The reason: Britain’s repeated failure to create an environment that encourages entrepreneurs, like him, to stay. In Narula, the country will lose an investor worth £780 million, according to this year’s Sunday Times Rich List, and one who came fourth in our 40 under 40 list.
The final straw, he said, was the leak this month that Rachel Reeves, the chancellor, would impose an “exit tax” in the forthcoming budget on wealthy people who leave the UK.
The idea of an exit tax appears to have been prompted by the departure of Nik Storonsky, cofounder of the London-based financial services group Revolut, for the United Arab Emirates. His exile means he will avoid a potential capital gains tax (CGT) liability of about £3 billion were he to sell his shares in his hugely successful company.
Under the Treasury’s plan, the leaks suggested, people moving domicile from the UK would have to pay tax on all their capital gains before leaving. Normally, CGT is only payable when you have sold an asset and made a profit, but the exit tax would be levied on the increase in value whether you have cashed it in or not.
“It’s completely insane,” said Narula, whose investment company is called Improbable. “I’m being told I’d have to pay a tax if I leave even if I haven’t sold the shares.”
The theoretical valuations of technology companies rise and fall all the time, he said. One of his proudest investments is a company using blockchain technology called Somnia (“the fastest blockchain in the world”, he claimed). Somnia’s value has fallen since its peak of £1.4 billion as the market ebbs and flows.
In the end, late on Thursday night, it emerged that the Treasury had scrapped the exit tax idea — just as it scrapped the idea of raising income tax rates.
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But for Narula, it was too late. “I’m still leaving. The thing, is, they’re clearly thinking about it, right? What if they change their mind? What stops them doing it in the next budget?”
Even with the U-turn, the leak had frightened entrepreneurs like him by making it clear the idea had been under consideration. “This is the danger of spooking people. Once you spook people, why should they trust you?”
The government’s flip-flopping before the budget — floating ideas, then ruling them out — has caused uncertainty in the wider financial markets too. After the U-turn on income tax emerged on Thursday night, the global bond markets punished Britain with higher interest rates amid jitters about the chancellor’s commitment to fiscal responsibility.
For Narula and others like him, a government that promised to create a stable and predictable place to invest in businesses is losing credibility. They say that, facing an ever-worsening economic situation, this government — like the previous one — has been hurting entrepreneurs, from increasing the rate of capital gains tax to the burdensome expansion of workers’ rights.
Lewis Morgan, co-founder of the clothing brand Gymshark, moved to Dubai with his family in February. He had made more than £100 million from selling his remaining shares in the company in 2020.
Morgan described Dubai’s appeal as “more investment opportunities, better weather, more active lifestyle, safety for my kids and on top of all that, no tax”.
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More young British businesses leaders are taking the same path, he added. “Once an avalanche starts, it’s impossible to stop. Each budget pushes more and more people. Now this exit tax propaganda will push even more people.”
Morgan said he was now spending his time investing in private fashion brands and “enjoying seeing my kids grow up”. He has a four-year-old daughter and a son aged two.
Narula sees a change in Britain’s view of wealthy business folk. He said people see them as either Elon Musk-type super-egos or rich gentry who sit and watch their wealth accrue from the hard-pressed tenants in their property portfolios.
“It’s so wrong,” he said. “What people like me are really all about is taking risks and building businesses. We’re kind of addicted to it.”
Most of the time, the investments come to naught, but occasionally, he said, you get a success which creates massive value, employs lots of people and results in huge tax revenues.
“Here at Improbable, we build and create companies, usually very risky companies, that attack problems nobody else is willing to attack. We started off with gaming, doing something really crazy which was trying to create virtual worlds.
“We had our successes and failures, but we went on [to sell a business] for more than $100 million. And a lot of that capital, we reinvested in start-ups in Britain and beyond.”
That has included a defence technology business that simulates battlefields. The British military deployed it to help the Ukrainian war effort, he said. “I’ve been sanctioned for that by Russia.”
Improbable’s UK investments this year included Fan3, a blockchain-based company that helps artists sell tickets for their shows without scalpers getting hold of them and ripping off fans. Big acts include the American rapper Pitbull.
Now, many of the entrepreneurs Narula backs are looking to leave Britain or have already left. “The issue here is the absolutely amateurish, unstable, shooting-from-the-hip proposals from a government that … won’t properly consult people on the plan,” he said.
Like many of his breed, Narula is a workaholic for whom “down time” is virtually non-existent and would therefore live and work wherever is best for his businesses.
When I asked if he will miss Britain’s glorious cultural and sporting scene when he’s in Dubai, he looked at me with utter puzzlement. “I just focus on work and what it’s going to create,” he said. “I spend a lot of my life in airports. I don’t have a wife or kids.
“It’s, like, my greatest pleasure in life is building amazing things. Being in an unaesthetically pleasing place — that’s just not a consideration. The consideration is: how can I change the world? Where do I have to be to do that?”
He talked of Silicon Valley, where a unique pool of investment dollars and brainpower has created the most powerful tech hub in the world: “Believe me, no one likes San Francisco. Literally no one … But it’s got some of the most innovative, vibrant people in the world doing amazing things.”
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He certainly seemed utterly unattached to the home we sat in — one of several around the world bought decades ago by his father. I asked if the painting on the wall was an original Monet and he shrugged: “No idea, probably not.” I rhapsodised about the antique silk rug under our feet: “It’s been there all my life and I’ve never noticed it.”
Another wealthy young London entrepreneur I spoke to on condition of anonymity said he was moving to Barcelona. He was despondent about Britain spending his taxes on high welfare and a wasteful NHS, but his main reason for leaving was to shelter a CGT bill on his tech start-up that would run to many tens of millions of pounds if he were to sell.
Spain, he explained, is offering generous tax breaks for foreign entrepreneurs and wants them to feel loved.
“It’s globalisation,” he said. “People in other countries seem to want to welcome us. And I like the look of Barcelona — it looks like a place I could start a family one day.”
Neither felt guilty about deserting the country that provided them or their employees healthcare and schooling. Narula said: “I’ve paid millions of dollars of tax here and will continue to pay taxes. The issue here is, if this government is incompetent enough to leak an exit tax, what else are they incompetent enough to do?”
Daphne, who spent most of the interview on my lap, nuzzled my hand. Will she come to Dubai too, I asked? “Oh yes,” Narula said. “Daphne comes everywhere.”
