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Billionaire, chancer, wild party thrower. Michael Spencer, the City of London’s most successful entrepreneur, is all of the above. So it is a surprise to find him seated sedately, smiling gently, in a near-empty Oswald’s club in Mayfair. His only company: two bottles of fine red wine — a 1989 Château Haut Brion Bordeaux, which is already decanted waiting for us to enjoy; and a 2002 Clos Saint Jacques Rousseau Burgundy, which remains unopened throughout our lunch.
Later, Spencer will extol the “beautiful relationship” he’s had with Haut Brion for decades, as he urges me to savour its elegant structure. But for now, it’s just a prop. It turns out Spencer’s choice of restaurant was all part of the showmanship: Oswald’s — a sister club of Robin Birley’s better-known 5 Hertford Street — allows members to store their own wine in the club’s cellar.
The Haut Brion, Spencer tells me, was bought for about £600 a case — or £50 a bottle — back in 1990 when the vineyard first released it. And is it worth a lot more now, I ask, playing my straight-man part to a tee. “Twenty-seven grand a case,” he grins. “I’ve got about five cases. It’s rather embarrassing,” he adds, looking not even faintly embarrassed.
Spencer’s stunt reminds me of a Lunch with the FT three years ago, when the guest — media mogul Richard Desmond— opted for a £580 Château Palmer in an apparent bid to shock the FT expenses department. “Richard’s way of evaluating his wine is: it must be better because it costs more, which is not always true,” quips Spencer. I tell him that he may have saved me a career-ending £2,300 expenses claim, but that by bringing his own wine to the Lunch he has bent the rules.
It was ever thus. Spencer’s business life has been a long story of smart, lucky and lucrative iconoclasm.
He started out in the City of London in the late 1970s and rode the wave of deregulation that began with Margaret Thatcher’s ascent to power in 1979. He admits to “a series of setbacks” early in his career — “all entirely my own fault”. Spencer was sacked from his first job because, he confesses, “they realised I was spending too much time speculating for my own account”. But he soon began to excel.
Having emerged from Oxford with an unspectacular 2:2 in physics (“I fell out of love with my subject very quickly”), he nonetheless used his academic grounding to great effect in the fledgling area of derivatives broking. “I got obsessed by interest rate [derivatives] because the interest rate game is a very mathematical game.” He catches himself. “It’s not a game, of course.”
His edge, he recalls, was having a programmable Hewlett-Packard computer. “Competing broking firms didn’t have one of those, they didn’t know what one was. ‘What the f*** do you need that for, Michael?’ they’d ask.” He soon showed them. Having had the good fortune to be working at the brokerage firm Charles Fulton as it floated, he secured a windfall, enough to buy a flat in Holland Park for cash and have £35,000 left over. Within months, he had resigned and set up his own derivatives brokerage, Intercapital. “I just thought to myself then, you know what? I know setting up your own business is high-risk, but I can live off zero salary for two years. And I genuinely thought at the time, this will probably fail.”
He couldn’t have been more wrong. His lifetime in the City has just peaked with the sale of Nex, the interdealer broking business that has morphed out of Intercapital and in which Spencer still owned an 18 per cent stake until this week. Over its 20 years as a listed company, its total shareholder return was close to 6,000 per cent. Now that the deal with Chicago Mercantile Exchange has completed, he is pocketing more than £700m, half in cash, confirming his net worth at more than £1bn.
As if to stress the fecundity of his entrepreneurship, two of Oswald’s waiting staff swoop in, bearing baskets brimming with figs and porcini mushrooms, and invite us to order. I am tempted by the special starter of figs and pecorino and the special main, porcini pappardelle. While Spencer orders a Greek salad, followed by chicken cacciatora and a side order of smoked peas, I take the chance to have a quick look around the restaurant: all rococo styling, with glass and mirrors seemingly plucked from the Palace of Versailles. The self-made man is quite at home in this paean to old money.
