March 23, 2025 - 1:15pm
This week, it was reported that Norway’s sovereign wealth fund has bought a quarter of London’s Covent Garden real estate for £570 million. The news comes just two months after Norges purchased a £306 million stake in the capital’s coveted Mayfair district from the Duke of Westminster. Norway’s central bank even owns a shopping centre in Sheffield. So what is going on here?
These locations are merely part of a long list of lucrative British assets which have been bought by overseas governments and companies. That list includes offshore energy sites, regional airports, cyber security operations, British Steel, Thames Water and further crucial infrastructure.
London, the proverbial family silver, has been increasingly sold off in recent years. Over 50% of offices in the City are now owned by foreign investors. Oxford Street, the capital’s iconic shopping district, is dominated by overseas capital. The build-to-rent boom, exploiting the housing crisis, is increasingly driven by money from global institutional investors.
The London fire sale is not a bug but a feature of Britain’s national economic system. To fuel unaffordable spending and avoid rampant inflation, the value of London’s assets (and those of other major UK cities) needs to be kept artificially high. That means encouraging scarcity and allowing for rampant rentierism.
London is a window into a wider problem. The sad truth is that Britain still has a lot of wealth in it, but it is increasingly not our own. Instead of being the workshop of the world, we have become the world’s safe deposit box.
At the heart of this was a disastrous policy decision which only fantasy economics could bring about. Politicians and economists came to believe that it was not important for the UK to remain a producer country with a trade surplus. That, they thought, was a mug’s game: just keep spending and the money would be found, and the global market would balance itself out.
In 1978, exports were equivalent to 20% of UK GDP. By the late Nineties, this had fallen by a quarter to 15%. Shockingly, the last year when the UK had more money coming in from overseas earnings than it had to pay out for imports was in 1983. The cumulative deficit since that year is £1.3 trillion, equivalent to roughly £20,000 for every person alive in the UK today. It does not take an economist to figure out that if you keep going like this, you are not going to stay wealthy for long.
Unsurprisingly, to pay for everything we have bought from overseas, from avocados to zinc, the rest of the world has asked for something in return. This is why British property is being snapped up by overseas investors, why businesses are increasingly foreign-owned, and why a quarter of all UK Government debt is owned overseas.
To take one example, the total stock of business share capital and reserves owned by overseas investors has increased by £500 billion in the last four years. This matters because these businesses are our future income. It’s like a worker sacrificing a portion of their salary from five years in the future so that they can buy something today. This may not be too damaging as a one-off, but doing it every year for 40 years will lead to bankruptcy. Worryingly, the Government’s recently published Industrial Strategy is essentially a brochure for global investors to come and buy our most productive and profitable assets. The fire sale continues to avoid painful choices at home.
This weak financial position is also why the UK remains in a perpetual state of austerity and high inflation. Everyone agrees that we are not investing enough, but at the same time we are selling off the very means of investment to fuel our day-to-day needs. What’s more, Britain’s tax base is losing people to the benefits system and old age, yet public services won’t pay for themselves.
If the UK is to become wealthy again, it will take more than just a few wealth funds. It requires bold choices such as living within our means and increasing taxes in the short term on British consumers to subsidise the export industries we have run down over previous decades. It would require a new realism on ownership of British assets, supporting domestic ownership as much as possible.
This is not a call for autarky. Trade and investment is good, even necessary, in a perfect world. But it needs to be balanced: the British people should benefit from the returns on our most lucrative assets. If the correction doesn’t start soon, we’ll need to find a few spare Covent Gardens to sell each year.
Andrew O’Brien is the former Director of Policy at the think tank Demos and currently Head of Secretariat of the Independent Commission on Neighbourhoods. He writes in a personal capacity.
ADOBrien88
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
Subscribe“increasing taxes in the short term ”
Take a look at the current tax burden before suggesting such things. It’s at a historic high:
https://obr.uk/box/the-uks-tax-burden-in-historical-and-international-context/
What we need is to abandon all NetZero nonsense, stop importing people who are a net drain on public finances, and radically cut back on the size and scope of government activities.
And find a way of making some people work a lot harder.
Tell that to Labour and the Tories. Both are behind it and can no longer help themselves.
Yes, increased taxes! Always guaranteed to make people save and invest.
While we’re at it let’s subsidise manufacturers who can’t sell their products otherwise.
