Propiteer Capital - Investing in the Booming UK Hotel Sector

Propiteer Capital - Investing in the Booming UK Hotel Sector

Despite some challenges in recent years, the hospitality sector shows great strength and optimism for the new year. Find out more about industry forecasts and hotel investment opportunities in 2023.

With domestic, tourist, and business travel on the rise, the UK hotel sector has been booming its way out of the pandemic. An industry that once crumbled under the pressures of lockdowns has experienced an impressive recovery over the last few years. But this growth doesn’t come without its headwinds, which are primarily triggered by a looming recession and long-term Covid-19 effects, but the sector remains incredibly resilient as hotel bookings, tradings, and investments stay strong.

Success in 2022

Two years since the eruption of Covid-19, the hospitality industry was set for a successful year in 2022. While offices and retail spaces faced a decline, hotels began an upward trend as people were keen to book holidays again and the rise of staycations began. Even by the end of 2021, a year of lockdowns, the global travel industry grew by an astonishing 4% versus 2020. Propiteer blog

Over the course of the past year, hotel performance has met positive expectations and trading proved to be strong throughout. New hybrid working trends and flexible business travel contributed to a strong recovery, and London in particular fuelled significant growth for the UK with occupancy rates in the capital having achieved 70% between April and October 2022. The year ended in a positive position as regional hotels exceeded their 2019 RevPAR (revenue per available room) figure by 3.5%.

Hotel investments also had a strong start to 2022 and held positive momentum throughout the year. In the January to April 2022 period, UK hotel transaction volumes exceeded £1.5bn, surpassing the H1 2021 volumes by 40% and showing a robust sector recovery. Performance was relatively evenly split between London (approximately £750m) and UK regions (approximately £800m). More online

Challenges in 2023

The hospitality sector has certainly had its challenges over the last few years. The economic struggle in 2022 is one of the factors impacting hotel performance and creating an uncertain outlook for the year ahead with soaring inflation, energy, and rising interest rates all providing considerable headwinds. Rising costs threaten areas such as employment and operations, but the government is due to introduce a new tax relief scheme in 2023, which will keep VAT at its current rate beyond April to support hospitality businesses with the growing costs. BBC News link

Covid-19 has also caused some lingering damage. In the UK, the hospitality sector experienced a loss of £115bn as a result of forced business closures and travel bans for months at a time. Even once hotels, restaurants, and airports started to reopen, some consumer apprehension towards travel remained, which caused a delayed recovery. Nonetheless, hospitality has seen one of the strongest bounce-backs from Covid-19 pressures and defied most expectations.

Optimism for hotels in 2023

“…hospitality can and will be the leading contributor to the UK’s economic recovery” – Pernille Thomsen, UK Hospitality

Despite a looming recession and continued fallout caused by coronavirus, there are signs of hope that make this an exciting time to consider investing in the UK hotel sector.

Business travel is one area that has been bouncing back and contributing to the growth of hotels, and both domestic and international travel are confidently returning to pre-pandemic levels. On average, travel managers estimate that domestic <link: https://www.traveldailymedia.com/business-travel-strong-outlook-in-2023-gbta/> business travel volumes are back to 63% and international back to 50% of pre-pandemic levels, and 2023 growth is expected to surpass that of 2022. Optimism is incredibly strong and neither Covid-19 nor economic implications seem to be stopping industry growth in the new year as 75% of travel buyers claim they won’t be limiting business travel due to economic concerns and only 4% say they may limit business due to Covid-19.

Some of the key forecasts for the UK hotel sector include:

· London RevPAR growth to rise by nearly 6%

· London occupancy to increase by over 8%

· UK regions occupancy to increase by over 2%

Despite the regional RevPAR being anticipated to drop by 0.6% in 2023, Samantha Ward, UK Hotels Leader at PWC, says that “hotels across the UK can weather this latest disruption, emerging stronger and more resilient for the future.”

