Review: UK corporate servants neglect their manor

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Workers walk to work during the morning rush hour in the financial district of Canary Wharf in London, Britain, January 26, 2017.

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LONDON, March 11 (Reuters Breakingviews) - It’s been a tumultuous week in London. With much of the world’s attention focused on the war in Ukraine, it was easy to overlook the significance of the British government’s decision on Thursday to belatedly freeze the assets of a handful of oligarchs including Roman Abramovich, the owner of Chelsea soccer club read more . Given the United Kingdom’s status as a preferred destination for global plutocrats, however, anyone who thought the British capital was still a safe place for dubious wealth will have taken notice.

Russian President Vladimir Putin’s invasion has prompted a long-overdue examination of the welcome that Britain extended to his wealthy compatriots over the past three decades. Many of the politicians, bankers, lawyers, and other professionals who served the oligarchs have quietly distanced themselves from their former masters. Yet for all the headlines about cleaning up “Londongrad” there’s less discussion about what made the United Kingdom such an appealing destination.

Oliver Bullough has spent years examining this question. His 2018 book “Moneyland” portrayed the global network of tax havens, shell companies and private banks as a country whose borders were only open to those with enough cash. In “Butler to the World: How Britain became a servant of oligarchs, tax dodgers, kleptocrats and criminals” he deploys a similarly vivid metaphor to describe the lackey who opens those doors.

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For Bullough, Britain’s transformation into a concierge for the global elite started with the loss of its colonies after the Second World War, culminating in the humiliation of the 1956 Suez conflict. He explores the ways in which the country and its former offshoots found a new role: The City of London facilitated the trade of U.S. dollars offshore; the British Virgin Islands transformed itself into a tax haven; Scottish law permitted the creation of anonymous limited partnerships; and so on.

In the process, Bullough writes, Britain became “an amoral enabler-for-hire, an enforcer-for-cash, which hides the reality of what it’s doing behind quaint traditions, literary allusions, immaculate tailoring, references to the Second World War and a supercilious manner”. The consequences of this globalised system are felt elsewhere: The victims of fraud and crime are in countries like Moldova and Ukraine, while the proceeds end up in Scottish legal entities or real estate in London’s wealthy South Kensington district.

The transformation was not the result of some malign government plan. Instead, it grew from realism about the limits of Britain’s influence, a reluctance to exert too much control over small offshore territories, and an obsequious attitude to wealthy foreigners. Above all, there was a reluctance to do anything that might make London less attractive to foreign capital or hand an advantage to rival financial centres.

Britain’s departure from the European Union only strengthens this defensive impulse. There’s a deep irony that campaigners who viewed Brexit as a way of reviving the country’s glorious past are enthusiastic participants in pandering to rich foreigners. Even the supposedly bureaucratic European Union has proved more ruthless about seizing sanctioned oligarchs’ yachts than the self-styled buccaneers of Global Britain.

The backlash against Russian wealth may yet lead to a broader reckoning. However, there’s little evidence that Britain is ready to rethink the system that made it so attractive to people like Abramovich. A more realistic outcome is that tycoons from Brazil, China or the Middle East will buy the mansions and country estates vacated by the Russians, install the same former government ministers on their advisory boards, and set up charitable foundations to lubricate their entry into the UK establishment.

It’s telling that even as Abramovich is seeking to offload Chelsea, Saudi Arabia has bought Newcastle United soccer club in a deal that required the Premier League to accept the fiction that the country’s sovereign wealth fund is not under government control.

The problem is that a once-grand house staffed by a helpful butler is looking past its best. Britain’s appeal depends in large part on a stable democratic government and well-functioning legal system. But tycoons have chipped away at the legitimacy of democracy with large financial donations and political favours, while their lawyers use British courts to intimidate commercial rivals and investigative journalists. The global wealthy will always be able to find another more amenable corporate servant. Britain’s foundations will be harder to repair.

Follow @peter_tl on Twitter

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

CONTEXT NEWS

- “Butler to the World: How Britain became the servant of oligarchs, tax dodgers, kleptocrats and criminals” by Oliver Bullough was published by Profile Books on March 10.

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Editing by Swaha Pattanaik, Karen Kwok and Pranav Kiran

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