Too many hairdressers, not enough invention, says Amiri

DEALMAKER Amin Amiri fears for Western capitalism and says it is destroying wealth.

He made the remarks at the annual convention of his investment firm A2e Venture Catalysts at the Lowry Hotel last night.

Mr Amiri holds interests in a string of companies, mainly in manufacturing, through Manchester-based A2e, and the event is a chance for the management teams and his associates to come together.

Informed by research from Harvard University, Mr Amiri fears the economy is too dependent on services, at 77% – or “hairdressers and coffee shops” – and too many businesses are simply generating cash, rather than creating wealth through innovation.

GDP may show signs of growth, he said, but it is lower per head than before the recession and real earnings have been declining for the past 20 years. He said the UK only emerged from recession due to consumer spending and he predicted the economy could fall back in two years.

He said: “I think we should get back to basics, we should look at how wealth is created and measured. Because I think the way we measure wealth is out of date and that’s why we think we’re in a recovery. When the country increases GDP it is considered progress, but real progress is health and wellbeing, standards of living and productivity.

“Premier wealth creation” comes from society-changing inventions such as cars, computers and jet engines, said Mr Amiri.

“This is always the result of research and development and we don’t count R&D in our GDP figures. We don’t count the cost, it’s excluded but from next year we will include prostitution and drug dealing. I don’t care if you show higher GDP becuase if it’s all hairdressing and coffee shops it’s pretty suspect.”

He added: “If you don’t sustain innovation you start making money by shuffling money. The money revolves around rather than being used to create the next market innovation. It was very easy to make money [in the City] and the auditors were fooled and the ratings agencies were stupid, and we all paid for it.”

His views led to a lively debate with the economist Professor Patrick Minford, a former adviser to Margaret Thatcher, who delivered a more sanguine view of the world economy and argued services businesses are creating wealth, as well as cash. He also predicted the next recession is 20 years off because a glut of commodities is keeping prices low and fuelling the economy.