The year Spencer founded Intercapital, 1986, was also the year Thatcher launched Big Bang. The break-up of the City of London’s restrictive categories of jobbers, brokers and bankers brought with it a flood of new clients in the form of Wall Street’s giant investment banks. “It was a lucky thing, yes. It was good timing — ’86 was dead easy. No regulatory requirement. No capital adequacy. No anything at all. Just set up your own company, phone up your clients, say: ‘Hello, it’s me again.’ ”
Thatcher was “jaw-droppingly bold”, he recalls with admiration. Though he didn’t meet her when she was in government, he had plugged into the Tory party machine from his student days. “My original dream was to go and be in the City for a while and then go into politics later in life,” he says. But by his early forties — with his firm still small but thriving — he was enjoying business too much. Instead, Spencer began giving increasingly large sums to Tory party coffers. (To date he has donated £4m.)
Our starters arrive. The wine is poured. And Spencer tucks straight in. There is a short pause in the conversation but he is clearly impatient to relive one of the most influential periods of his career. During the late 1990s and early 2000s, his business grew exponentially — both through acquisition and thanks to the fast-expanding use of derivatives by companies (to hedge risks) and by investment banks’ casino banking arms (to inflate profits).
He recalls inviting David Cameron and George Osborne to lunch in 2005, as the Tories were regrouping after another Tony Blair election victory. “I said at the end of it, ‘Listen, if you’re going to run, David, I will support you. I will give you public support and obviously some financial support.’ ” Within six months, Cameron was leader. And barely a year after that, Spencer was Tory party treasurer, a part-time fundraising role.
Spencer’s conviviality has always been one of his defining traits. His 60th birthday party three years ago, with Robbie Williams as the £1m entertainment, is the stuff of legend. The first time I met Spencer was on the fringes of the World Economic Forum in Davos seven or eight years ago, when he was dancing enthusiastically — surrounded by admirers, most of them beautiful women — at the Hotel Europe piano bar, the town’s top after-party venue. But he also proved adept at tapping his contacts for cash. In his four years as treasurer, Tory party funds recovered from a deficit of £8m to a surplus of £75m.
Our main courses arrive and Spencer carves into his chicken, only to be struck with a brief bout of coughing. A glass of water is to hand, but true to type he prefers to wash down the offending morsel with a slug of wine.
As I fork a mouthful of salty pasta, I tell him that my inner quack psychologist is curious how Spencer became the mix of contradictions that he is — the bon vivant who is also a considered collector of fine wine and fine art (his favourite painter is Lucian Freud); the impetuous gambler who has steadily built a £1bn business empire; the embodiment of the City’s Thatcherite revolution, who never quite fitted into the financial establishment.
Spencer was born in British Malaya in 1955, his mother a linguist, his father an economist working in the colonial government. Aged five, as his father moved to a UN post in Sudan, Michael was parachuted into a life of exotic liberty. “I was a little white boy in Khartoum. My parents didn’t mind what I did. I had a donkey to get me around.” His memory is not entirely rose-tinted — he notes the poverty, the commonness of diseases such as leprosy. But these were clearly among the happier days of his life.
And then, aged eight, he was shipped off to boarding school in northern England. “It was wet and grey and cold.” There is an almost visible shudder. “You arrive, you don’t know a single child, you have nothing in common with them. You are dumped there with your big suitcase and [told]: ‘Well, get on with it.’ ”
After his mother intervened, he was moved to Worth Abbey, the Catholic boarding school, where he gradually felt happier. He remained something of an outsider but ultimately formed firm bonds with some fellow pupils and masters, particularly his maths tutors, physics tutor and housemaster. “Funnily enough, about 10 years ago, I managed to corral them all together for lunch. Just to say thank you.”
Spencer is similarly soft-hearted about Africa. Though he has no ongoing connections with Sudan, he does have two houses in Kenya — a villa on the Indian Ocean and an estate in the mountains that is home to 43 rare black rhinos and stables where he and his wife, Sarah, breed racehorses. Much of Spencer’s charitable giving has gone to African conservation projects, he tells me.
Our dessert arrives — a plate of hard cheeses for Spencer and a fruit salad for me. With it the tone of the conversation changes. For all his business success, I say, I have the sense that the decade since the financial crisis has left Spencer feeling more of an establishment exile than ever.
“Of course there have been setbacks and disappointments and issues that have saddened me,” he admits. “Probably the worst,” he says, was the accusation that his company, at this point called ICAP, was complicit in the manipulation of Libor, the interest-rate rigging scandal that rocked the City in the aftermath of the 2008 crisis.
