee any iteration of Brexit having a significant impact on these figures. Losing visa-free access to the United Kingdom may put some non-European investors off, but essentially all residence- or citizenship-by-investment programmes will be affected equally by this, and when all is said and done, Malta’s Individual Investor Program still remains one of the best offerings available anywhere in the world,” Mr Blewer tells BM.
“When all is said and done, Malta’s Individual Investor Programme still remains one of the best offerings available anywhere in the world.”
In terms of citizenship by investment, Malta has been widely recognised for its scheme. Out of a total of 13 countries investigated, Malta has finished eighth on the recently-published CBI [Citizenship by Investment] Index, as a runner up to Cyprus on the seventh place; the two being the most attractive European countries of all. This makes Malta the second most attractive country for investors seeking citizenship in the region, according to a report recently published by the Financial Times in association with CS Global Partners.
Additionally, on the Henley Passport Index, the Maltese passport has been steadily stepping up, ranking ninth and eighth earlier this year, and currently ranking as the seventh strongest document of all passports around the world. The Henley Passport Index is based on data from the International Air Transport Association (IATA), which maintains the world’s largest and most accurate database of travel information, and is enhanced by ongoing research by the Henley & Partners Research Department.
Britons looking abroad
It appears that British HNWIs are scanning possibilities all around the world fuelled by the prospect of being cut off from the continent. “While it is true to say there are currently more enquiries coming from British passport holders than there were previously, it remains unclear how much of the interest will convert into actual citizenships for Malta or anywhere else. It is important to note that interested Brits do not only have Malta on their radars. Other European countries offering residence and/or citizenship are also courting interest from Brexit-threatened Brits. For instance, Cyprus, Greece, and Portugal are all potential recipients of British investment,” Mr Blewer says.
While pundits ferociously debate whether Mr Johnson is bluffing with a no-deal Brexit — as the scenario could jolt the United Kingdom into long years of recession according to many — or is genuinely ready to make the bold move of abruptly severing ties with the bloc as the clock turns to 1 November; shutting the door from the outside brings too many factors into the game to make certain forecasts.
“There are simply too many variables at this stage to know what a no-deal scenario would look like, including whether or not Britain is able to strike up any attractive post-Brexit trade deals with the United States or any other trade partner. Malta and a number of other European residence- and citizenship-by-investment programmes will remain extremely attractive propositions, regardless of what happens with Brexit,” Mr Blewer says.
Nevertheless, opportunities are plenty in Europe and around the world CBI-wise, therefore, the impact of Brexit — whatever turn it might take — should be insignificant globally on the investment migration space in general.
“Increasing demand, combined with the continual introduction of new programmes, means that the industry will soon reach US$20b annually. As of the beginning of 2019, there have been investment migration programmes in nearly 100 countries, including more than 70% of the European Union member states, with the majority having been up since 2000. It is estimated that investment migration has brought approximately €25b in FDI [foreign direct investment] into EU countries since 2010, and even the industry’s critics acknowledge that residence- and citizenship-by-investment schemes have been fundamental to these countries’ economic recovery following both the global financial crisis and the European sovereign debt crisis,” Mr Blewer breaks it down.
Either way, “it will certainly be interesting to see if and how Brexit affects Britain’s own residence-by-investment programme though, and whether the British government lowers any of their price points in an attempt to encourage inbound investment,” Mr Blewer concludes.