Help yourself to UK plc

Despite a spate of takeovers of British firms by foreign acquirers, the Government remains unperturbed. Should it be worrying a bit more?

by Patience Wheatcroft
Last Updated: 31 Aug 2010

Overseas collectors are racing to acquire British companies as if they were the hottest new fashion. Bids have been coming in from France, Spain, Germany, Dubai, Singapore and the US at prices that just a few months ago would have been unthinkable. The owners have tended to find them irresistible.

Yet as British businesses have been knocked down to overseas purchasers, the excitement has barely registered beyond the financial pages. This would not be the case elsewhere in the world. In France, mere rumours that PepsiCo might bid for Danone were treated as a national crisis. Emergency cabinet meetings were called and Government ministers made speeches about the need to preserve French ownership. PepsiCo listened to the furore and rapidly filed any thoughts of bidding for the business in the 'too difficult to bother with' box.

If the business involved had been a major infrastructure provider rather than a yogurt-maker, the zenophobic reaction might have been understandable. But in Britain, everything is available to the highest bidder. The British Government did not seem in the least perturbed, or even interested, when two overseas powers began to compete to take over P&O. Some shareholders allowed themselves a touch of emotion at the thought that the Peninsular & Oriental pillar of the empire might sail into foreign hands, but only the private investors; the emotional reactions of institutional fund managers are reserved for their bonuses.

In the US, however, the P&O deal caused uproar. The company has long shed its ships in favour of operating ports around the world, such as Felixstowe in the UK and New York's ports. That these assets should now be transferred to the ownership of Dubai Ports, an arm of the state's fabulously wealthy rulers, was not seen as an issue in the UK. Opposition in the US has been so strong, though, that the buyers have been forced to agree to divest the US ports from the main company and vest them in a US corporate entity. This was a victory for Hillary Clinton, who spotted an opportunity to milk the situation for political effect, despite the fact that her husband had been advising Dubai on how best to proceed.

Fears that Al-Qaeda terrorists might be welcomed into New York by the container-load may have been irrational, but they were laid over an increasing mood of protectionism. Last year, when the Chinese made overtures to a US energy company, it rapidly became apparent that ways would be found to prevent such a deal. In today's energy-tight marketplace, the Americans were not about to allow the Chinese to take over US-owned energy assets.

Would Britain exhibit any more qualms over the potential sale of BP to an overseas bidder than it has about the loss of P&O and the mooted bid for BAA, the airport operator? Perhaps there might be some noises of concern from the petrol-pump protestors, but it would be hard for the Government suddenly to justify an interest. After all, most British households now depend on foreign-owned businesses for the energy supply they use at home.

As a nation, Britain has genuinely espoused the notion of free trade, being open to all-comers and resorting to quotas only occasionally. Ownership, it has been contended, is not the issue, so long as jobs and wealth-creation remain in the country. Most of the great names that once dominated the Square Mile have been swallowed up by banks from abroad, yet London has not lost out to New York or Frankfurt as a result. Instead, the capital has benefited from the success of these giant combines as they drive ever-increasing amounts of business through the City.

Now the London Stock Exchange is being sought after by would-be new owners.

The LSE's feisty chief executive, Clara Furse, has fended off attacks from Europe and Australia, and now must deal with the attentions of New York's Nasdaq. She has throughout avoided jingoism, concentrating on persuading investors that the bids have undervalued their asset.

There has been a second strand to the argument, though, and one given credence by the Financial Services Authority. It is crucial that the LSE remain regulated in London, whoever the ultimate owner, it says. Retaining regulatory control safeguards customers, as has been the case with those UK utilities that have been taken over by foreign companies. Since the LSE's owners are also predominantly its customers, that thought is likely to sway their attitude towards any bid, but the decisive factor will be price.

It must be generally right that Government interference should not be allowed to deprive an owner of a business from taking a profit. Yet while Britain holds so firmly to that view, there are a couple of points that should at least be the subject of wider debate. First, if so many of our companies seem to be judged bargains by foreigners, why are they so undervalued at home? And, second, although it may make sense to avoid putting up nationalistic barriers, should we simply accept that other countries will play by different rules?

There are those who argue that France will eventually be the loser for its insistence on retaining ownership of native businesses. Perhaps. But the Government should at least examine the issues, instead of so sanguinely allowing UK plc to change hands.

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