Hilton hotel growth exceeds expectations

One of the largest and fastest-growing hospitality brands, Hilton, is just one example of the remarkable strength, consumer demand, and investment opportunities within the hotel industry. During Covid-19 recovery in 2021, Hilton’s global growth enabled more than one hotel to be opened per day throughout the year. Hilton’s loyalty programme Hilton Honors also expanded to 128m members, a 13% increase year on year to December 2021. Information link

In Q3 2022, Hilton Worldwide sales increased by 36% year on year, and earnings per share (EPS) reached $1.31, up from $0.78 from the previous year and beating the consensus of $1.24. HLT shares are also up 1.48%. Hilton Worldwide President and CEO Christopher Nassetta comments: “Improved performance reflected the continued strength in leisure travel, as well as recovering business transient and group demand. We expect these strong trends to continue throughout the fourth quarter with system-wide RevPAR once again exceeding prior peaks.” Information link

Hotel investment opportunities in 2023

There are many opportunities for commercial investors to take advantage of in 2023. Here are some of the top UK hotel construction projects to explore:

• Duke Street Hotel Complex, Liverpool, $40m – A former car park is being converted into an eight-storey hotel at 107-125 Duke Street.

• Palace Hotel Redevelopment, Devon, $30m – A 5-star hotel conversion of a former Palace Hotel in Torquay is expected to be completed in late 2023.

• Indigo Hotel Development, Coventry, $25m – A five-storey hotel with 100 rooms in Friargate is due to be completed in Q4 2023.

• Hilton Garden Inn Peterborough City Centre, £26m – A prestigious city-centre hotel with an iconic Sky Bar and key tourist attractions nearby aspires to be the finest Hilton Garden inn in Europe to date.

• Hampton by Hilton Exeter Airport, Devon £23m – With easy links to Exeter airport, this award-winning hotel has a focus on sustainability with new solar panels recently installed. The local area is currently undergoing new travel improvements.

This post was written by Propiteer Capital PLC that works with the Hilton group and provides investment opportunities into new hotel developments around the UK and Ireland. Read more

Blevins Franks Financial Tips - Investing Responsibly - Earning Returns While Helping the Environment and Society

The news was dominated recently by the COP26 meeting in Glasgow and the environmental issues affecting the planet and our daily lives.  It came at a time when many of us were already thinking about what changes we can make to play our part in improving the situation. The topic of ‘ESG investing’ – Environmental, Social, Governance – was highlighted over the fortnight and it is something many investors are keen to explore. 

The November COP26 (26th Conference of the Parties) was a global United Nations summit about climate change and how countries can bring it under control.  Large companies also need to play their part to reduce their impact on the environment, and this is where investors can be selective over which companies to buy shares in.

Interest in ESG investment has been growing noticeably over recent years. Investors are placing greater emphasis on the environmental and social impact of their investments, wanting to make sure the firms benefiting from their capital do not contribute to problems like climate change, inequality etc. They are increasingly seeking to manage to exposure to ESG factors, while generating sustainable long-term returns – responsible investing and performance can be complementary.  

It is estimated that around 20% of global investors have some ESG investments and almost 50% say they are interested. 

ESG investing 

This type of responsible investing prioritises financial returns alongside a company’s impact on the environment, its stakeholders and society.  Here are some simple definitions:

·      Environmental – The impact of a company’s activities on the environment: carbon footprint, greenhouse gas emissions, renewable energy usage, using a sustainable supply chain etc. Positive outcomes include managing resources and executing environmental reporting/disclosure, or avoiding/minimising environmental liabilities such as climate impact or pollution.

·      Social – A company’s impact on its employees, customers, consumers, suppliers and the local community: how employees are treated, racial diversity among staff and executives, LGBTQ+ equality, inclusion programmes etc.  Positive outcomes include increasing health, productivity, and morale, or reducing negative outcomes such as high turnover and absenteeism.

