They come from as far afield as Russia and Abu Dhabi and they're paying millions for UK businesses. But are the mega-rich helping or hindering our economy?
You may think it sounds odd, with all the gloomy stories on the TV news, but there's a lot of crazy money flying around London right now. Take my own world of restaurants. Last month a famous US chef made a guest appearance in a pop-up restaurant in Harrods and the fixed-price menu was £250 per person for food, so the average bill per head with wines climbed to over £500.
Someone I know asked me how to bribe the maître d' there – the night she wished to go already had 55 people on the waiting list and she was prepared to bung a few thousand pounds to whoever could get her and her family a table.
But it's not just getting into the right restaurants that appeals to the mega-rich – it's owning them, too. There was a group of West End restaurants that I was bidding for recently and we were advised to offer £6.25m for them. A week later we were told that 33 bids had been received and if I wanted to stand a chance we would need to hit £7.5m. So I pulled out and later heard that someone had bid £10m.
The trophy or vanity investment is largely driven by new money
from overseas. A little while back a wealthy Russian oligarch spent £6m on a restaurant that turns over £32,000 a week – roughly one-fifth of what that level of investment should expect to return. Now another is spending £14m on a Mayfair restaurant and bar.
If you think all this new money benefits the British economy, you're misguided. These operations are usually not run on profit motives, so there is no commercial drive to optimise them. They do not employ as many people, do not pay as much tax and sweep any money they do manage to make to offshore entities. And by distorting commercial valuations they are stifling those entrepreneurs based in Britain.
In the hands of people like me those businesses would be employing more people and making more money, which we would either spend or invest locally or use to support local charities, paying more UK tax and encouraging budding entrepreneurs to do the same.
This is more than sour grapes. And while we have already seen Indian money via the purchase of Grosvenor House for a reputed £70m above the asking price, Russian money, the Qataris buying Harrods and Abu Dhabi paying £30m in 2008 for super-trendy restaurants Hakkasan and Yauatcha, we have yet to see what the Brazilians and the Chinese will get their bags of cash out for when they arrive here.
Ironically, with the exception of Indian hotel groups such as Taj and Oberoi, in their own countries these high spenders haven't built their own luxury brands. Walpole, the British luxury goods company, sends out daily press releases announcing which members have opened in which emerging or emerged markets that are witnessing whopping sales. Tell Louis Vuitton there's a global recession and they'll laugh in your face – 90 per cent of women in their twenties in Tokyo have at least one of the company's products and soon the same will be true in Beijing, Mumbai and Rio.
We've got the brands and they've got the cash. In the last year, I've had offers to buy Roast from a Malaysian, an Indian, a Singaporean and an Abu Dhabi group not so much because it's profitable but because they want one in their own town. So far I've resisted – my foreign travel plans should be for holidays and not for business – but it is tempting to cash in, however crude the offer. Someone I know who owns a smart club in Belgravia was asked one day by a passer-by when he was standing outside it whether he was the owner of the building and, if so, how much would he sell it for.
I hope we continue to hold off. If we can't expand on competitive market terms here, perhaps we'll have to pack our suitcases with business suits rather than Bermuda shorts and expand abroad rather than sell to a foreign partner.
That way we could still end up on the winning side. There was once an Indian emperor who was so busy conquering other states that when out on one such expedition he ended up being overpowered himself. Perhaps British businesses need to heed the moral of that tale?
