Who is buying up Britain?
By Andrew Mayer
By Andrew Mayer
(Photo: Oil rig - Gulf states are anticipating the days when their oil is not flowing so freely)
The credit crunch may have put the brakes on the UK economy, but a fast-growing but relatively unknown financial institution may just come to the rescue - the sovereign wealth fund.
Typically owned and run by countries in the Middle and Far East, these funds have huge reserves of cash and they want to invest it.
In 2006, Liverpool football club was taken over by two American sports tycoons.
Fans hoped it would once again be able to challenge clubs like Chelsea, which has benefited hugely from wealthy foreign ownership, for the Premier League title.
But so far the Americans have failed to deliver a real turnaround in the club's fortunes, and another potential buyer has now emerged.
Dubai's sovereign wealth fund, Dubai International Capital (DIC), sits 3,500 thousand miles from Merseyside.
The danger is that a country which is as open as Britain to foreign investment eventually just becomes the kind of plaything for the political whims of foreign powers Jeremy Warner, The Independent
It already has considerable stakes in UK companies, including Travelodge, The London Eye, Alton Towers, HSBC and the London Stock Exchange.
Like many sovereign wealth funds based in the Middle East, its objective is to diversify and invest for a future when the oil runs out.
Spending its money at home is not an option because it could trigger high inflation so instead, the profits accumulated from oil and gas are heading to the UK in the form of large investments in UK companies.
Selling the family silver?
Great for the credit crunch you might think, but not everyone is happy.
They are going to be very big players and that shouldn't worry us Lord Patten on sovereign funds
"As these foreign powers grow in wealth and influence the danger is that a country which is as open as Britain to foreign investment eventually just becomes the kind of plaything for the political whims of foreign powers," says Jeremy Warner, from The Independent.
"Dubai buying Liverpool may not be much of an issue, but when it comes to a utility or a major bank it could well be."
So could sovereign funds try to wield political influence in the UK or is that paranoia?
TAQA, the Abu Dhabi Sovereign Wealth Fund, invests in and runs energy companies around the world, but its chief executive Peter Barker-Homek denies its motives are anything other than money-making.
"I think they've proven themselves to be a stabilizing influence in the world." he says of sovereign funds in general.
Their investments have helped stabilise the global financial markets Open University
"They've put to work billions of dollars to stabilise the banking system in Europe and specifically in the US."
Indeed, many western banks have turned to SWF cash to offset the effects of the credit crunch.
Citigroup, Merrill Lynch, UBS, Barclays and Morgan Stanley have collectively accepted more than $50 billion from funds in Singapore, Kuwait, Saudi Arabia and China.
'Fear of the Dragon'
The increased wealth and influence of China is the latest and most complex part of the SWF story.
China has accumulated a huge amount of cash - more than $1.5bn trillion - from the sale of its cheap exported goods and now it wants to invest it.
But part of the problem is to do with openness - or the lack of it.
"These funds are un-transparent," says Jeremy Warner.
"They're frequently run either directly by government officials or by government cronies. So although we have not yet seen any cases of outright abuse, it's quite possible that we'll get them and, in fact, I think it is extremely likely over the next five to 10 years."
Critics point to China's record on human rights.
"If we come to the crunch about issues like Taiwan, Tibet, things where we are strategic competitors in a way and we don't agree, does that mean we are going to be very muted in our response, that we're going to be obliged to react less strongly than we did before?" says Kerry Brown, of the Asia Programme at the Royal Institute of International Affairs.
But supporters of sovereign funds argue that their willingness to invest outside their own countries is good for the global economy.
"They are going to be very big players and that shouldn't worry us," says Lord Patten of Barnes, the last Governor of Hong Kong.
"Would we prefer the countries of the gulf to be earning all that money and burying it in the sand? Would we prefer the Chinese to be simply hoarding the money, or bailing out our banks and investing it in potentially profitable investment opportunities in the UK or Germany or France or America?"
Here to stay
Sovereign funds may well be the biggest and most powerful financial force most people have never heard of, and a symptom of economic power shifting from west to east.
SOVEREIGN FUNDS BY ASSET SIZE
United Arab Emirates: $875bn
Norway: $380bn
Singapore: $330bn
Saudi Arabia: $300bn
Kuwait: $250bn
China: $200bn
Libya: $50bn
Qatar: $50bn
Algeria; $42.6bn
Source: Morgan Stanley (all estimates except Norway)
"By 2012, sovereign wealth funds will have about $7 trillion to invest worldwide," Peter Barker-Homek predicts.
In fact as some bankers have said, perhaps the biggest danger is that the sovereign investors go elsewhere.
As the credit crunch continues, people will not only be asking whether we can we afford to risk accepting sovereign investment, but can we afford not to.
