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 center 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 conceive. 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 subsidize 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.
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