From Canary Wharf to Camden Market to keeping the heating on – the tiny oil-rich state is becoming one of the most powerful forces in London
- Qatar’s mission: move beyond hydrocarbons and diversify its huge wealth.
- How? By investing over £10bn into London.
- Keeping London warm: by 2025 as much as 75 per cent of the UK’s energy could come directly from Qatar.
London’s age of industry is long dead. A forgotten landmark, Battersea Power Station looms forlornly over the Thames – more akin to Miss Havisham’s house than the world of business.
The iconic power station has sat decommissioned and redundant since the early eighties, looking for regeneration ever since. Now it looks to have found a “saviour” – one in the shape of an emirate the size of Yorkshire.
Situated on the easterly coast of the Arabian Peninsula, the tiny State of Qatar bailed out Barclay’s in 2008 – saving the tax payer a hefty bill in the process.
This time it’s the hugely indebted Treasury Holdings – the redundant station’s development fund – looking for the bailout. Talks are under way which could lead to Qatar Diar, the property arm of Qatar’s vast sovereign wealth fund, taking a 50 per cent stake in the company.
That this iconic power station’s fate may soon be in the hands of the Qatari royal family is emblematic of our time; one where London is gradually being born again thanks to the emirate’s petrodollar.
So far the Qatar Investment Authority (QIA) – the chief investment vehicle for Qatar’s sovereign wealth fund – and its various subsidiaries are thought to have invested more than £10bn into London.
That’s more than Mozambique’s GDP.
Qatar’s GDP on the other hand is about 128 times that. Geographically, it’s 67 times smaller.
The QIA and its web of subsidiaries
- The QIA owns 100 per cent of Qatari Diar
- Qatari Diar owns 45 per cent of Qatar Barwa Real Estate, the rest is traded on the Doha Securities Market
- Qatar Holdings is an “indirect subsidiary” of the QIA and recently acquired Harrods.
These companies hold chunky stakes in Barclays (Qatar Holdings: 6.68 per cent), the London Stock Exchange (QIA: 20 per cent), Canary Wharf (Qatar Holdings: 24 per cent) and Sainsbury’s (QIA: 15 per cent).
There’s also Chelsea Barracks, the US embassy building in Grosvenor Square, the Chelsfield retail project and about 20 per cent of Camden Market. Yes that’s correct, Camden market – dreadlocks, marijuana and, er, Qatar.
As for the real estate of QIA and its network, attention-seeking showstoppers include: 1 Hyde Park, the Shard, and Park House.
And it doesn’t end there.
Sitting on some of the largest oil and gas reserves in the world, the country once described as “possibly the most boring place on earth” by Lonely Planet is now powering our city twofold: through its financial investment and through its gas.
Around one sixth of the UK gas demand is met through Qatari imports. Three years ago none of it did. So what happened?
Keeping us warm: the rise of Qatar’s liquefied natural gas
This rise in natural gas imports is largely because of the South Hook Terminal in South Wales – the largest liquefied natural gas terminal in Europe.
South Hook Terminal is 70 per cent owned by state-owned Qatar Petroleum. Ships carrying liquefied natural gas are taken from Qatar to the Welsh terminal before being converted back into gas and fed into the UK national distribution network.
South Hook Gas estimates that by 2025 Qatar could provide 75 per cent of the UK’s energy
Why is this so significant? Heralded by many as the future for energy, liquefied natural gas is one of the cleanest-burning fossil fuels and plays a vital role in helping the UK meet its CO2 emissions targets.
This has particular implications for smoggy London, which faces an EU fine of £300m for failing to reduce its air pollution. Ouch.
With North Sea gas production in decline since 2000, the UK is fast moving away from an age of self-sufficiency, and Qatar’s natural gas exports are stepping in to plug the gap and ensure our central heating stays on.
London-based import company South Hook Gas, which manages the terminal’s gas production and is also majority-owned by Qatar Petroleum, estimates that by 2025 Qatar could provide as much as 75 per cent of the UK’s energy.
Qatar is powering us in more ways than one. It’s also housing us.
According to research by BNP Paribas Real Estate, our City banks alone will “need four Shards of City space in the next three years” to accommodate an estimated total of 11,500 extra employees in financial services.
