Do new protections against foreign takeovers of strategic businesses go far enough?
Last week’s poll was predicated by government proposals to prevent manufacturers in strategic industrial sectors from being bought by foreign interests.
The proposals apply to manufacturers in two sectors: the ‘dual use’ and military sector, whose products are already subject to export controls; and companies involved in the design of computer chips and quantum technology.
The government can intervene when the annual turnover of the target company is above £70m — this limit will be reduced to £1m — and if the proposed takeover or merger increases the company’s share of UK supply to 25 per cent or over. More information on the proposals can be found here.
Of the 320 votes, just under half (49 per cent) thought that such protections are overdue, followed by a third of the vote who thought additional sectors should be afforded such protection.
Of the remaining 18 per cent of the vote, 11 per cent thought that the UK isn’t in a position to reject inward investment, four per cent thought the proposals to be sufficient and three per cent couldn’t find a fit with their view.
The debate that followed saw comments from those advocating government abstention in matters of takeovers, and others taking a more protectionist view.
Mohammed Amin Abdullah said: ‘This all seems wrong to me. People should be free to buy and sell companies as they please. Indeed, the UK should strive to be a paragon of laissez-faire capitalism, with one major caveat: there should be considerable public assets in infrastructure, strategic industries and R&D. The United States has operated incredibly successfully with this model, and the UK should aim to do the same.
In answer to our question, 20 Cent said: ‘Not only strategic industries but strategic infrastructure should be in the hands of British companies or the British Government. I mean water companies, power generation and distribution companies, rail transport companies, etc.’
Others thought that questions around takeovers should start at home, with Edward adding: ‘I am also concerned about the conduct of British companies when it comes to strategic industrial sectors. Companies like BAE Systems have a long history of taking over operations in the UK and then closing them down and moving production elsewhere…leaving the country dependent upon imports in many key areas. The key driver in several of these ‘rationalisations’ was to free up the land the plants stood on for house building. It now seems likely that the new warships being built by BAE for the Royal Navy will be fitted with naval guns built in BAE plants in the US – what future for UK-built naval guns? While fully understanding that companies like BAE need to be profitable, stripping out the UK defence industry to achieve that does nothing to protect national interests.’
This view was backed up by John Smith, who said: ‘You can also include the Rover group. It only took them 6 years to close factories and sell the land. Not a fine example of corporate responsibility. We now have to rely on foreign manufacturers to create a British car industry.’
What do you think? Keep the debate active by submitting your comments below.
Long Overdue and far from sufficient. All “takeovers” should be ruthlessly reviewed as many involve asset stripping or moving the jobs and company abroad taking the tax revenue with them.
The UK and its workforce have been treated as a car boot sale for far too long.
I am also concerned about the conduct of British companies when it comes to strategic industrial sectors. Companies like BAE Systems have a long history of taking over operations in the UK and then closing them down and moving production elsewhere (the tank factories in Leeds and Newcastle have been closed, the Nottingham small arms factory has gone, RSAF Enfield has gone, the fuse plant in Blackburn has gone…..), leaving the country dependent upon imports in many key areas. The key driver in several of these ‘rationalisations’ was to free up the land the plants stood on for house building. It now seems likely that the new warships being built by BAE for the Royal Navy will be fitted with naval guns built in BAE plants in the US – what future for UK-built naval guns?
While fully understanding that companies like BAE need to be profitable, stripping out the UK defence industry to achieve that does nothing to protect national interests.
You can also include the Rover group. It only took them 6 years to close factories and sell the land. Not a fine example of corporate responsibility. We now have to rely on foreign manufacturers to create a British car industry.
The UK and its workforce have been treated as a car boot sale for far too long.
What else do you expect from spivs? (For the benefit of younger readers, these were folk who, during and after WWII were wheelers and dealers in whatever was not nailed down! – military surplus, fell off the back of a lorry, lost in transit, by-passing both the words and the spirit of the law….) But just think how large the fees of the bankers, lawyers, accountants, auditors, agents, back-hand merchants who arranged the ‘deal’ will have made. Enough to retire to the Bahamas post-Brexit!
How will the city ‘professionals’ survive if they can’t sell off the family silver?
This all seems wrong to me. People should be free to buy and sell companies as they please. Indeed, the UK should strive to be a paragon of laissez-faire capitalism, with one major caveat: there should be considerable public assets in infrastructure, strategic industries and R&D. The United States has operated incredibly successfully with this model, and the UK should aim to do the same.
Why?
I was under the impression that the US has severe underinvestment in creaking infrastructure https://projectm-online.com/investing/united-states-of-disrepair-4-trillion-dollars-off-gdp/
Would be good if the government provided a legal definition of what a strategic industry is and then ensured the UK held a majority stake in those industries.
Starter for ten: A strategic industry is one that enables the UK to survive completely independently of other states or foreign industries.
Examples: Farming, Utilities, Infrastructure, Defence,, NHS, Banking (thinking of Maslow’s hierarchy).
stripping out the UK defence industry to achieve that does nothing to protect national interests.
Just remind me? Which two nations (both the apparent losers in the last major conflict that occurred) dominate the consumer (as opposed to Government) manufacturing effort ?
They have done so, since 1945 by concentrating their efforts on(*) ‘non-bellicose’ products: bought in millions by ordinary citizens with their own money…: not in ones and twos by Governments with money they have to borrow (on our behalf?) Did I miss some pivotal element of international politics? Are their economies propped-up by financial skulduggery, manipulation of ‘portfolios’, traded on-screen (often by young persons in sharp-suits…) or are such based upon value (as opposed to simply profit) added conversion of raw-materials to finished products (*)as above!
Is the UK in a position to turn away any inward investment at all?
Is it seriously suggested that the buying and selling of assets such as those of concern in this article, somehow represents ‘investment’. Please advise?
Not only strategic industries but strategic infrastructure should be in the hands of British companies or the British Government. I mean water companies, power generation and distribution companies, rail transport companies, etc.
Russia developed a list of strategic industries, originally 14, now 47. This killed inward investment. These days the review committee decides how much subisdy to offer foreigners to invest in these industries. Protectionism destroys competition, innovation and in the long term jobs.
That said, strictly military purchasing is not market driven and it’s purpose is not wealth creation. Maybe?
I would have said the Energy Technology sector should be a thought of as a prime candidate – if not THE prime candidate – for protecting as a strategic industry, especially the Nuclear industry where at least the Netherlands has made the right decision in re-visiting Molten Salt Reactor technology.
I don’t think the confectionery industry can be classed as strategic, but look what happened to Cadbury, regardless of the promises made to HM Government.
Russia developed a list of strategic industries, originally 14, now 47. Well, perhaps that is the result of the leadership having knowledge and understanding of technology, economics, and so on. Rather than of Roman & Greek history and politics! Joking apart: I recognise the importance of the pressures of the market-place: it has taken the former USSR nearly 100 years to do the same. Any society where everyone is a ‘servant’ of the State must eventually falter and fail: civil servants (a contradiction if ever there was one!) by definition create no wealth! -only manipulate other peoples money. Come to think of it, so do most if not all of the sham groupings, who debase the true professions by trying to suggest that they are the same?
Fellow bloggers might be interested to note that I have been invited to join a team, on behalf of the Bank (initiated by Putin) responsible for investment in ‘basic’ industries (including yarn-spinning) in the former USSR : to be set up to replace those decimated by the financial and commercial free-for-all that passed for the first Russian attempt to move from ‘state-run- to private manufacture.
Shut it down was sadly, the first and last option too often, allowing the massive increase(s) in imported items that Russia can ill-afford in foreign exchange!