FROM bustling restaurants to textiles and manufacturing firms, Turkish entrepreneurs have carved out a thriving scene in London. But now a worried business community is wrestling with the fallout from the currency crisis in its homeland, which has sent the lira crashing.
Some 250,000 Turks have made their home in the capital across north and east London in Barnet, Hackney, Haringey, Enfield and Waltham Forest.
But with Turkey heading towards likely recession as a result of its plummeting currency, exports sanctions imposed by the US, rising inflation and president Recep Erdogan’s authoritarianism, many Turkish Londoners feel vulnerable as they rely on the stability of the lira for importing products into the UK.
As a result of the plunge, import contracts which have been in place for years with Turkish exporters are now having to be renegotiated, with many struggling to settle on price.
One London-based Turkish banker said: “It’s a complex situation. The problem is the volatility the lira has caused, particularly for London’s wholesalers, who import from Turkey’s major food and textile companies.
“Prices from Turkey are volatile as Turkish companies are seeing their input costs rise thanks to the falling lira. They in turn are passing these costs on to their customers, including those in London.”
Unsurprisingly, it is the food industry which has been hardest hit by the volatility, with more than 3000 Turkish restaurants in London adding £2 billion to the economy.
These rely on bottled water, beer, herbs, tomato paste and vegetables from Turkey, and so quickly has the situation escalated that many owners are now worried about where they can source the products they need to survive.
Traditionally, restaurants have bought these products, including Efes beer and Oncu tomato paste, from north-east London wholesalers like Gama, Sema, Holland Bazaar and the Turkish Food Centre.
But Ibrahim Dogus, who owns four restaurants including Troia, near Westminster Bridge, says owners are in discussions with wholesalers such as UK-based Booker in search of price stability, despite the fact they do not stock many Turkish products.
He adds that there are also deep fears that should the economic situation escalate then imports may stop altogether. “Because of the economic problems in Turkey we are considering changing our suppliers,” he says. “There is no security. The unemployment is going up in Turkey and the country is in a big mess, so if this crisis continues over the next few weeks then there might not be any products to import.
“As a restaurateur who provides Turkish dishes, if you’re not able to import the products that you need for your cuisine then you’re in trouble.” Food aside, Turkish Londoners are also deeply worried about what might happen to their assets and savings after rumours that assets in Turkey are being confiscated.
When the Turkish economy was booming from 2003 to 2014 many London Turks snapped up villas in their home country, riding on the back of an economy that was growing on average at 5% a year.
But reports that the government is looking to introduce heavy 40% taxes on those who transfer their cash reserves from Turkish to foreign banks have left many feeling stranded.
Dogus continues: “People are being discouraged against taking their wealth away but if they have any cash savings in Turkey they will try very hard to take it out now and bring it to the UK because they do not trust the system.”
The Turkish community is also concerned by the image the crisis is sending to the rest of the world, particularly given that the country is increasingly turning its back on the West, as Erdogan builds ties with Russian president Vladimir Putin.
Erdogan is an unpopular figure among London Turks, many of whom believe, because of his religious beliefs, he has told the Turkish central bank not to raise rates.
Rates in the country need to rise in order to stem runaway inflation, currently at more than 15%, but last month they were kept on hold as Erdogan has publicly stated he is against increases (see box).
Dogus adds: “He was so focused on growth he prevented the central bank raising the rates at the right time because raising interest rates is not good and it’s haram [an act forbidden by Islam].
“The central bank, which is meant to be independent, should have increased interest rates but cannot do it because the president doesn’t like it.”
The question for London’s Turkish businessmen is: when will the crisis end?
Many economists compare the situation with Venezuela, where hyperinflation has taken hold, leaving many people starving as they are unable to pay for food. Venezuela devalued its currency by 95% this week.
One thing is for sure – Turkish businesses in London under deep pressure want some answers, as well as some badly needed stability.