CAB129-53 — Page 208

Page 208

Printed for the Cabinet. July 1952

SECRET

C. (52) 236

Copy No. 63

CABINET OFFICE

11th July, 1952

RECORD COPY

CABINET

PROPOSED NEW HOTEL IN LONDON

MEMORANDUM BY THE PRESIDENT OF THE BOARD OF TRADE

I invite my colleagues to approve the grant of a building licence, for some £1,800,000, for the erection of a new first-class hotel in Portman Square. If this were agreed, I would propose the starting date should be as soon after 1st November next as possible.

2. This proposal was considered on 2nd July by the Economic Policy Committee, which had before them my memorandum E.A. (52) 84. The Com- mittee thought there was a strong case on economic grounds for the proposal. The hotel would be built mainly by British capital and managed by an American operating company. The promoters and the Export Credits Guarantee Depart- ment have for a long time been in close touch, and the Department is now satisfied that (subject to satisfaction of its normal underwriting criteria) there is scope in the proposals for a joint venture guarantee to be underwritten on a commercial basis. It is understood that the American operating company would provide the quantities of steel required from Belgium, as part of its contribution to the capital of the venture, and no building licence would be granted unless the company were prepared to do so. The expenditure of dollar visitors while staying in the hotel would be large and has been estimated at about £2 million a year, whereas the dollar outgoings of the hotel would not amount to more than £200,000 annually. It is estimated that some three-quarters of the earnings would be new business since, except during the winter months, there is not sufficient good hotel accommodation in London for Americans to stay here. These estimates do not take account of the further sums which the new dollar visitors would spend during the remainder of their stay elsewhere in this country. The project would, there- fore, substantially increase our dollar earnings from the tourist trade.

We must do all we can to encourage this tourist trade which last year earned us £22 million in dollars, since, unlike most manufactures for export, it is capable of great expansion without heavy additional running demands on labour and raw materials. The project could be undertaken within the 1953 investment programme limits I have proposed for my Department.

3. While, as I have said above, my colleagues on the Committee thought that the case for the new hotel had been fully established on economic grounds, they invited me to bring the matter before the Cabinet in view of possible political criticism. This might take the shape of arguing that the housing programme would be affected adversely; or it might be argued that it was inconsistent to authorise the building of a large new hotel in London while at the same time there is a proposal to allow the Mayfair Hotel in Berkeley Street to be turned into offices.

4. On the first point, the Economic Policy Committee recognised that the effect on the housing programme would be very slight and that any criticism of this kind could be met on the ground that any measures designed to assist the balance of payments problem must have priority. The situation regarding the Mayfair Hotel is that an application has been made by the owners of the Mayfair for

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