Canary Wharf turns a corner

How many wealthy individuals have left the UK over the latest reforms to the non dom regime?

Lots of numbers have been bandied around, but January forecasts from the Office for Budget Responsibility (OBR) suggested that one-in-four non-doms with trusts would leave, falling to about one-in-ten for those without trusts. The reforms removed protections for offshore trusts, meaning beneficiaries are now taxed on incomes and gains as they arise. The OBR numbers help underpin forecasts that the policy shift will raise more than £4bn in 2026-27.

But through the spring and into the summer, there were regular reports of high-profile business people leaving for sunnier climes, particularly Dubai. 'Exodus' became the designated term for the departures, and the OBR gave credence to some of the more dramatic assumptions in July, when officials admitted in the annual Fiscal Risks and Sustainability Report that they might have misjudged the initial forecasts: "Higher earners’ behavioural responses to tax changes are more uncertain and potentially higher than assumed in costings," the report stated. "A growing reliance on this small and mobile group of taxpayers therefore represents a fiscal risk."

Broadly correct

Well, it turns out the official forecasts might be correct after all - Treasury officials have briefed the FT on HM Revenue & Customs payroll data showing that the initial OBR predictions are "broadly correct". The department is drawing on payroll data, which officials regard as reliable because most non-doms receive UK employment or pension income, according to the report.

This will take some pressure off chancellor Rachel Reeves, who was facing calls to reverse at least some of the plans due to the likelihood they raised little to no money, or even came at a cost to the taxpayer. Separate FT reporting suggested the Treasury was considering rowing back on the decision to charge inheritance tax on the global assets of non-doms.

As this morning's FT report notes, those who don't work in the UK may not be featured in the payroll data, and HMRC won't really know how many former non-doms have left until January 2027, when individuals submit tax returns, so any decision Reeves takes before then will be with incomplete information.

The whole saga, which began with the previous Conservative government, has damaged the UK's business-friendly reputation, and it would be worth ministers reconsidering some of the proposals on that basis alone. However, Reeves needs to find as much as £50bn in spending cuts or tax rises this Autumn, so a policy-reversal that costs money seems unlikely, particularly when it will be billed as an embarrassing U-turn rather than a pragmatic rethink.

The best in a decade

The Docklands & Stratford office market, which includes the Canary Wharf Estate, had a strong second quarter. There were nine leasing transactions totalling more than 370,000 sq ft, which is up 121% on the previous quarter and double the long-term quarterly average, according to Knight Frank's London Office Market Report. JP Morgan Chase's 150,000 sq ft deal at 1 Cabot Square was the largest transaction.

A turnaround in Canary Wharf in particular is now well underway. After reporting stable valuations in its 2024 results, Canary Wharf Group reported its first rise in valuations for three years during March and June, according to figures released to the FT this morning. "This year’s volumes, which are expected to be a record, eclipse the annual totals for 2022 and 2023 and are expected to produce the best leasing year in over a decade," the report said, citing people familiar with the situation.

The figures are the fruits of the group's long-term strategy to turn what was largely an office hub into a mixed-use district, perhaps best encapsulated by Wood Wharf, now in its third phase, which includes 3,600 homes, 2m sq ft of offices and 350,000 sq ft of retail space.

A re-run

Estate agents are feeling flat. The July RICS survey provided marginally negative readings of demand and agreed sales. Respondents expect conditions to remain subdued in the near-term, though they are a little more optimistic over the twelve-month time horizon.

“April’s stamp duty cliff edge was the first and now buyers and sellers are increasingly unsettled by a re-run of last year’s game of ‘guess the autumn tax rise,’” Tom Bill, head of UK residential research at Knight Frank told Bloomberg. “Supply still notably outstrips demand, which is also keeping a lid on prices.”

The outlook for mortgage rates is also growing more uncertain. Fixed rates looked set to keep easing before last week's split Bank of England decision. Hot wage figures posted earlier this week and resilient GDP figures out this morning will also give BoE officials pause for thought, raising the prospect that the plateau we've seen in recent months will continue.

In other news...

Saudi wealth fund suffers $8bn writedown on ‘giga-projects’ (Times), Singapore Home Sales Jump to Five-Month High Despite New Curbs (Bloomberg), New Zealand May Be Poised to Loosen Foreign Home-Buyer Ban (Bloomberg), and finally, Top Federal Reserve official signals uncertainty over September interest rate cut (FT).