And all with a back-drop of expensive green energy! What could possibly go wrong?
Has this man ever had a job where a profit has to be made? I haven’t looked it up…but what’s the betting?
Major part of the problem is that we fell for the get-rich-quick idea that financial services can make one wealthy as a nation. The global economy is a giant ponzi scheme and UK is a major player. Of course services can be of economic value, but no nation can be safe in the long term without actually making something to back up the money in the national ‘bank’.
An “open” or “liberal” economy is just one without defence mechanisms — economic or social. What did you expect? That Britain wouldn’t be asset-stripped?
They’ll have to be clever to carry away the real estate. It’ll stay in Britain no matter who owns it.
The old London Bridge is in the US somewhere, and Adolf H had plans to rebuild Rochdale Town Hall, stone by stone, in Germany…
But, yes, your point stands. “Ownership” is, in any case, entirely dependent on certain agreed principles.
You might change your mind when illegals look down at you from the high rise built next door.
“It’ll stay in Britain no matter who owns it.”
Except, of course, the important bit—the profits—won’t.
The same applies to companies, government debt etc. It’s the way capitalism works. And I don’t recall the country booming under exchange controls.
The end result of Thatcherism, this is the result of 40 years of neoliberal economics which has been gleefully followed by both parties
Thatcher didn’t come out of a vacuum.
The problem with Britain and much of Europe IMO, there is no export industry. While there are many businesses that export goods to other countries, I can’t think of something I consider British industry, like oil and gas in Canada or coal in Australia. London is one of the most important financial centres in the world, which basically props up the entire economy.
of course the UK owns more debt of others , then other’s own UK debt.
the UK is the 3rd largest holder of US debt, just shy of the amount China owns. Of course most of these are private funds, who in turn are owned by shareholders from countries not just the UK
the reality most of the time, X country owns this,is meaningless in most cases, who actually owns most of these companies, most of them like Apple can they really claim to be American, when the majority of their shareholders are probaly not even American
i used to work for a hedge fund of around 6 people, for a period of around an hour we where the largest shareholder in Volvo, we brought it, sold it within an hour, made a nice profit.
That was fundamentally 1 guy in N London who was the largest shareholder of swedens at the time 2nd largest company, the concept of sovereignty for these companies is meaningless. for that 1 hour was volvo no longer a swedish company
I feel this article has a certain naivety about it. As far as I can tell the British decided what kind of country they wanted to be back in 1979. And that doesn’t look like Germany or Japan who’ve made a different decision. The main export Britain has today is a functioning legal system, and political stability (and a relatively open society but these last two may be changing being pushed too far). That such a high proportion of British assets are foreign owned means that it’s working.
The biggest threat to this set up is a deranged Woke establishment that will go rogue for social justice – speaking nothing yet of the brewing populist reaction to its excesses. These are simply too expensive luxury beliefs for a country that’s just about managing. Witness what’s happening in Delaware, in the scramble to halt companies incorporating elsewhere after one too many Woke judicial activism instances. To my surprise the picture perfect member of the virtue signalling class Keir Starmer seems to get this, so there’s probably still chance for the deal old Blighty.
I’d like to understand how to become an export player when
Electricity is very expensive
Taxes are very high
Regulations and rules are out of control
We lack a pipeline of high quality stem graduates
We are run by a bunch of clowns with degrees in ppe and history
Fwiw
Selling off one’s patrimony to subsize an opulent and extravagant lifestyle, and borrowing and taxing to make up the difference–because that worked so well for Charles I.
So we have Malaysian and Chinese “investors” who.own empty flats in tower blocks lining the Thames.
Meh.
A most thought-provoking article. Yea though I am admirer of Mr. O’Brien’s work – and in particular around sustaining positive neighbourhoods – could we not think about the hard work of achieving value for money in government spending before voting for more taxation?
“It requires bold choices such as living within our means”.
Aka the A-word, as the gutter press constantly screams at us. This heretic should be burned at the stake for even suggesting such a thing.
Classic short term, kick the can down the road, politics. It started with Margaret Thatcher.
The old must be required to earn their keep.
They’ve already done so, by paying tax and NI all their working lives.
Many already do. God knows what people do without a job to do, or other useful purpose in life. Older people tend to have a work ethic.
I had intended to work until I was 80 but I got a heart attack when I was 78. Should I go on working?