New research by Rex McKenzie and Rowland Atkinson shows the scale of inward offshore investment into Liverpool and the effects in the city.
We have recently been working with Land Registry data on Overseas companies that own property in England and Wales. This fascinating data offers a glimpse into the private, offshore companies that own property in England and Wales. We turned our attention away from the bright lights of the mega finance economies of a city like London that we had covered in our earlier work to the Merseyside area, connecting the new registry data with interviews with key actors in the city-region. Our goal was to gain insight into the impact of offshore investment in the area’s real estate in a context of extreme social depression. Unlike our work on Kensington and Chelsea we worked from a hunch and initial data analysis suggesting that even in such distressed conditions there was significant interest and value to be gained from tax-advantageous ownership overseas. Read more about our findings in our recent working paper.
Tax havens and offshore ownership have been mainstreamed by a series of recent reports and can be linked to proposals for a wealth tax in many countries, and the recent work by the US to create a universal minimum tax level to reduce the incentive to use offshore. Our work fits into this agenda, particularly so given our concern to enumerate the kind of impact offshore has, and its relative contribution or hoarding effect on a city, like Liverpool, and a region like Merseyside which so desperately requires investment. Liverpool has for some time been recognised as a changing city, one in many ways keen to sideline its reputation for poverty, physical decay and a struggling labour market alongside other issues and problems. The culture-led renaissance pinned to key developments (Tate North) and event planning (City of Culture, 2008) have linked to a development-led attempt at bolstering the local economy. Liverpool’s changes can be seen in the iconic changes in the built environment. The massive sale and de jure privatisation of an entire sector of the city in the form of the One Liverpool shopping district and the continuing rebuilding of the city’s waterfront and related new housing developments in the city are key elements of these changes.
Underlying these physical changes are the turnings and energy of global capital flows, monies from wealthy investors and co-ordinated development actors using the raw material of the built environment as a means of extracting gain. The repositioning of Liverpool as a city of culture, with theatres, music venues, coffee shops and wine and tapas bars has meant that among other things the city’s real estate has attracted serious investment from domestic and overseas landlords looking for high yielding investment opportunities. Liverpool and the Merseyside area is now one of the best places in the country for landlords seeking the highest of rental yields.
Interviews showed a general lack of direct knowledge and awareness of offshore investment as a direct influence in the city. Nevertheless, some of those we spoke to were keen to draw attention to the way in which non-UK money was important to the funding of particular projects in the city. Most of those we spoke to found it hard to identify the scale or location of flows of offshore monies. This is not in itself particularly surprising, but the interviews provide further insight into the nature of these flows, its effects on city and social conditions and the wider political culture and ramifications of such investment.
The data from the Land Registry had one striking limitation – between 2000 and 2020 there were 2,913 transactions but of these 2,066 had no recorded price. Thus, a realistic estimation of the value of unrecorded investments proved beyond the scope of our investigation. The data we collected showed that Merseyside property owned offshore was dominated by a few key jurisdictions. Jersey registrations stand out, with 1,050 property registrations (out of a total of 2,873) that cost just over half a billion pounds. The Isle of Man, Luxembourg, Guernsey and the British Virgin Islands are also significant actors in the region.
Offshore, in Britain’s cities
What are the wider effects of inward offshore investment in a city like Liverpool?
From our interviews we learned that offshore investment could be located in a broader anxiety about the direction of the city’s political management of the local economy. Notably this was understood as comprising historical legacies of underinvestment, local poverty and a boosterism located firmly in the real estate and land economy of the city. In short, there is a distinct political dimension to the story of offshore and international investment that is obviously not captured in the way that local key actors discuss land, housing and property in the city currently. While there was a clear understanding of the limits of inward investment this was also tied to a longer-term politics of austerity which had pushed local, city politics into a position in which external money was sought out. Offshore inward investment is particularly courted therefore because of the absence of wider, national supports and frameworks for inward investment to offset historical losses.
From the Land Registry dataset we learned that offshore inward investment centred on specific postcodes and could be distinguished via the use of land and property that it targeted; in Liverpool (L15, L2 and L3 post codes) this was buy to let property aimed at students. In Southport (PR8) and on the Wirral (CH61), senior citizen residences and in St Helens we found that offshore took aim at rent extraction. The rest of the Liverpool and Merseyside area was virtually untouched by offshore investment.
Our work revealed that despite depressed house, commercial and other land values, a deprived area like the north west of England and an impoverished city may offer rich pickings for investment capital. In such locations capital may be invested to take advantage of higher rental yields and asset value appreciation. Few barriers appear in such political jurisdictions which in reality act to funnel and conduit offshore funding to help develop infrastructure, key sites and generate related economic activity in the absence of structural and central government funding mechanisms. It seems that UNESCO’s decision to withdraw world heritage site status from the city’s waterfront may be part of a growing criticism of the growth at all costs model that the city has pursued in recent years. Yet this is symptomatic of the embedding of finance into urban life more broadly, the point now is to continue to dig into the data sources that will help cities to be wrested from the jaws of predatory capital.