The Money Programme: Who's Buying Up Britain? BBC2 at 1900 on Friday 1 August.
Story from BBC NEWS:
The credit crunch may have put the brakes on the UK economy, but a fast-growing but relatively unknown financial institution may just come to the rescue - the sovereign wealth fund.
Typically owned and run by countries in the Middle and Far East, these funds have huge reserves of cash and they want to invest it.
In 2006, Liverpool football club was taken over by two American sports tycoons.
Fans hoped it would once again be able to challenge clubs like Chelsea, which has benefited hugely from wealthy foreign ownership, for the Premier League title.
But so far the Americans have failed to deliver a real turnaround in the club's fortunes, and another potential buyer has now emerged.
Dubai's sovereign wealth fund, Dubai International Capital (DIC), sits 3,500 thousand miles from Merseyside.
The danger is that a country which is as open as Britain to foreign investment eventually just becomes the kind of plaything for the political whims of foreign powers Jeremy Warner, The Independent
It already has considerable stakes in UK companies, including Travelodge, The London Eye, Alton Towers, HSBC and the London Stock Exchange.
Like many sovereign wealth funds based in the Middle East, its objective is to diversify and invest for a future when the oil runs out.
Spending its money at home is not an option because it could trigger high inflation so instead, the profits accumulated from oil and gas are heading to the UK in the form of large investments in UK companies.
Selling the family silver?
Great for the credit crunch you might think, but not everyone is happy.
They are going to be very big players and that shouldn't worry us Lord Patten on sovereign funds
"As these foreign powers grow in wealth and influence the danger is that a country which is as open as Britain to foreign investment eventually just becomes the kind of plaything for the political whims of foreign powers," says Jeremy Warner, from The Independent.
"Dubai buying Liverpool may not be much of an issue, but when it comes to a utility or a major bank it could well be."
So could sovereign funds try to wield political influence in the UK or is that paranoia?
TAQA, the Abu Dhabi Sovereign Wealth Fund, invests in and runs energy companies around the world, but its chief executive Peter Barker-Homek denies its motives are anything other than money-making.
"I think they've proven themselves to be a stabilizing influence in the world." he says of sovereign funds in general.
Their investments have helped stabilise the global financial markets Open University
"They've put to work billions of dollars to stabilise the banking system in Europe and specifically in the US."
Indeed, many western banks have turned to SWF cash to offset the effects of the credit crunch.
Citigroup, Merrill Lynch, UBS, Barclays and Morgan Stanley have collectively accepted more than $50 billion from funds in Singapore, Kuwait, Saudi Arabia and China.
'Fear of the Dragon'
The increased wealth and influence of China is the latest and most complex part of the SWF story.
China has accumulated a huge amount of cash - more than $1.5bn trillion - from the sale of its cheap exported goods and now it wants to invest it.
But part of the problem is to do with openness - or the lack of it.
"These funds are un-transparent," says Jeremy Warner.
"They're frequently run either directly by government officials or by government cronies. So although we have not yet seen any cases of outright abuse, it's quite possible that we'll get them and, in fact, I think it is extremely likely over the next five to 10 years."
Critics point to China's record on human rights.
"If we come to the crunch about issues like Taiwan, Tibet, things where we are strategic competitors in a way and we don't agree, does that mean we are going to be very muted in our response, that we're going to be obliged to react less strongly than we did before?" says Kerry Brown, of the Asia Programme at the Royal Institute of International Affairs.
But supporters of sovereign funds argue that their willingness to invest outside their own countries is good for the global economy.
"They are going to be very big players and that shouldn't worry us," says Lord Patten of Barnes, the last Governor of Hong Kong.
"Would we prefer the countries of the gulf to be earning all that money and burying it in the sand? Would we prefer the Chinese to be simply hoarding the money, or bailing out our banks and investing it in potentially profitable investment opportunities in the UK or Germany or France or America?"
Here to stay
Sovereign funds may well be the biggest and most powerful financial force most people have never heard of, and a symptom of economic power shifting from west to east.
SOVEREIGN FUNDS BY ASSET SIZE
United Arab Emirates: $875bn
Norway: $380bn
Singapore: $330bn
Saudi Arabia: $300bn
Kuwait: $250bn
China: $200bn
Libya: $50bn
Qatar: $50bn
Algeria; $42.6bn
Source: Morgan Stanley (all estimates except Norway)
"By 2012, sovereign wealth funds will have about $7 trillion to invest worldwide," Peter Barker-Homek predicts.
In fact as some bankers have said, perhaps the biggest danger is that the sovereign investors go elsewhere.
As the credit crunch continues, people will not only be asking whether we can we afford to risk accepting sovereign investment, but can we afford not to.
The Money Programme: Who's Buying Up Britain? BBC2 at 1900 on Friday 1 August.
Story from BBC NEWS:
