It is more difficult than ever to become a millionaire in the UK
Nowadays, you are more likely to become a millionaire through the tech sector than you are if you work in banking, UHY Hacker Young has revealed
Ever since the enforcement of the EU bankers’ bonus cap in January 2015, the number of people in the UK earning more than £1m per year has fallen. This is according to recent research conducted by UHY Hacker Young.
As of 2017, there were 16,000 people earning over £1m in the UK. However, just 12 months earlier, this number was at 19,000—and the bankers’ bonus cap has been cited as the main reason behind this.
“The bankers’ bonus cap will have played a part among the highest earners, with investment banks no longer able to pay their top earners many multiples of [their] salary, as they used to.”
UHY Hacker Young explained: “The cap limited bonuses to 100% of salary where bonuses worth several times [an] investment bankers’ base salaries were once commonplace.”
Moreover, due to the bankers’ bonus cap, the European Banking Authority reported that the number of people in the UK investment banking industry earning €1m or more has decreased by 15%, from 4,100 in 2015 to 3,500 in 2016. These numbers did not recover as well as they could have by 2017—have reached just 3,550.
£1m+ earners are not the only ones to be affected in recent years, the firm has gone on to reveal. The number of people in the £500,000- and £300,000-income brackets are also falling.
“The bankers’ bonus cap will have played a part among the highest earners, with investment banks no longer able to pay their top earners many multiples of [their] salary, as they used to,” Mark Giddens, partner at UHY Hacker Young, added.
“The potential impacts of Brexit on that could not come at a worse time. The Treasury relies on high earners to pay tens of billions of pounds in income tax each year.”
“The UK has seen a drop in the number of high earners—and that is even before Brexit made an impact,” said Giddens.
Statistics shared by UHY Hacker Young have certainly revealed the fact that the UK economy was already struggling before the historic Brexit vote took place.
Giddens continued: “These numbers also point to the fact that the economy has now been stuttering for several years. The potential impacts of Brexit on that could not come at a worse time. The Treasury relies on high earners to pay tens of billions of pounds in income tax each year.”
In 2016-17, the 16,000 people who made more than £1m per year paid 35% of all income tax for that year; that 35% equated to £15.3bn.
“An increasingly common method of becoming a millionaire these days is for tech entrepreneurs to build and exit a business. That isn’t ‘income’ in the strictest sense, it is a capital gain, so that huge wealth creation will not show up in these figures.”
The rise of the technology sector in recent years has proven to be one of the main drivers behind the UK’s economic growth.
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UHY Hacker Young has reported that more people in the UK are earning more than £1m per year through sales of businesses, rather than through “traditional salary and bonuses.”
Giddens said: “An increasingly common method of becoming a millionaire these days is for tech entrepreneurs to build and exit a business. That isn’t ‘income’ in the strictest sense, it is a capital gain, so that huge wealth creation will not show up in these figures.”
He concluded: “So, while investment banking might not be creating millionaires on the same scale it once did, tech has replaced it—to an extent.”