·      Governance – The way companies are run: how does the management drive positive change?  What are its business ethics?  Positive outcomes include aligning interests of shareowners and management, improving diversity and accountability, and avoiding unpleasant financial surprises, such as excessive executive remuneration.

In summary, ESG investing considers how a company serves its staff, communities, customers, stakeholders and the environment. 

These days, most public companies, as well as many private ones, are evaluated and rated on their ESG performance by various third-party providers of reports and ratings. These include Bloomberg, S&P Dow Jones Indices and MSCI.   

Institutional investors, asset managers, financial institutions and other stakeholders are increasingly relying on these reports and ratings to assess and measure companies’ ESG performance compared to peers.

ESG performance 

Investing responsibly does not mean you have to accept lower returns.  

ESG investing is building up a good track record, with noteworthy performance over the pandemic. During the market turbulence and uncertainty, many companies with strong ESG track records showed lower volatility than others  and investors turned to ESG for increased resiliency.   According to US financial services firm Morningstar, the last quarter of 2020 saw record sales of $152 billion and total assets invested worldwide reached $1.6 trillion. 

Analysis by Morningstar also found that, over a decade, 80% of equity funds investing in sustainability outperform traditional funds. ESG funds also show longevity – 77% of ESG funds that existed 10 years ago survived, compared to 46% of traditional funds.  

Investment planning 

You do not need to spend hours researching a company’s ESG track record and scores, or comparing its share price with other companies to try and work out which ones to invest in.   As with other capital investments, you can buy funds which invest in highly rated companies. This also reduces risk as it provides much more diversification.  

Apply the same investment principles with ESG investing as with all other capital investments: 

1.     Establish your objectives and time horizon.

2.     Obtain an objective analysis of your appetite for risk. 

3.     Have a mix of assets and sectors in your portfolio to reduce the risk of one area performing badly.  

4.     When considering a new investment, analyse how it fits in with the rest of your portfolio and impacts its risk weighting. 

5.     Conduct regular reviews, around once a year.  

 You can choose to use a financial advisory company that incorporates responsible investing within its advisory services. Some companies now look at ESG considerations, as well as traditional assessments, as a part of the overall investment considerations when assessing suitability of investments for clients.  

So responsible investing does not have to involve more work on your part, and you can invest as you normally would, without compromising returns or your risk weightings – but with the difference being which companies benefit from your investment capital.  You don’t need to focus all your portfolio on ESG funds – indeed, you need a good spread of assets to reduce risk – but it is one step you can take to help protect our environment and society. 

All advice received from Blevins Franks is personalised and provided in writing. This article, however, should not be construed as providing any personalised investment advice.  The value of investments can fall as well as rise, as can the income arising from them. Past performance should not be seen as an indication of future performance.

You can find other financial advisory articles by visiting our website here

Edmond de Rothschild (Monaco) Outlook & Convictions - Are We Headed for a Paradigm Shift?

We are pleased to share with the third edition of Outlook & Convictions, a publication from our Private Banking Investment team. 

Content:

-       editorial by Lars Kalbreier, Global CIO Private Banking
-       Macro forecasts by Mathilde Lemoine, Group Chief Economist, 
-       a presentation of our “5 CE” methodology for selecting high-potential and low risk stocks 
-       our main convictions on asset classes, with a focus on China
-       our megatrends, key growth themes in 2021, including regionalisation.

READ THE PUBLICATION

The past 18 months have been truly extraordinary. The global pandemic has disrupted our lives to an extent which is unprecedented in recent history. Notions such as curfews had last been used during WWII and had all but disappeared from our vocab- ulary. Moreover, civil liberties that we had taken for granted, such as the right to assemble, were se- verely curtailed at the height of the lockdown. Dai- ly activities like going to the office, taking a plane, going on holiday or eating in a restaurant, all be- came much more difficult if not impossible.

