Gordon Brown Asks Gulf Wealth Funds to Invest in U.K.

By Gonzalo Vina

Nov. 2 (Bloomberg) -- U.K. Prime Minister Gordon Brown urged sovereign wealth funds from the Persian Gulf to invest in British companies needing more financing because of the credit crunch.

Brown arrived in Riyadh late yesterday with Business Secretary Peter Mandelson, Energy Secretary Ed Miliband and a delegation of business leaders to encourage funding from cash- rich oil producers.

``The Gulf states will have a vital role to play in agreeing the plans to get the world economy moving again,'' Brown told reporters before arriving in Riyadh. They ``are an increasingly important source of inward investment to the U.K. As long as they play by our rules and operate in a commercial manner, we welcome investment from sovereign wealth funds.''

Barclays Plc, Britain's second-biggest bank, earlier this week said it would raise 7.3 billion pounds ($11.8 billion) by selling securities to investors including funds in Abu Dhabi and Qatar. Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi's royal family, will become its biggest shareholder.

Sheikh Mansour will collect interest payments of as much as 14 percent and control 16.3 percent of the London-based bank after putting up 5 billion pounds ($8 billion), the company said in a statement yesterday. Barclays fell 13 percent after analysts at Sanford C. Bernstein & Co. said the bank was paying a ``fairly expensive'' price for the capital injection.

Energy Projects

Brown's visit coincides with the signing of a number of deals in which Gulf states will invest in renewable energy projects in the U.K.

``Gulf oil and gas revenues have provided masses of finance for the region, but will now also be used to help kick-start the British green energy revolution,'' Miliband told reporters. ``Gulf states recognize the U.K., too, has natural assets to offer investment opportunities for them.''

BP Plc Chief Executive Officer Tony Hayward, Centrica Plc CEO Sam Laidlaw and Royal Dutch Shell Executive Director Malcolm Brinded were among business leaders accompanying Brown.

The initiative comes at a time when oil-rich states are suffering from a plunge in oil prices. Brent crude futures prices have fallen by more than half from a record of more than $147 in July.

Political Interference

Mandelson, a former European Union trade commissioner, said he wants more money from the region to go to the U.K. and that he didn't anticipate difficulties with political interference.

``We haven't had a problem with sovereign wealth funds in the past, so I don't see why it should be a problem in the future,'' he said in an interview. ``They want to generate a good return. They are the first to steer clear of politics.''

Separately, Brown reiterated the need for gulf states to boost the International Monetary Fund's $250 billion cash supply by ``hundreds of billions of dollars.''

``If we are to stop the spread of the financial crisis, we need a better global insurance policy to help distressed economies,'' Brown said. ``That is why I have called for more resources for the IMF.''

Countries including Saudi Arabia will probably contribute more to the IMF ``so we can have a bigger fund worldwide,'' Brown said. ``I think people want to invest both in helping the world get through this very difficult period of time, but also I think people want to work with us so we are less dependent on oil and have more stability in oil prices.''

Arab nations and china haven't been represented enough on international bodies such as the IMF, he said.

To contact the reporters on this story: Gonzalo Vina in Riyahd at gvina@bloomberg.net