According to BNP Paribas the City alone will “need four Shards of city space in the next three years”
This means at least 1.6 million sq ft of extra space is needed purely for banking growth requirements, notwithstanding the other sector requirements within central London.
Helping serve those other sector requirements will be Park House on Oxford Street. Due for completion in November next year, Park House includes 87,660 sq ft of retail space; 163,010 sq ft of office space and 58,500 sq ft of housing.
Managing the site’s development is Land Securities, which forward-sold Park House to Barwa Real Estate in June 2010 for £250m.
Selling the family silver
Tony Dolphin, senior economist at the Institute for Public Policy Research (IPPR) believes this level of investment by Qatar is by and large “a good thing”, but points to the seemingly inherent uncertain longevity of foreign investment.
Referring to QIA’s stakes in British companies such as Sainsbury’s, Dolphin questions the investor’s stability, asking: “Is this investment stable and long-term relative to other potential investments in these companies?”
Dolphin also makes the rather uncomfortable point that, “one worries that if we upset the Qataris in some way, will they will take it back?
“There’s an extra danger there of that.”
“The problem is, we’re not investing and saving enough here, so we have to sell our assets to cover the gap”
Tony Dolphin, senior economist at IPPR
Danger aside, he sees the UK as having little choice but to keep “selling the family silver”, and that it has been doing so for 20 years.
Less happy about the “adjustment” are trade unions Unite and GMB. GMB’s general secretary Paul Kenny has branded the Qatari royal family “playboy employers”.
The GMB accused QIA of setting unreasonable rents at Southern Cross care homes, which then union claims are half-owned by QIA.
With placards emblazoning angry messages such as “Stop the right royal Qatari rip-off of Britain’s elderly”, the GMB union has been embroiled in a year-long campaign to bring rental fees down, whilst demanding a higher level of transparency over where the proceeds from the care homes are going.
A spokesperson for QIA has branded the union’s campaign a complete “red herring”, claiming that the investment vehicle has no influence over Southern Cross at all.
“QIA has, only an indirect, passive, ownership interest in NHP, a company which holds property assets. It does not, and has never had, an ownership inte
rest in Southern Cross, which operates the property portfolio of NHP.
“In any event, QIA’s involvement is irrelevant since NHP, having breached its main debt covenant in March 2009, is being managed by a special servicer, Capita Asset Services UK on behalf of the company’s creditors.”
Capita and Southern Cross declined to comment.
Unite’s complaint is with Harrods’ plan to move one of its depots out of West London. Qatar Holding bought Harrods from Mohammed Al-Fayed last May and, according to the union, Al-Fayed promised not to move the depot – a move Unite claims would cost hundreds of jobs.
Harrods, however, has confirmed that it is moving the distribution centre, and says the 200 staff at its existing Osterley site has been kept “fully aware of the developments, with Unite kept involved in discussions throughout”.
But of course, protest between unions and big business is nothing new: they are as old as the day we stood on the shoulders of coal and iron ore.
It’s just that now we sit, perhaps a little uncomfortably for some, on the backs of Sheiks and emirs while they piggy-back us out of recession – helping us to keep our heating on in the process.
- Qatar: “Possibly the richest place on earth”?
- About half the size of Wales, Qatar has been ruled by an absolute monarchy for more than 100 years.
- Qatar’s Emir is Sheikh Hamad bin Khalifa al-Thani, who kicked out his father in 1995.
- Qatar’s PM is the Emir’s second cousin, Hamad bin Jassim AlThani.
- Overshadowed by its big brother Dubai, the state has been overlooked in recent times, yet its nominal GDP has been growing at an average of 15 per cent.
- Estimates for its 2010 GDP put it at $128bn, with its growth rate at 19 per cent.
According to David Roberts of the Qatar branch of the Royal United Services Institute (RUSI), it’s partly this wealth that explains why Qatar escaped the Arab Spring:
“Qatar is one of the richest countries on earth. The Qataris are very well satisfied, the majority of people are perfectly happy. Qatar doesn’t need democracy… The notion that democracy would solve all our problems is rubbish,” he says.