The pandemic will most certainly cause some pro- found changes to several aspects of our lives. For instance, the way we work is likely to be different, with more flexible employment models that com- bine both a physical and virtual presence becom- ing mainstream. We might also trade more busi- ness trips for video conferences, etc.

There is another paradigm which the pandemic has affected: global supply chains. Covid has shown how fragile these supply chains can be. For dec- ades, the key trend for companies was to produce goods in low-cost countries, i.e. emerging markets. This meant that parts or finished products had to be shipped across the globe in order to reach their customers. Ever since the pace of the vaccination campaigns accelerated in developed markets with life returning to normal, many manufacturers have faced supply shortages that have exposed the fra- gility of global production chains. Voices speaking out in favour of more localised and regional supply chains so that production can take place closer to the end-consumer are getting louder. In addition, increased scrutiny of the carbon footprint of the goods produced no longer only includes the CO2 emissions from their production, but also their transport. Shipping cheap goods halfway across the globe will no longer be socially acceptable.

In the meantime, significant progress has been made in the manufacturing industry with the help

of new automation processes, robotics and 3D printing, thus significantly reducing the costs of production in locations with higher labour costs. We are convinced this trend will intensify as com- panies and governments are pursuing greater re- gionalisation with increased control over their sup- ply chains. This will provide a boost for investments in manufacturing technologies and the creation of regional champions (page 14).

From a more macro-economic standpoint, govern- ments and central banks have provided extraordi- nary support to the economy and financial markets during the pandemic. This took the form of large government stimulus programmes as well as very accommodative monetary policies as central banks provided abundant liquidity and maintained record low interest rates.

Now that many economies are on the road to re- covery, governments and central banks will need to bring their stimulus measures to an end. This should lead to more volatile financial market condi- tions and slower growth as economies start to nor- malise after experiencing a strong post-pandemic rebound. Investors will need to be more discerning to find sources of yield. Our Megatrends aim to identify these investment opportunities in secular growth themes (page 20).

In this context, selecting equities that provide a good balance between risk and return has become even more crucial for portfolios. Our “5 CE” invest- ment methodology based on the “5 Criteria of Ex- cellence” allows for such a selection. See the main components and the process of this methodology on page 8.

I hope you enjoy reading this edition of Outlook & Convictions.

Lars Kalbreier, CFA

Blevins Franks Financial Advice - Tax Efficient Investing in France - the Benefits of Assurance-Vie

When you look at the headline rates of tax in France, you can understand why many people consider France to be an expensive country to live in, tax-wise.  What they often do not realise, however, is that they may be able to take advantage of compliant opportunities to protect their assets from various French taxes – so much so they may even end up paying less tax in France than in countries like the UK.  With the right structures in place, you could significantly lower your tax bill.  

What was tax efficient in the UK is generally not tax efficient in France.  For example, ISAs and Premium Bonds are taxable in France. 

One very useful arrangement for lowering French tax on your investment income is the assurance-vie.  This specialised form of life assurance allows you to hold a wide range of investment assets and is highly tax efficient for residents of France, especially if you hold your policy for over eight years.  

Both French nationals and expatriates find assurance-vie to be very valuable for providing tax-efficient income (particularly useful in retirement) while also protecting their wealth for their loved ones. 

French tax benefits of assurance-vie

1.     Income and gains can roll up tax-free within the policy

2.     Withdrawals are taxed very favourably

3.     Substantial allowance from year 9

4.     Succession tax savings for your heirs 

5.     Wide range of investment options 

6.     Consolidation of investments in one policy

7.     Estate planning benefits

1) Income and gains

 If you do not take any withdrawals, there is no income or capital gains tax to pay, regardless of how much the capital has grown or how much interest has been earned within the policy. 
 

2) How withdrawals are taxed

When you take withdrawals, they are taxed very favourably.  Only the growth element is taxed, rather than the whole withdrawal.  For example, if the whole portfolio of assets within your assurance-vie has grown by 7%, and you are taking a withdrawal of €25,000, you only pay tax on €1,750 and €23,250 is tax free!   

