WealthBriefing's Geneva correspondent, Osmond Plummer, has direct experience of the pros and cons of living in the Swiss city. As he explains, those bankers thinking of leaving the UK for Switzerland will find such a move can be expensive.

Enough is enough. It is time for you to move out of the UK. Maybe the 50 per cent income tax band – due to kick in at the start of April - was the last straw or you are a non-domiciled person not wishing to pay the new annual levy on non-doms. But where to go? One place that is looking to cash in on any exodus from London is Geneva in Switzerland.

What is there not to like about Geneva? The city regularly appears in the top ranks of the world’s most liveable cities alongside such places as Vancouver and Sydney, according to Mercer, the consultants. You are in an international lake-side city, home to the UN, WTO, ILO and a whole alphabet soup of other organisations, and within a short drive of world-class skiing, Alpine views and mountain hikes. Lyon, France’s second city and its gastronomic capital, is an hour and a half away by car or the super-fast TGV train and the Mediterranean only a few hours more.

Recent changes to tax rules have made it an excellent environment for hedge funds, which has been a deliberate strategy of the cantonal treasurer David Hiller. This seems to be a strategy that is bearing fruit. BlueCrest, a large UK-based hedge fund manager, has announced its intention to transfer some 50 of its managers to the city of Calvin. Many commentators expect many more to follow.

To underscore the lure of Swizerland, Withers, the international law firm, recently undertook a straw poll of 116 respondents, demonstrating that the UK may face a large-scale exodus of high earners in the coming year. Some 75 per cent of respondents said they were very likely or somewhat likely to move abroad in the next 12 months.
 
Switzerland remains by far the most popular destination amongst those thinking of leaving, it was cited by nearly 63 per cent of respondents as a possible location. The Channel Islands came second, with 13.79 per cent considering relocating there. Other jurisdictions named included US (12.93 per cent), Hong Kong (11.2 per cent), Monaco (10.34 per cent), Singapore (9.48 per cent), France and UAE with 7.75 per cent each and others.

Possible downside

So is there a downside of moving to the shores of the lake? When your correspondent asks this question of the local government, they seem to see only a silver lining. The reality, however, is that there are three things that which can make a move more challenging: housing, schooling and the cost of living.

Geneva is a small city and the canton has limited space for new properties. Property prices have continued to rise locally even as much of the west has experienced a slump in house prices.

“There is availability but it is very limited. You can see all the properties in your budget in a day to a day and a half,” says Johanna Hartley, a Geneva-based relocation consultant with Network Relocation.

A 200-square metre four bedroom house with a garden will set you back about SFr7,000 (around $6,900) a month or more in nearby Vaud and may be over SFr10,000 in Geneva. If you want something more luxurious, the prices rise accordingly. Ms Hartley finds that “people are often unprepared for the limitations of the housing market and can be very disappointed”. Diana de la Soujeole of Sigma Relocation in Geneva confirms these figures and adds that for many hedge funds, “the problem is that the will to move is clearly present but the enthusiasm is fast dampened by the reality that the infrastructure offered is probably not sufficient for a group move of this type of demanding clientele”.

It is true that you can always cross the border and live in neighbouring France but you are then tied to a motorized commute in a city that has recently announced plans to pedestrianise 200 streets in the centre of town. In that environment parking spaces can be as difficult to find as housing and traffic can be hideous.

Education challenges

But what of Switzerland’s reputation for excellence in education? Sally Walker is the Good Schools Guide International’s editor for the French speaking part of Switzerland. “Local school may be an option if your children are starting out in kindergarten,” she says. “But it is difficult for most children to settle into foreign language schooling as they get older.”

In addition to this, children in Switzerland are streamed at the age of 11 into one of three education pathways that dictate their future and it is nearly impossible to move up without re-sitting a year (which is common practice in Switzerland just to stay where you are). In Geneva, this streaming is often based significantly on a child’s ability in French.

“In Switzerland and France, state provided learning is significantly rote based and motivation is based on use of a stick. There are no carrots. It is quite a shock for children coming out of the more encouragement-based culture in the UK,” Ms Walker says. France is even worse according to anecdotal evidence.

The international school system is a far friendlier place for expatriate children, but here space is also tight. In 2005 Ecolint – the largest of the three main English language school providers, opened a new third campus for 700 students which, it was hoped, would “provide for a buffer” according to Michaelene Stack, Director of Development for the International School of Geneva (Ecolint). It filled up within a year. “We are normally waiting for a child to depart before we can offer places,” she says.

In 2011 Ecolint will open a new primary school which will allow it to offer 520 more places overall to the current 4010 Ecolint has available but, according to Norbert Forster, President of the Association of Private International Schools, “The Geneva region has need of at least 700 more international school places.” As with the housing shortage, the affordability and availability of land and public transport/access issues remain a big barrier to providing these places. And that is before any influx of hedge fund managers and their families.

A further educational challenge is the much debated “dumbing-down” of UK education. The three main English language international schools in Geneva offer the International Baccalaureate (IB) examination rather than UK A-Levels. This requires students to sit six subjects, three at a higher level and three at standard level. Choices are limited with mathematics, mother tongue, a foreign language, a science and a humanity being compulsory as well as community work, an extended essay and a Theory of Knowledge paper.

Your correspondent recently dined with a family who moved here last summer. Their eldest child had a raft of A*s at GCSE level. But an A* in French was not a high enough level to sit the IB at a standard level and an A* in maths not enough to sit the IB Maths at a higher level. In fact, a number of families move back to the UK so their children can specialise in grades 12 and 13 and not have to study the broad range of subjects at the level that is required by the IB.

And then there is the cost of living Swiss style. International Schools come in at around SFr28,000 per child per year, plus extras. For a family of four, expect to spend some SFr3,000 per month on your grocery shopping and at least SFr1,000 per month for (compulsory) Swiss (not international) health insurance – more if you want a low franchise and full private cover. In fact all Swiss insurance is expensive by UK standards.

Don’t get me wrong. I love living in Geneva. It is my home. It is, however, worth pointing out that a saving of 10 per cent in income tax may come with significant other outgoings attached and some sacrifices in your quality of accommodation and the education of any children. And for companies thinking of making the move, even though there is a Swiss law allowing contracts to prohibit discussion of salaries I can promise you one thing –you will be paying your people more than you do in London.