Wealthy French spooked by election explore possible moves abroad

PARIS – France’s hung Parliament and deeply divisive election campaign have left many of the country’s richest residents increasingly worried about political and fiscal instability to the point where some may decide to leave, according to wealth managers.

Their warning comes as the main political parties jockey to gain control of the National Assembly – which is now roughly split into three blocks – and form a new government.

The possibility that some of the proposals for higher taxes put forward during the campaign to pay for costly spending programmes could soon become law has left some individuals weighing options about how to protect themselves.  

“People who can leave will leave if extreme policies are adopted,” said Mr Emmanuel Angelier, president and co-founder of wealth management firm La Financiere d’Orion.

“France would no longer be attractive to foreigners, and the rich would go.”

Mr Angelier is among wealth advisers who have fielded calls from panicked clients during the four weeks of campaigning and two rounds of voting that ended on July 7, with some sending capital abroad and beginning investigations into possible expatriation.

While the ambiguous election outcome provided a measure of relief because the extreme parties on the right and the left did not gain outright power, the situation was a wake-up call for potential volatility ahead of the 2027 presidential election, they said.

“We have new clients like top executives who are asking what they can do to shield themselves,” said Ms Xenia Legendre, a Paris-based managing partner at law firm Hogan Lovells.

“Following Brexit, there was an influx of bankers into France, but these high-earners will leave because they won’t want to pay more taxes.”

French parliamentary gridlock and the election of a Labour government in Britain have raised the possibility of higher taxes for both countries’ top earners.

New British Prime Minister Keir Starmer has pledged to eliminate certain inheritance tax breaks, while in France, Ms Marine Le Pen’s far-right National Rally party and the leftist alliance New Popular Front took direct aim at billionaires during the campaign. 

Ms Le Pen’s party is not in a position to form a government, so the question has become to what extent the left alliance – which unexpectedly won the most seats – will hold sway in a future administration.

Lawmakers can not only undo measures put in place by President Emmanuel Macron that are considered more friendly to the rich but also push through policies like a broader wealth tax. 

The New Popular Front – which includes the Socialist Party, the Greens and France Unbowed – promised to pass a law to “abolish the privileges of billionaires”.

In addition to reinstating a wider wealth tax, their platform called for scrapping France’s flat tax and reviving an exit levy, raising income taxes to a top marginal rate of 90 per cent and overhauling succession rules to include a cap on inheritance.

“Some people are considering whether they should stay in France,” Ms Legendre said. “There is a lot of international mobility now, people move around, so the question becomes whether moving can help them optimise their fiscal situation.”

The alternatives include places like Italy, Dubai, Singapore and the US, but relocation takes time and the choices are sometimes difficult, depending on the individual’s family and professional circumstances. 

In France, Mr Macron spent the past seven years courting the country’s well-heeled residents in a bid to keep them investing and creating jobs.

In 2018, a year after coming to office, his government narrowed an existing wealth tax so that it applied only to property, created a flat tax of 30 per cent on savings income and has maintained the controversial Dutreil pact that can dramatically reduce inheritance taxes on family-owned businesses.

The moves, which tied in with Mr Macron’s other pro-business reforms, helped to boost investment, according to the government, and improve France’s standing as an attractive place for companies. They also appeared to stem the net outflow of wealth to other countries.

In a letter published in France’s regional press on July 10, Mr Macron called on parties that represent “republican forces” to build a broad majority from the political centre to shut out both the far right and far left.

World’s richest

France is home to some of the world’s richest individuals, including LVMH luxury goods tycoon Bernard Arnault and L’Oreal cosmetics heiress Francoise Bettencourt Meyers, according to the Bloomberg Billionaires Index.

The number of dollar millionaires in the country is expected to increase by 16 per cent over the next five years, according to the UBS Global Wealth Report 2024 published July 10.

Yet the cohort is now spooked.

As talks between political leaders intensify about forming a government, decisions on investment, hiring and real estate deals have been deferred and fund-raising in venture capital interrupted, Mr Patrick Martin, head of France’s main business lobby Medef, said in an interview this week in Les Echos newspaper.

Ms Legendre said some financing operations have been put on hold.

She and other advisers to the wealthy said fears are also increasing about the potential for politics-related social unrest in France in light of the at times violent street protests that have broken out in recent years including the Yellow Vest movement, the demonstrations and strikes against pension reform, and riots related to a police shooting in 2023. 

Mr Julien Magitteri, a private wealth adviser and founding partner of Barnes Family Office by Come, said some of his clients did not even wait for the second round of voting in the election before moving capital to more stable places such as Switzerland and Luxembourg.

“Foreign investors are taking a lot more time these days to complete operations,” he said. “We have had a climate of trust and stability. In the space of a few days, this was wiped out, with little visibility of what’s to come.” BLOOMBERG