San Francisco Soars, London Slides
London Ranked Last on Pay for International Workers
Expat workers in London are increasingly feeling the pinch, according to research we conducted in 16 key markets.
The culprit is a financial cocktail with three ingredients; the cost of living, taxation and the sliding pound. Collectively these have sent London plunging to the very bottom of our list of lucrative expat destinations.
The Sky-High City
As anyone seeking accommodation in London knows, the city is now a very expensive place. Indeed, the cost of UK property (per m2) is the highest in Europe, save only the very tiny and very wealthy enclave of Monaco1, and London is the Monaco of Britain.
London hungrily gobbles up a higher proportion of the expat average salary than any other comparable city we examined – and the proportion is rising fast!
While UK taxes are not the highest in our comparison (that honour goes to Brussels), they consume roughly a third of expat salaries.
Sterling has slid some 20% in the last five years2, gradually reducing the value of UK salaries for the purpose of making remittances.
So, if not London, what are the most financially rewarding destinations?
The current top spot is occupied by San Francisco. While San Francisco shares London’s housing crisis, surging Silicon Valley salaries more than compensate. Other favourable spots owe their ranking to low taxes and/or relatively cheap living expenses.
This is all very interesting, but what should you do about it? Not everybody can – or would wish to – relocate halfway around the world to seek out a more financially rewarding destination.
The answer is that wherever you work, you can make the most of it.
Expats intending to work in low tax jurisdictions should consider becoming non-tax resident in their country of origin. Rules on tax residency are complex and differ the world over, meaning some overseas workers could be liable for taxes in the country they call home, even when they are not living or working there.
In the UK, non-tax residency rules require that you normally spend no more than 90 days in the country in any year. As can be imagined, return trips to the UK to visit family and friends merit careful planning.
What can we conclude from this?
Different Strokes for Different Folks
London has suffered a statistical decline due to multiple tangible causes, but the city also has multiple intangible benefits. European countries remain popular with contractors despite their generally high taxes and living costs. While they make poor choices for contractors looking to save money, their enduring popularity is related to lifestyle and cultural choices.
Low taxes are not a reliable guide to the best destinations. Dubai levies no income tax at all. However, other factors conspire to rank this desert kingdom only fifth in our 2019 study. Dubai is not a high-paying destination for skilled contractors. Expats can earn considerably more in East and South East Asia, even when taxes and social security are factored in.
By far the biggest change we saw occurred in San Francisco. Featuring an easy commute to Silicon Valley and a historic cultural compatibility with the army of knowledge workers who operate there, San Francisco has become the global capital city of venture capital. The world-beating tech companies clustered between San Francisco and San Jose are locked in a continuous bidding war for top talent, causing average salaries to rocket. However this has a knock-on effect on house prices, resulting in a growing proportion of tech workers’ wages going towards housing costs.