London’s new prosperity has once posh types feeling poor.
One recent autumn morning, the harsh realities of life in today’s London hit one wellborn gentleman over the head. It was damp and chilly outside, the skies were a mottled gray, and the man, who works in the art world, was on his way to a breakfast appointment. “I was in Notting Hill, and I saw the little children in their uniforms walking to school at Pembridge Hall and Wetherby,” says the consultant, referring to two top private elementary schools, the latter of which was attended by Princes William and Harry. “And there was my own kid, going to state school down at the bottom of the hill. For the first time in my life, I felt working class.”
The Eton-educated Englishman, who asked not to be named, runs his own company and earns about 125,000 pounds a year, or $250,000. But that’s nowhere near enough to support his wife and three children in the style to which he was accustomed. When he was growing up in Kensington, a full staff manned his family’s seven-bedroom home; weekends were spent at his grandmother’s country estate; and trust funds took care of his tuition. But the trusts dried up, and he opted for a career in the arts rather than in banking. Now he’s fretting over expenses big and small, from school fees to dinners out. “I am desperate to give my kids the same kind of opportunities I had—and I’ll feel a total failure if I don’t,” he says.
Says one art collector who just bought a new vacation home, “In London we’re ’comfortably’ poor. We’re swimming on the edges of real wealth.”
Lady Kinvara Balfour, whose father is an earl and whose uncle is the Duke of Norfolk, is another member of the increasingly pauvre posh set. A playwright and London editor of dailycandy.com, she knows she’ll have to “work my socks off,” as she puts it, to give her children an upbringing like her own. Balfour has seen several friends with new babies move to once unfashionable (and not always safe) neighborhoods such as Hammersmith and Brixton. Nowadays, of course, central London real estate is only for the very, very rich: The average price of a prime property there is 1.6 million pounds, or $3.2 million, and rising by the hour. “Gone are the days of poodling up to Sloane Square with the pushchair,” says Balfour with a wry laugh.
It happened slowly and sneakily, over the past five years or so: While America was licking its post-9/11 wounds and watching the dollar decline, the British economy was booming. UK housing prices have increased 52 percent since 2002. The pound has touched 25-year highs against the dollar, and billionaires from Russia, India and the Far East have been planting roots in London, their new tax haven. (Part-time residents pay next to nothing.) Bankers, hedge fund wizards and private-equity moguls have been raking in billions thanks to the relatively unregulated financial services industry. Such is the wealth being generated by the City, London’s financial district, that some skilled clerical temp workers there are earning up to $400,000 a year—more than double the typical salary of the editor in chief of a British fashion magazine.
It’s no wonder, then, that London has the world’s most expensive restaurants, with the average meal costing about $80, double that of Manhattan. A decent martini can run $30. And forget about luxury goods. Even a trip to the Abercrombie & Fitch flagship on Savile Row can bleed the wallet dry: Prices are double of those in the U.S. Indeed, Britain’s entire class system has been reshuffled. “Years ago, it was the age of the aristocracy,” says Balfour. “Then came the meritocracy. Today, we’re all having to keep up with the Abramoviches.”
Sure enough, the affluent middle and upper classes—most of whom were privately educated, accustomed to winter holidays in swish Alpine resorts, family homes in Chelsea and weekend houses in the countryside—are feeling poor for the first time in their comfy lives. The tuition fees at private schools, where attendance was once a birthright, are a big part of the problem. Between 2001 and 2006, annual charges have risen by 39 percent. Eton now costs about $18,000 per term—and there are three terms in the school year. One investment banker, who asked to remain anonymous, said the vast majority of his colleagues would not be able to send their children to private schools if they didn’t have jobs in the City. “Of course, it would be a real struggle for them, but you know, tough s—,” he says. “That’s just the way it is now.”
And so genteel types have begun cutting corners—and rebelling against the flashy culture imported by the nouveaux riches. “London isn’t like New York: We still think a lot of money is common and slightly comical,” says writer India Knight. That’s one reason why scions of the old English families are retreating to their private men’s clubs—like Boodle’s, White’s and Brooks’s—for dinner.
“True, it’s difficult to become a member, but once you’re in, membership costs almost nothing, you never have to fight to get a table, and the meals are considerably cheaper than Zuma,” says one London banker, referring to a top foodie haunt.
Some Londoners have caved and begun sending their kids to state schools or “the scruffier private schools,” says Knight (whose own boys are privately educated). “And I can kind of see why,” she adds. “My 13-year-old son recently went to a party at the ballroom in Claridge’s. It must have cost tens of thousands of pounds.” Others are taking more creative measures. Hector Macdonald, an Eton- and Oxford-educated novelist whose latest book, The Storm Prophet, has been attracting critical attention, is seeking his fortune outside the UK. He’s been snapping up houses—not in Belgravia but in Bulgaria, “because they’re cheap and it’s a good investment,” he says.
Even the very rich—those with a net worth of $20 million or so—are increasingly stunned by the money they see sloshing around them. “I can’t complain, because we have a great lifestyle,” says an art collector who lives in Belgravia with her husband and children. “We eat at the best restaurants and just bought a big vacation home. But in the new London, we’re ‘comfortably’ poor. We’re swimming on the edges of real wealth.” By that she means the sort of wealth that buys a private jet or, at the very least, an account with NetJets. “The rich don’t fly commercial anymore,” she says.
Helen Kirwan-Taylor, an American writer whose English husband heads up a hedge fund, is one of the only people on her block in Holland Park without a chauffeur. And her foreign billionaire neighbors are driving her nuts. “They just park their money here, and they’re not interested in meeting English people,” she says. “We’re not even chatting with them at the grocer, because it’s the maids doing the shopping for them. Most of them don’t have any culture—it would be great if they were part of a wave of writers, artists and intellectuals. But these people add nothing; for them it’s all about showing off.”
So is London set to become the world’s next Monte Carlo, a soulless patch of land with the cultural complexity of Euro Disney? “London is what it is because of the creative industries based here,” says Kirwan-Taylor. “And if the intellectual body of the city—the artists, writers, designers, creative directors—can no longer afford to live here, that’s a big risk we’re taking.” Others predict that the growing ranks of the discontented might well spur a new wave of creativity in literature and art.
Gordon Brown and his Labour government might do their part to rebalance the economic scales. This fall, taking a cue from the Conservative Party (which has morphed into the new champion of the middle class), Brown announced plans to raise Britain’s famously low capital gains tax and sting nondomiciled residents living in the UK for more than seven years with an annual flat tax of $60,000. Meanwhile, the latest real-estate data indicates prices in central London are about to level off.
But it might be too late for Balfour, who, like many young London professionals, is contemplating a move abroad. “You can do so much more with your money in America,” she says. “And, you know, I think I’d rather be poodling up to Bleecker Street with the pushchair.”