Foreign investors are pouncing on failed New York businesses. UK private equity firms must act fast to save London from a similar fate
I've just returned from New York on the business-class only British Airways flight 001. Outside London, the Big Apple is my favourite city—I love the people, the places, the food, the fun. I nearly opened a restaurant there a few years ago but shied away at the huge costs involved and the fickle nature of New York customers: "Have you been to So and So?" The reply? "No, but I went when it was So and So."
There was also a sizeable amount of under-the-radar red tape if you needed to deal with the unions and their audacious demands. In a city that was in so many ways the embodiment of free enterprise, I recall being taken aback at practices that would have made Arthur Scargill proud.
All that's changed; the recession looks to have hit New York much harder than it has London. Businesses are collapsing and there is much talk among the businesspeople I met of this trend continuing for two or three years.
But locals deal with the gloom and doom in classic New Yorker style. One Fifth Avenue furniture store had a sign up when I was there, saying "Bad Economy Sale" and a property broker I know sent out a PDF file to his overseas contacts with the subject heading "New York for sale", listing several high-profile retail outlets that could be acquired for little or no money.
Similar trends are emerging in London but here we are trying to capitalise on the opportunities ourselves before cash-rich Middle and Far Eastern wealth funds grab the bargains. Private equity firms in the UK are developing distressed business funds to acquire and turn around struggling companies with new vigour and better management teams.
They've been sitting on their hands for a while but seem ready to pounce—if they leave it too long they'll miss the chance to make a lot of money quickly. We'd all prefer that any business revival benefited the UK rather than those economies that are already healthy.
In New York a similar opportunity may be slipping away from them. Of course, the city's economy will bounce back, more jobs will be created and people will start spending again. But business ownership will become increasingly offshore, invariably with tax-saving structures that mean the public purse is not sufficiently filled.
Le Bernardin, Manhattan's excellent three Michelin-starred seafood restaurant, where the chef's tasting menu costs $325 per person (£200), was as full as always but this time the only Americans dining were the ones entertaining prospective clients from India and the Middle East (as a restaurateur, I love people-spotting). Their guests were lauding the change in global dynamics with the West now going cap in hand to the East.
We should make sure the same doesn't happen here. Qataris (bought Harrods), Indians (purchased Grosvenor House hotel) and others are not only snapping up our national assets but crucially not paying the same levels of taxes that a British company would. If they did, the daily news that we can't afford teachers, nurses and soldiers may cease.
The Treasury can only tax our rich and not those domiciled elsewhere. In the UK, we haven't seen much of the predicted flight for non-dom status but if we can't get anything out of overseas investors, our own rich lists will be hurt more and driven to the point where they're forced to move to the dullest of places, Switzerland.
My inbox is filled with offers to take over failed or failing London restaurants for little or no money. Russian and Arab money is sniffing around these opportunities. Government failure to force the banks to lend to businesses isn't helping but private equity firms are sitting on billions and any time soon they will act.
They've had a bad time shoving huge amounts into pub chains and are cautious about calling it wrong again. But this is the time for them to gather up their courage to back UK entrepreneurs, who are ready to seize these once-in-a-lifetime opportunities.
Wouldn't that be better than other big investors coming to the UK and raking in what should stay here? As a lifelong London resident, I'd hate to see emails being sent abroad with the headline, "London for sale".
