Suddenly it is starting to look as if the period after 1914 — when London lost its position as the financial capital of the world to New York — was an aberration
Suddenly it is starting to look as if the period after 1914 — when London lost its position as the financial capital of the world to New York — was an aberration, a downturn in an otherwise upward trend. Stroll around Chelsea, Belgravia and Holland Park and see the flash cars with blacked-out windows, waiting with chauffeurs inside. Listen to the foreign voices echoing down Bond Street; chat to estate agents, or to bankers or art dealers or even to a good dentist, and the message is clear: London is on the up, and the world’s rich are congregating here like bees around the blossom of spring.
This week London’s position as the headquarters of globalisation will be reaffirmed overtly and boldly. As I write, its wealthiest resident, Lakshmi Mittal — the very poster-boy of the super-rich — is putting the finishing touches to a $20 billion offer for Arcelor, a lumbering rival to his Mittal Steel. Already Mittal’s proposal has been denounced in the chancelleries of Europe, but Mittal (named after a Hindu god of wealth) was prepared for this. ‘It is a strike straight at the heart of Old Europe from the New World,’ says one of his advisers. If he succeeds, he will win a great victory for shareholder value and free markets in the EU. No doubt the knowledge that he is already worth £14 billion helps him maintain a zen-like calm. ‘He bought well,’ I am told. ‘When everybody was thinking about high-tech companies like Microsoft, Mittal was sticking to a traditional metal-bashing industry in countries everybody had written off, like Romania and South Africa.’
He moved to London in 1996 and runs his dynastic interests (Mittal Steel, though quoted, is family-controlled and his 30-year-old son Aditya is his finance director) from Berkeley Square, although the company is technically domiciled in Rotterdam. He spent his early years sleeping on the floor at his parents’ home in Rajasthan, but these days he has money to burn on a £50 million wedding for his daughter, Vanisha, and a £2 million donation to the Labour party.
‘London is cosmopolitan, culturally diverse,’ he explains. ‘And it is in the right time zone.’ One of the things which recommended it to him as a base was Heathrow. ‘It’s easy to get anywhere else,’ he says. He evidently does not want to be pigeonholed as a Londoner, however. ‘Mittal is a global company.’
But one of the interesting things about Mittal is that he is far from unique. He is merely the best-known member of a tribe now congregating in London: foreign-born billionaires, many of whom made their fortunes in basic industries such as copper mining, steel and, of course, oil. They hail from India, the former Soviet republics and the Middle East and, as a class, they are importing a culture of private luxury to rival anything F. Scott Fitzgerald wrote about in 1920s New York.
There is Vladimir Kim, the controlling shareholder of Kazakhmys, a vast copper company from Kazakhstan, which recently joined the FTSE 100; Russian entrepreneur Leo Blavatnik, Mittal’s neighbour in Kensington Palace Gardens (where Mittal set a record with his £57 million house purchase in 2002); Oleg Deripaska, another Russian copper baron; Johnny Hon, the Chinese gambling tycoon; and, of course, Roman Abramovich, who rubs along with assets of £4 billion, including Chelsea Football Club (assuming that’s an asset and not a liability). Forbes magazine reckons there are 28 billionaires now living in London — and that is just the ones we know about.
There are many, many others too, who are either too secretive or not quite rich enough to be considered billionaires. The super-rich are obsessed with security. This is partly because they were alarmed by the murder of the banker John Monckton in Chelsea last year; and partly because some of them made their money in what might euphemistically be described as exotic and opaque circumstances. They have dangerous enemies — such as the Kremlin, or even each other.
Perhaps the most eloquent demonstration of this paranoia is to be found in their homes. Nick Candy and his brother Christian are property developers by appointment to the super-rich. Among the brothers’ successes is selling a flat for £27 million in Chelsea Square (a world record) to an unnamed foreign buyer last year. Nick Candy tells me, ‘There is so much money coming into London. London is the most important global city in the world. It is not just Russians, it is Chinese, Indians, Arabs and even Irishmen. Actually, many of our clients are British but nobody ever seems interested in that.’
Candy & Candy’s latest project is the redev-elopment of Bowater House in Knightsbridge, which is being renamed No. 1 Hyde Park. The project will include 84 multimillion-pound apartments, with underground parking, CCTV cameras, 24-hour security guards and a concierge service provided by the neighbouring Mandarin Oriental hotel. ‘A lot of our clients don’t want to live in houses any more,’ says Candy. ‘They want lateral living, because that means you get proper security, air-conditioning and porterage. You can just drive in, get out of your car and into the lift.’
So, why London? The arrival of the super-rich is, of course, a sort of flattery for the British way of life, our institutions, our professional services and for the English language and culture. But let us not be naive. It carries risks too. Foreigners who are here for only a few weeks a year are creating fierce competition for scarce items. They are driving through the roof the prices of nice houses, grouse moors, Old Master paintings and domestic help. Mittal himself is a UK resident and pays tax here. But many of those who emulate him are not so scrupulous. They are technically non-residents, so they contribute little to the Exchequer. Let’s face it: some of them are rather selfish, unmoved by the sense of noblesse oblige that might make them pay tax voluntarily or pour money into struggling football clubs; and a minority of them are probably crooks.
The biggest factor attracting the wannabe Mittals is not sentimentality about Britain but a series of own-goals by America. For years, New York was the natural home of the global nouveaux riches, but now they no longer feel comfortable there. The US Immigration Service makes visitors stand in long lines; the US tax authorities enforce a tough global regime (HM Revenue & Customs still has generous non-domicile rules for those who live here for only part of the year); and Congress has passed a nasty securities law called Sarbanes–Oxley, which is wrapping Wall Street in red tape.
That said, the long-term economic effects of welcoming the super-rich to Britain are, on balance, beneficial — and not just because we can all find work as their butlers or interior designers. Indeed, Ajay Kapur, a bright spark at Citigroup, has invented an economic theory he calls ‘Plutonomy’. He believes that the Mittals of this world are putting rocket fuel into financial markets. For the super-rich are the clients of the hedge funds and private equity groups, of which there are now about 1,000 in London. Hedge funds and private equity not only provide lucrative employment for aspirational young British financiers, but are also starting to wield the sort of influence once reserved for the mightiest pension funds. Thanks to the super-rich, a colossal arsenal of money — hundreds of billions of pounds — is now being managed in London. Our competitive advantage in financial services is being handsomely reinforced.
‘I think wealth and income inequality explain many of the conundrums which vex investors,’ says Kapur — one of those conundrums being the continuing growth of the British economy, despite the punitive taxation regime of Gordon Brown. Money is flooding into London, squirting through complicated tax loopholes unavailable to ordinary Britons who plod away in salaried employment, slaves to PAYE. ‘The rich are now the dominant drivers in many economies in the world, such as the US, the UK, Canada and Australia,’ says Kapur. ‘Asset booms, a rising profit share, and favourable treatment by market-friendly governments have allowed the rich to prosper.’
He believes we have seen nothing yet. ‘Global capitalists are going to be getting an even greater share of the wealth pie over the next few years, as capitalists benefit disproportionately from globalisation and the productivity boom at the expense of labour.’ It is an arresting thesis, exemplified by the princely Mr Mittal — and London will be the richer for it.
George Trefgarne is City editor of the Sunday Telegraph.