For new policies set up after 27 September 2017, the tax rate on withdrawals is 30% (the standard tax rate on investment income).  This includes both 12.8% income tax and 17.2% social charges.  The income tax rate is lowered to 7.5% for income from contracts which are more than eight years old and relate to contributions not exceeding €150,000. You can also elect to pay the scale rates of income tax instead, which can work out cheaper even with social charges.  

Note that the 30% fixed rate only applies if your policy is approved for French tax purposes. If you have a non-EU assurance-vie you will pay the scale rates of income tax plus 17.2% social charges, regardless of your premium.  Policies from companies in the Isle of Man, Channel Islands – and now also the UK – are therefore at a disadvantage. 

3) Annual €4,600 tax-free allowance

Once you have owned your policy for over eight years, your first €4,600 –  €9,200 for a married couple – of growth withdrawn every year can be tax-free. This doesn’t apply to social charges but is still a very favourable tax break.  

4) Reducing succession tax

An assurance-vie could also help lower your succession tax liability.  

In particular, considerable tax savings can be made if the policy was established with lives assured under age 70.  Each individual beneficiary will receive a €152,500 exemption, after which they pay a flat tax rate of 20% (when the taxable part of the assurance-vie is under €700,000) and 31.25% on any excess over €700,000. 

If you are over 70 when you set up your policy, your heirs are still better off with your assurance-vie as, although they pay the usual succession tax rates, they receive a €30,500 allowance. 

5-7) Other assurance-vie benefits

 Depending on your policy, you can usually hold a wide range of investment options within your assurance-vie, with flexible currency options. 

You can bring many different investments together under one roof making it easier to manage, and combine your tax and investment planning in one exercise.  

Purchases and sales within the policy are normally transacted at little or no cost, so you can change your investments as your circumstances change without incurring extra costs.  

Investments within an assurance-vie can also be easier to distribute to your nominated heirs on your death, making their life easier. 

It is important to note that there are different types of assurance-vie policies available, and you need to make sure you choose the one that will provide the advantages you are looking for.  Tax rules and rates in France also change frequently so your adviser needs to be up-to-date on the latest regulations in France and what actually works for British expatriates living here.  

Finally, your tax and investment planning should be based around your situation, objectives and estate plans, so it is essential to take personalised advice.

The tax rates, scope and reliefs may change.  Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change.  Tax information has been summarised; an individual must seek personalised advice.  

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

You can find other financial advisory articles by visiting our website here

Investment Tips with Corporate Partner Blevins Frank - Why Chasing Star Performers Won’t Guarantee Investment Success

While it may be tempting to choose investments based on past performance, this tactic rarely works in the long term. So how can you put your best foot forward as an investor?

Reading about investing, you will usually find the disclaimer ‘past performance is no indicator of future performance’. While this may seem like a standard get-out clause inserted by lawyers, it serves as an important reminder that nothing is certain in the world of investment.

There is a reason we aren’t all making millions on the stock markets! Financial markets are complicated and unpredictable, with no formula you can follow to ensure you will strike big, or even get out more than you put in. It is important for private investors to carefully manage risk, as investment success often comes down to the sheer luck of being in the right place at the right time.

Given this element of chance, it is important not to get swayed by the latest trend and chase good performance. History repeatedly shows that the best performer one year could be amongst the worst the following year. 

Asset class performance

There have been many examples of ‘star’ assets that have soared before dramatically crashing back to earth. The dot.com bubble famously saw US technology stocks in the Nasdaq Index rise five-fold in the late 1990s before falling 77% in 2002, wiping out billions of dollars. Just recently we have witnessed the less dramatic, but nonetheless volatile, fortunes of bitcoin and other cryptocurrencies change rapidly. 

