On October 7, 2021, thousands of Newcastle United football fans gathered at the entrance of St. James’ Park. Across a sea of black and white Newcastle shirts, several supporters waved green flags bearing the Islamic testimony of faith: “there is no God but God. Muhammad is his prophet.”
A new era under Saudi Arabia’s Public Investment Fund (PIF), following the sale of the club by retail magnate Mike Ashley, had begun. Newcastle now boasted the world’s wealthiest owners. Ecstatic supporters danced and drank long into the night.
Like all English football clubs, Newcastle is a vital source of local pride, pleasure and often frustration. These teams not only carry strong emotional significance but also represent core social and economic institutions within typically faltering English local economies.
Football clubs draw national and sometimes international tourists into regional towns and cities, filling pubs and restaurants on match days. Indeed, the promotion or relegation of a team—and thus the rise and fall of its reputation—often has multiple and compounding socioeconomic impacts on entire cities.
From a British perspective, Gulf investments in Northern England are bound up within the so-called “levelling up agenda”—a Conservative government policy programme intended to reduce economic inequality between the South East and the English peripheries.
For their part, the oil sheikhdoms are willing to buy Northern Football clubs, either directly through the Saudi sovereign wealth fund or through private investors with strong links to governing regimes. While such investments may help remedy the Gulf’s international image, these clubs also represent “undervalued assets” and therefore potentially strategic long-term investments.
Turning a club around and boosting the local economy can translate into political influence and an ability to shape policy agendas favourably for Gulf capital investment and wealth extraction, thus fulfilling strategic objectives of the Gulf Cooperation Council (GCC) to diversify away from oil.
Britain’s economic divide
Taken as a statistical whole, the North of England suffers from high levels of poverty, poor public health and rapidly decaying infrastructure. The South East, by contrast, suffers from what economists might call a problem of “overvalued assets.” The extreme concentration of economic activity in the South East feeds the region’s housing crisis, exorbitant rents and house price bubbles.
Since 2019, investments from GCC countries in North England have notably increased. The Bank of London and the Middle East, Europe’s largest Islamic bank, credits the levelling up agenda with boosting regional infrastructure and connectivity with the Gulf. As a result, the Bank notes, “regional investments now offer the prospect of stronger returns.” The North of England is emerging as an enticing prospect for state investors, especially those with enough capital and an eye for long-term profit extraction.
The fates of England’s North and the Arabian Peninsula are deeply entwined. The rise and fall of their prospects mirror each other within the economic history of the twentieth century. The collapse of British manufacturing and coal mining—the pinnacles of the Northern economy—coincided directly with the age of high oil prices and the rise of OPEC. As Britain rapidly de-industrialized in the 1970s, the Gulf was reaping the super profits of that decade’s oil crisis, consolidating ownership of its resources and amassing foreign currency that required urgent re-investment.
More substantial direct Gulf involvement in the British economy first materialized in the British banking sector in the 1980s. Skyrocketing oil prices during the 1970s had coincided with the beginnings of financial liberalization in the City of London. During the 1980s, the Saudi Arabian Monetary Agency consolidated Gulf investments in London by creating a branch of the Arab Bankers’ Association.
Gulf expansion into petrochemicals was, in part, supported by a $300 million credit package guaranteed by Barclays Bank International. Soon, cheap Saudi petrochemicals began to out-compete British petrochemical industries in Manchester and Scotland. In turn, factories in the North began producing Tornado fighters for Saudi Arabia and Oman. By the mid-1990s, BAE systems, the British multinational security and arms company, had secured several key arms export contracts to Saudi Arabia.
In the early 2000s, GCC investors began to expand their focus beyond the purchasing of weapons produced in Northern arms factories and toward British sports teams. In 2003, the Manchester Evening News reported that a mega-rich consortium from Saudi Arabia, Russia and Europe was planning to purchase Manchester United. While the sale never materialized, GCC interest in the North persisted.
In 2008, Saudi Telecom, the Saudi state’s telecommunication services provider, signed a long-term cooperation agreement with Manchester United.
A decade later, the Saudi state formalized its cooperation with Manchester United, a partnership that would result in Manchester United lending its expertise to Saudi Arabia’s football teams.
In 2019, Arabian Business reported that Mohammed bin Salman’s $3.9 billion bid to buy Manchester United had been rejected.
GCC investments in Northern football feed into a symbiotic relationship, wherein reputation management or “sportswashing” complements the money-making potential of football itself. Moreover, by owning emotionally resonant and culturally prized Northern assets, GCC investors can seek to further shape broader regional politics in ways favourable to future GCC portfolio expansion.
Saudi Arabia’s Newcastle purchase might likewise be framed as an attempt to generate goodwill with local decision-makers, allowing Riyadh to shape the local and regional regulatory environment to further capital diversification and wealth extraction.
An uncertain future
It is not only their access to oil that makes GCC countries crucial to the British economy but also their willingness to act as domestic investors. As Britain moves into a post-Boris Johnson period, it seems unlikely that any successors will seek to stem the petrodollar flow.
Instead, this troubling symbiotic relationship will likely strengthen further, with an intensified confluence of interests between cash-strapped post-industrial Northern English towns and cities, on the one hand, and Gulf investment diversification, on the other.
Whether these investments will succeed in reversing the North-South divide—and at what cost—remains to be seen.
A longer version of this article was originally published by the Middle East Research and Information Project (MERIP) at https://merip.org/2022/11/the-gulf-and-the-british-regional-divide/