Although the three brokers involved were acquitted of criminal wrongdoing, the company was fined £55m by regulators. Spencer has always been adamant he knew nothing about the brokers’ actions that helped (subsequently jailed) UBS and Citigroup banker Tom Hayes in his attempts to push Libor rates up and down by altering their market quotes for Libor. Their behaviour was “extremely stupid”, he says.
When pressed, he admits the affair was probably part of a broader “cultural malaise” in the City. “It’s ultimately about the ethicality of: ‘I’m doing business with you. Am I giving you a fair deal or am I really trying to rip your eyes out?’ ”
Shouldn’t we have tamed trading’s macho culture over the past decade? “It’s a contact sport. It’s a bit like telling people in a rugby game that you can’t say in a locker room you’re going to f***ing kill your opposite number when you go on the pitch. Language and actual actions are different. But you’re right: there are cultural issues that need to be addressed.”
Spencer himself has never had a squeaky-clean reputation. Aside from his self-confessed chicanery back in his early days as a broker, there have been allegations of insider trading — of M&S stock ahead of Philip Green’s 2004 takeover attempt and of his own stock ahead of a 2010 profit warning, both of which he has always denied and which probes deemed unfounded. And although the Libor affair did not implicate Spencer personally, he was hurt by it.
In combination it seems to have been enough to scupper Spencer’s final shot at a political career via a seat in the Lords. In 2016, when Cameron resigned as prime minister, he sought — for at least the second time — to secure a peerage for Spencer. The Cabinet Office’s decision to block the appointment still clearly sticks in the craw. Suddenly the effusive raconteur becomes prickly. Is it a sore point? “It’s not a sore point. It’s a disappointment in my life.” Why does he think he was denied the peerage? “I don’t know.” Was it Libor that sealed it? “I have no idea.” Did he ever talk to civil servants about the topic? “No. Life’s too short.” So he’s over it? “Yes.”
He confirms, though, that since Theresa May’s marginal election victory last year, his donations to the Tory party have ceased. He was a reluctant Remain voter but thinks Brexit negotiations are “a shambles”. Is May a shambles, too? “I don’t think she’s a shambles,” he says, adding generously that her position is more challenging than any prime minister’s, bar Winston Churchill.
A macchiato (his) and a mint tea (mine) arrive — and after a little small talk he warms up again. Time to tackle another sensitive subject.
Earlier he had told me how he felt in the vanguard of employment practices in the 1990s when he was building Intercapital, boasting a workforce that was 15-20 per cent female. (“We had some very talented girls who did very, very well.”) Even so, until a few years ago, Spencer was merrily consorting with old-school City fraternities, including the now notorious Presidents Club— the charity disbanded this year after the FT used undercover reporters to expose how some guests at its annual fundraising dinner propositioned and sexually harassed the all-female hosts.
“I did go,” Spencer admits, referring to previous years’ dinners. “I went over the years several times . . . But I stopped going. I just thought whilst I hadn’t witnessed some of the specific things that came up in the press, it was just a bit of a tacky evening. It was a relic of a bygone era.”
That was a throwback to the City’s past, but what of its future? Having spent 40 years building a business, three-quarters of it during a boom, then through a crisis and now as Brexit looms, is he a bear or a bull? Clearly the post-crisis regulatory crackdown means that founding the business he created in 1986 would be impossible today. But worse, he says, is that Britain as a whole doesn’t care what happens to the City. “I’m afraid to say I think, partly as a wash-over or an aftermath of the financial crisis, that the public view and the political view and the general view is we don’t care if the City suffers. [People think we] sort of deserve it. I think this is a very, very narrow-minded, ill-informed and stupid view.” That’s the thing with Spencer: for all his charm, he can often be refreshingly blunt.
As I pay the bill, and we emerge on to Albemarle Street, Spencer, ever the genial host, seems keen to assure me that my questions about Libor manipulation, blocked peerages and sexist dinners have not blunted his bonhomie. “We never got around to the Clos Saint Jacques,” he says with a wave. “I’ll have you over to share that another time.”
Patrick Jenkins is the FT’s financial editor
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