Essentially, there is little long-term benefit in only picking the latest top-performing asset. If you look at which asset type generated the most returns during a year, you would likely see a different star each month. Take 2019 – the year started with North American equities leading the way, only to move over for UK stocks the next month, then European shares before property took the spotlight. May saw Japanese equities ahead, followed by emerging markets, then Asia-Pacific stocks. UK bonds in varying forms took over for the next four months, before the year ended with cash in the lead. 

Over the ten-year period from 2010, no two years followed the same pattern, and one asset class rarely spent more than one month at the top. Without a crystal ball or a time machine, you could not have picked the right winners every time.    

Fund manager performance 

The same is true of ‘star’ fund managers. With hundreds of funds available from different managers, it can be difficult to know where to turn. While many of them seem to offer similar investment opportunities, the difference in performance can be significant… but often temporary.

Let’s say you had invested £10,000 in a UK-listed shares fund over the ten-year period starting 1 January 2010. If you happened to be in the best performing fund over that period, you would have made a net profit of 440%. Meanwhile, investing in the lowest performing fund would have brought a much reduced profit of 49%. Similarly, the best-performing property fund over that period would have returned profits of 227% versus 72% from the lowest.

On the face of it, it looks like you should just pick the best performing fund. But again, choosing a previously successful fund manager is no way to guarantee ongoing top performance. Statistics illustrate how the performance of the top 25% of fund managers tends to weaken over time. Of the 56 managers in the top quarter of performers in 2015, for instance, only four remained the next year. 

A sensible investment approach

So how can you improve your chances of investment success? There are some key principles you can follow to help manage risk and reach your financial goals.

Diversification is crucial. Spreading your investments across multiple areas is the optimal strategy for minimising risk. This should include a range of different asset classes (shares, bonds, cash, property) as well as geographical regions and market sectors. Diversifying in this way gives your portfolio the chance to produce positive returns over time without being vulnerable to any single area or stock under-performing. You can diversify further using a dynamic ‘multi-manager’ approach, which reduces reliance on any one manager making the right decisions in all market conditions.

It is also important to think long term and have patience when investing. As we have seen, chasing good, quick returns rarely succeeds in the long run. Likewise, exiting a market when it dips would lock in your losses and make you miss any rebounds when markets recover. Research shows that ‘time in’ the market – staying fully invested – is a more successful strategy for investors than trying to ‘time’ the market.

Ultimately, of course, you need to make sure your portfolio is matched to your personal situation, income requirements, goals and timeline, alongside your appetite for risk. This is best assessed objectively by an experienced professional who can then build a diversified portfolio with the right balance of risk/return for your peace of mind. 

For the best results, talk to a locally based adviser with cross-border experience who can bring all the principles together while ensuring your arrangements are structured as tax-efficiently as possible for your life in France. 

All advice received from Blevins Franks is personalised and provided in writing. This article, however, should not be construed as providing any personalised taxation or investment advice. 

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML. 

EU Post Brexit - Why It’s Time To 'Think Local' For Your Financial Planning In France

Now that Brexit is here, EU-resident Britons with UK bank accounts, investments or a UK-based financial adviser may see accounts closed or face restrictions. In these times of widespread restrictions and lockdowns, our worlds have become a lot smaller. Whether this will have a long-term effect on your travel, lifestyle and shopping habits will be a personal matter. But with Brexit now in full flow, UK nationals living in France have good reason to permanently ‘think local’ when it comes to financial arrangements. 

Just as UK citizens lost automatic EU freedom of movement when Brexit took effect on 1 January, many UK financial businesses lost the right to provide banking and investment services within the EU. If you are resident in France but still use a UK bank account, other financial products or a UK-based financial adviser, make sure you check where you – and your money – stand.

UK financial services and Brexit 
Before Brexit, UK firms providing financial services to Britons living in the EU could legally do so through ‘passporting’ arrangements. This meant UK providers – enforced by the Financial Conduct Authority (FCA) – were committed to meet the same minimum standards and consumer protections for EU residents as other EU states. 

