Mohamed Fayed’s casual relationship with the truth held back his business achievements
Little has been heard from Mohamed Fayed during the last decade.
He sold Harrods to Qatar Holdings as long ago as May 2010 and his other main trophy asset in the UK, Fulham FC, was offloaded to the US businessman Shahid Khan in July 2013.
That latter deal brought down the curtain on a controversial – to say the least – career during which he had been a prominent figure in British business for nearly 30 years.
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Fayed (he added the honorific ‘al’ to his name, despite having no right to, after he arrived in the UK in the 1960s) remains best known to the general public for the relationship his late son, Dodi, enjoyed with Diana, Princess of Wales and for the corrupt payments he made to MPs to ask questions on his behalf in parliament.
Before that, though, the Egyptian tycoon had become a notorious figure in the City and in British business circles for his unorthodox approach and his somewhat casual relationship with the truth.
Many people, including some who should have known better, bought the story that this son of a primary school teacher was, in fact, the expensively educated scion of one of Egypt’s richest shipping families – although he did, in the end, accumulate a fortune the size of which was never entirely clear.
Founding his fortune
That fortune was founded on his early dealings with Adnan Khashoggi, a wealthy Saudi arms dealer, whose sister he married and later divorced.
After working for Khashoggi, his ability as a deal-maker drew him to the attention of the Sultan of Brunei, for whom he worked for a while and under whom he accumulated sufficient wealth to acquire a shipping agency.
He later sought to establish an oil production business in Haiti, posing as a Kuwaiti sheikh, before the samples he had hoped might be crude oil turned out to be molasses.
He eventually had to flee the island after falling out with its monstrous dictator ‘Papa Doc’ Duvalier.
After acting as a middleman in more deals in the Middle East, Fayed pitched up in London, again posing as an Arab sheikh and setting himself up in an apartment on Park Lane.
Many were taken in by him. He and his brother, Ali, had sufficient funds or backing by 1978 to buy the Ritz hotel in Paris for $30m.
The nastiest and dirtiest takeover battles in history
What really put him on the map though, so far as the City was concerned, was the saga which began in November 1984 and which turned into one of the nastiest and dirtiest takeover battles in history.
The mining conglomerate Lonrho, which owned a sprawling portfolio of assets across the world but primarily in Africa, had for years been trying to buy Harrods – then owned by the House of Fraser department store chain.
Its chief executive, Roland “Tiny” Rowland, had built a 29.9% stake in House of Fraser as a prelude to a takeover bid for the company – which was referred to the old Monopolies & Mergers Commission by Margaret Thatcher’s government.
Mr Rowland, who had been famously dubbed “the unacceptable face of capitalism” by the former prime minister Edward Heath, knew the referral could be tricky.
So he hit on the wheeze of “parking” the stake with the Fayed brothers.
Unfortunately for him, he was double-crossed by Mohamed who, backed by the Sultan of Brunei, used the stake to launch a £615m takeover bid of his own.
He acquired the business and, in the process, deprived Mr Rowland of a treasured asset he had been stalking for the best part of a decade.
An enraged Mr Rowland waged a campaign against him thereafter to obtain revenge on the ‘”phoney pharaoh”.
The Department of Trade & Industry investigated the takeover and, when Mr Rowland obtained a leaked copy of its report, he published it in March 1989 in a special midweek edition of The Observer, the world’s oldest Sunday newspaper, which was at the time owned by Lonrho.
The DTI report pulled no punches.
A ruined reputation
In their most damning line, the DTI inspectors said the Fayeds had “dishonestly misrepresented their origins, their wealth, their business interests and their resources to the secretary of state, the Office of Fair Trading, the press, the House of Fraser board, House of Fraser shareholders and their own advisers”.
It forever ruined Fayed’s reputation and, arguably, ensured that he was never given the British passport he craved for so many years.
Two years later, in an unprecedented move, the Bank of England forced the Fayed brothers to relinquish control of Harrods Bank after deciding they were not fit and proper people to run a deposit-taking institution.
However, despite Mr Rowland’s best efforts, Mr Fayed retained control of Harrods.
He gave up his fight in 1993 when, just before Christmas, he and Fayed publicly embraced in the Harrods food hall.
Months later, Mr Fayed floated House of Fraser on the stock market, but kept Harrods.
Harrods
Troubled time at Harrods
The first two decades of his ownership of the department store were troubled.
Profits fell and Fayed was variously accused of electronically eavesdropping on employees and of firing minority employees with no cause.
Mr Rowland also alleged that papers he had kept in a security box at Harrods had been stolen and, while the police never charged anyone, damages were ultimately paid to Mr Rowland’s widow.
By the turn of the century, the business was in a bad way, with Mr Fayed’s management style ensuring a vast turnover of top management.
