Profile: Swraj Paul: The peer for all parties

As a working Labour Lord, Britain's most influential Asian businessman will fight industry's corner, writes Richard Halstead

Swraj Paul is no stranger to the twists of fate. He could have had five healthy children. Instead four were born healthy, and one was struck down by leukaemia. He could have been a leading light in the business community of his home town, Jalandbar in India's Punjab.

Instead he came to London, and built a pounds 500m industrial empire in steel and manufacturing. And he could have accepted the post of India's ambassador to Washington when it was offered, and might then have had the chance to succeed Indira Gandhi as prime minister. Instead he dismissed politics, preferring his business.

These occurrences will no doubt be flitting through Swraj (now Lord) Paul's mind this weekend as he contemplates the future as a working peer on the Labour benches in the House of Lords, one of the six Labour peers appointed last week. The Anglo-Indian businessman, founder and chairman of the Caparo Group and one of Britain's richest industrialists, has handed over the reins of the business he has spent three decades building to his Harrow-educated sons. Now, at 65, he will finally embark on his political career.

It's all a bit of a shock, he says. Speaking from a cruise liner in the Adriatic, where he is on holiday with his wife, Paul claims he had only just found out about his peerage this week. But despite the apparent suddenness of his elevation, Paul has a well-prepared agenda: the importance of manufacturing industry to economic health. "In the last 10 years we have thought we can manage without manufacturing," he says. "But it's the only way for Britain to create permanent jobs." Paul admits that he airs such views "whenever I can get my two-pennyworth in", but has preferred in the past to remain on the sidelines.

Not any more. Paul's views have not necessarily run along party political lines. He has been a member of the Labour party since the early 1970s, and has a long-standing friendship with Michael Foot. He was also close to Indira Gandhi and architect of the country's socialist economy. But in the recent past he was better known as an admirer and close confidant of Margaret Thatcher, and was a donor to the Conservative party in the 1980s.

But according to Paul, that is all behind him now. "Thatcher's first three or four years were marvellous, but I don't agree with some of the things she did later on." He is now closer to Labour leader Tony Blair, and is also known to be a friend of shadow Chancellor Gordon Brown. He has become one of Labour's larger corporate donors, giving the party around pounds 130,000 in the past two years. Such largess may embarrass some senior figures in the party, but Paul think it's money well spent.

His anointment as the most influential British Asian is a long way from his arrival in London 30 years ago. He came with his young family, leaving behind a prosperous family steel business in Punjab. His presence in London was solely to get treatment for his two-year-old daughter, Ambika, who had leukaemia. Two years later, after a long and painful battle, she died. It was, he says, "the most painful and shattering experience of my life".

Paul, in keeping with his Hindu faith, spent the next 18 months at his Portland Place flat in mourning and reflection. He then decided that he was in Britain to stay. Renting a small office in the City, and armed with a pounds 5,000 bank loan, he began using his contacts to start a steel stockholding business. Hebranched out into manufacturing, securing grants from the EEC and the Heath government to build a steel tubing plant in Ebbw Vale, and ignoring the objections of the then state-owned British Steel that such investments in a "sunset" industry were useless.

A string of further acquisitions followed, including a fork-lift truck business, a steel rolling-mill operation and then the Empire Tea Company, which he bought in 1980 as much for business reasons as for the fact that he is a great tea-drinker. As a non-drinking, non-smoking vegetarian, it is his only vice.

Not every acquisition has worked. In 1984 he paid pounds 14m to acquire Fidelity, a consumer electronics business that was apparently making profits. It was running at a loss and despite pounds 10m of investment, it never made money for Caparo and closed in 1988. An incensed Paul sued the auditors Touche Ross, and spent pounds 1.5m pursuing his negligence claim to the House of Lords, only to lose in a landmark decision. Undeterred, he sued again, this time as Fidelity itself, and won an out-of-court settlement in 1994.

It hasn't stopped him buying: In the 1980s he incurred the wrath of India's business community by launching hostile takeover bids for two sleepy Indian conglomerates - Escorts and DCM. In 1989 he bought Armstrong Equipment, a UK consumer electronics supplier, and last year a steel mill in Pennsylvania. His sons will inherit a plan, as yet unfinalised, to build a $4bn steel plant in the Indian state of Orissa.

Those who have done business with Swraj Paul talk of a modest man who, once at the negotiating table, reveals an aggressive business mind. The youngest of seven, his childhood was marked by the death of his mother when he was seven. After his austere father died six years later, he was sent to a Christian school in Lahore, and had to find his way back home after the 1947 partition placed him and his school in Muslim Pakistan. After completing a degree in science and engineering, he returned to his home state where he met and married his wife of nearly 40 years, Aruna. "I arranged it myself," he recalls.

In some ways he is a natural politician. His appearance is cheery, round and avuncular. His eyes twinkle and he seems to have a permanent smile. Those close to him talk of the great interest he takes in the problems faced by people from all walks of life. His children recall bringing schoolfriends home only to have them quizzed by "daddy" about their career goals before they were allowed to go home.

When London Zoo faced bankruptcy in 1993, Paul donated pounds 1m to help keep it afloat and to fund a new children's zoo section, where families can pick up and stroke rabbits, guinea-pigs and goats. It was named in honour of his late daughter Ambika, whom he used to take to the zoo. In addition, his private charitable contributions have become the stuff of legend within Britain's Asian community. Apocryphal stories circulate of people who went to his office to confess family or business problems and emerged a short time later clutching cheques.

Paul says he took this opportunity to get into politics because it came at the right time, six months after handing over control of Caparo to his twin eldest sons Ambar and Akash. "It's a pleasure to pass my business on to the next generation, but I'm sure I will miss it." But he added that trekking to the House of Lords to debate Bills won't stop him from dropping in on Caparo's headquarters. "After all, I'm still the chairman."

His presence in the New Labour political machine will be much appreciated - not least by those who still think that the party's commitment to business is only skin-deep. As Paul has gravitated to Labour, he has severed his ties to the Conservative party, fed up, he says, with the Government's lack of a coherent investment policy towards industry. "They seem to think that as long as the Square Mile is doing well, the economy is doing well," he says. Whether a Labour government will provide coherence for the much-abused manufacturing base is unclear. But it is clear that Paul will be using thepersistence that has characterised his career to fight the corner on behalf of British business.