But now that the UK (and the FCA) are free to make their own rules, the EU has no assurance that UK firms will meet their requirements. Consequently, on 1 January, the EU withdrew passporting rights for UK firms ­– including banks, insurance companies, investment providers and financial advisers. Now, some could even be breaking the law by working with EU residents.  

Does this affect all UK financial firms?
This depends on various factors, including how a company is structured and where it is based. Those with headquarters in an EU country, for example, can retain their passporting licence and continue operating as before. 

However, wholly UK-based firms who want to support EU-resident clients will likely need to restructure and form agreements with the financial regulators for each EU/EEA country they operate in. This is a highly complex, expensive and time-consuming process, so not a cost-effective option for all.

Negotiations on financial services are ongoing, so it is possible that the UK and EU may still reach an arrangement in this area. Some companies may be holding out for this before going through the potentially unnecessary expense of restructuring. Others have already withdrawn from EU markets. 

Some major UK banks have informed EU-based clients that they cannot provide services for them post-Brexit and closed their accounts. Other providers have kept accounts/policies open but suspended activity, or are allowing them to run until the end of their term.  

How might this affect you? 
If you hold a British bank account, insurance policy, investment or other financial product and your provider hasn’t contacted you about limited services, ask them what arrangements they have in place for France. 

If your account has not been closed, has it been frozen? In some cases, while you may be able to retain existing accounts and make withdrawals as an EU resident, you may be restricted from adding or moving funds or renewing policies. You may also be unable to apply for new services, such as term deposits, bonds, foreign currency management, loans, credit cards and mortgages. 

If you still use a UK-based financial adviser, check they have the authority to continue supporting you as a French resident. Besides the legal implications – and whether you are protected if things go wrong – some financial institutions have stopped accepting instructions from UK-based (unregulated) providers. So if you hold EU-based investments, your planning options may be significantly limited with a UK adviser. 

Post-Brexit financial planning for France
Even if the financial services issue does not affect you, there are other key benefits to thinking more local for your finances. 

Still holding on to UK savings and investments? Now that UK assets are no longer EU/EEA assets, they could potentially attract a higher tax bill within the EU. ISAs are also taxable in France for non-UK residents. Own UK property? Remember: EU residents are still in the firing line for UK stamp duty and capital gains tax.

Meanwhile, French residents have access to opportunities that can offer better tax-efficiency and other potential benefits, so make sure you review your options.

What about UK pensions? This is not so straightforward. You may be better off leaving them in the UK and drawing income as needed in France. However, while Brexit does not affect the ability to receive UK pension income into an EU account, it will always be paid in sterling, so the value could be adversely affected by exchange rates and conversion costs. Explore whether it may be more beneficial for you to transfer funds out of the UK into a tax-efficient structure for France. Doing so could also unlock currency flexibility and estate planning benefits, but be sure to take specialist, regulated advice to do what’s right for you.

With Brexit bringing such a seismic shift in the landscape, it has never been more important to ensure your financial arrangements are compliant and suitable for your life in France. A specialist, locally-based adviser is best placed to help you take advantage of suitable opportunities here and secure financial peace of mind for you and your family.

Blevins Franks is fully authorised to provide advice in France.  Our financial advisers live and work locally and have in-depth knowledge of the local tax and succession regimes and common issues faced by UK expatriates. Contact us to discuss how we can help you with your investments, pensions and cross-border tax and estate planning.

By Rob Kay, Senior Partner, Blevins Franks

Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this article, which is general in nature and not specific to your circumstances.

Blevins Franks Group is represented in France by the following companies:  Blevins Franks Wealth Management Limited (BFWML) and Blevins Franks France SASU (BFF). BFWML is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists.  Blevins Franks France SASU (BFF), is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z.  Garantie Financière et Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA). Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of retirement schemes. This promotion has been approved and issued by BFWML.

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