Between 2000 and 2002, Harrods lost no fewer than 12 directors, while between 2000 and 2005 it got through five managing directors.
Meanwhile the store itself, in the eyes of critics, degenerated into a “vulgar Egyptian theme park”.
Fayed finally got it right when, in March 2006, he poached Michael Ward, a retailer-turned-private equity executive, from Apax to fill the vacant post of Harrods managing director.
It was a fine and shrewd appointment.
During his first year in charge, Mr Ward increased annual profits at the business by 152% and, crucially, found a way of working with the owner.
Shortly after the Qatari takeover, in 2010, Mr Ward – who stayed with Harrods under its Qatari owners and propelled it to record annual sales and profits several times since – explained to the Sunday Times: “Once trust was established he was a very good person to work with. The problem, historically, was that nobody managed to cross that barrier.”
Interestingly, while Fayed sold both Harrods and Fulham, he never relinquished control of the Paris Ritz, the trophy asset he held on to longer than any other despite the fact that, for long periods of his ownership, it was heavily loss-making.
It will be interesting to see whether his heirs choose to cash in on this most valuable of properties after his death.
The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.
A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).
Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.
It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.
A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.
This was borne out by other figures released by the ONS on Friday.
Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.
Overall, there was a “large rise in goods imports and a fall in goods exports”.
A ‘disappointing’ but mixed picture
It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.
“I am determined to kickstart economic growth and deliver on that promise”, she added.
But the picture was not all bad.
Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.
It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.
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The expansion in March means the economy still grew when the three months are looked at together.
While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.
Such a cut would bring down the rate to 4% and make borrowing cheaper.
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Is Britain going bankrupt?
Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.
“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.
Why did the economy shrink?
The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.
The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.
It made up for a “very weak” month for retailers, the ONS said.
Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.
However, the picture emerging a year since the election of the Labour government is not hugely comforting.
This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.
Output shrank in May by 0.1%. That followed a 0.3% drop in April.
Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.
Hangover from artificial growth
However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.
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In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.
Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.
Signs of recovery
Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.
“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.
Meanwhile, the services sector eked out growth of 0.1%.
A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.
Struggles ahead
It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.
The economy remains fragile, and there are risks and traps lurking around the corner.
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Is Britain going bankrupt?
Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.
Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.
Business
Government to announce new scheme as it ramps up AI adoption with backing from Facebook owner Meta
The government is speeding up its adoption of AI to try and encourage economic growth – with backing from Facebook parent Meta.
It will today announce a $1m (£740,000) scheme to hire up to 10 AI “experts” to help with the adoption of the technology.
Sir Keir Starmer has spoken repeatedly about wanting to use the developing technology as part of his “plan for change” to improve the UK – with claims it could produce tens of billions in savings and efficiencies.
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The government is hoping the new hires could help with problems like translating classified documents en masse, speeding up planning applications or help with emergency responses when power or internet outages occur.
The funding for the roles is coming from Meta, through the Alan Turing Institute. Adverts will go live next week, with the new fellowships expected to start at the beginning of 2026.
Technology Secretary Peter Kyle said: “This fellowship is the best of AI in action – open, practical, and built for public good. It’s about delivery, not just ideas – creating real tools that help government work better for people.”
He added: “The fellowship will help scale that kind of impact across government, and develop sovereign capabilities where the UK must lead, like national security and critical infrastructure.”
The projects will all be based on open source models, meaning there will be a minimal cost for the government when it comes to licensing.
Meta describes its own AI model, Llama, as open source, although there are questions around whether it truly qualifies for that title due to parts of its code base not being published.
The owner of Facebook has also sponsored several studies into the benefits of government adopting more open source AI tools.
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Mr Kyle’s Department for Science and Technology has been working on its mission to increase the uptake of AI within government, including through the artificial intelligence “incubator”, under which these fellowships will fall.
The secretary of state has pointed to the success of Caddy – a tool that helps call centre workers search for answers in official documents faster – and its expanding use across government as an example of an AI success story.
He said the tool, developed with Citizens Advice, shows how AI can “boost productivity, improve decision-making, and support frontline staff”. A trial suggested it could cut waiting times for calls in half.
My Kyle also recently announced a deal with Google to provide tech support to government and assist with modernisation of data.
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Joel Kaplan, the chief global affairs officer from Meta, said: “Open-source AI models are helping researchers and developers make major scientific and medical breakthroughs, and they have the potential to transform the delivery of public services too.
“This partnership with ATI will help the government access some of the brightest minds and the technology they need to solve big challenges – and to do it openly and in the public interest.”
Jean Innes, the head of the Alan Turing Institute, said: “These fellowships will offer an innovative way to match AI experts with the real world challenges our public services are facing.”
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