Foreign take over bids

Mrs May spoke about the need to make it more difficult for certain foreign investors to take control of UK companies in her economic speech prior to becoming PM. She wants to design a new industrial strategy, which would need to incorporate her latest thinking on this topic as part of it.

I approach this issue from a largely liberal position. If people in the UK own shares in a business and want to sell them to foreigners, I generally have no problem with that. It would be wrong usually for a government to intervene and tell owners they cannot sell their assets. it would put other investors off venturing here, for fear of not being able to sell when they wish to move on.

If the shares being sold represent substantial investments in UK infrastructure and real estate, perhaps as the facilities for a manufacturing or service business, the foreign owner cannot parcel up the road or railway line or office building and take it abroad. They remain important UK assets which the new owner has to operate or sell on to someone else to operate. In that sense UK investments are not at risk from a change of owner.

The legitimate fears that people have are threefold. The first is what if the foreign owner buys up UK factories in order to close them, to reduce world capacity and make his factories and products elsewhere more valuable? The second is what if the buyer is a foreign state or nationalised industry which is buying strategic assets in the UK to gain power over our economy and to increase its leverage at times of tension? The third concern is about intellectual property. What if the purchase is to take crucial technology or other information that could be harmful to us to share?

Our current policy allows normal competition rules to be suspended over defence technology. We can buy from ourselves, and can restrict access to defence companies as part of a national security override. As the ubiquitous digital technology spreads more widely so we may need to broaden our definition of what is a defence interest.

The first worry of future closures to concentrate world output elsewhere can partly be tackled through current anti monopoly provisions. When a large company seeks to take over another in the UK it has to demonstrate that this does not lead to an anti competitive concentration. Maybe stronger or enforceable requirements need to be placed on businesses about maintaining capacity in the UK if it is an option for the buyer to promise to keep our factories whilst intending at a later date to close them. Where someone wishes to acquire a central infrastructure asset, like the Stock Exchange, the answer should usually be No. It will be too easy in the future for foreign owners of the Exchange to switch business from London to Frankfurt.

The second needs new policy. It is wrong if a foreign state or nationalised industry can buy our businesses in a given sector but we cannot buy theirs owing to their public ownership structure. There should be a ban on foreign state purchases where we cannot have similar access to their market, unless the UK authorities think it is in the UK interest to allow it.

The third area also requires some broadening of the areas where the competition authorities can halt or add conditions to an acquisition.

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67 Comments

  1. Sam Stoner
    Posted September 29, 2016 at 5:40 am | Permalink

    “There should be a ban on foreign state purchases where we cannot have similar access to their market”

    O I do so agree! If only we could join a bloc in which there are carefully written and rigorously enforced rules guaranteeing reciprocal non-discriminatory access to the markets of all participating States! Mr Redwood is spot on in grasping that we cannot develop any kind of sensible competition or industrial policy through Westminster alone.

    • Original Richard
      Posted October 1, 2016 at 6:44 pm | Permalink

      Mr. Stoner,

      You write :

      “Mr Redwood is spot on in grasping that we cannot develop any kind of sensible competition or industrial policy through Westminster alone.”

      Where in Mr. Redwood’s article does he say this ?

      A nice try to pretend that membership of the EU gives the UK protection against foreign takeovers which are against the interest of the UK in general or UK companies in particular.

      In fact NOT being in the EU will give us greater protection as we can make the rules and prevent the lack of fairness and reciprocity which we currently experience from some EU countries.

  2. Mick
    Posted September 29, 2016 at 5:40 am | Permalink

    Off subject
    http://www.express.co.uk/news/politics/715370/European-Union-Brussels-keep-britain-eu
    The sooner Mrs May is forced to implement article 50 the better, the British public cannot be kept in limbo any longer with all the scare stories appearing every day, we demand action NOW before its to late, so come on Mr Redwood get the ball moving

    • Jerry
      Posted September 30, 2016 at 7:36 am | Permalink

      @Mick; Why do you, and others, fear a second referenda?…

      • David Price
        Posted October 1, 2016 at 4:36 am | Permalink

        For my part it would not be fear but concern, concern that it would confirm that democracy really is dead in this country.

        • Jerry
          Posted October 1, 2016 at 6:23 pm | Permalink

          @David Price; But many would suggest that by not having a referenda on the “How” and “When” would also confirm that democracy really is dead in this country. No one is suggesting rerunning the “If” question.

      • amon
        Posted October 1, 2016 at 11:48 am | Permalink

        We dont, we should schedule one sometime in 2050.

        • Jerry
          Posted October 1, 2016 at 6:26 pm | Permalink

          @amon; “We dont [want to stop a second referenda], we should schedule one sometime in 2050.

          So just like how some in the Remain campaign want to obstruct democracy, in their case by putting Brexit off until 2050…

          • Edward2
            Posted October 2, 2016 at 3:55 pm | Permalink

            He was teasing you Jerry

  3. Mark B
    Posted September 29, 2016 at 5:50 am | Permalink

    Good morning.

    Brilliant article ! Especially about the the concerns people have over foreign ownership.

    Like our kind host I too am very relaxed about foreign ownership and support many of the items covered. The only issue is, how can you determine, and prevent, a foreign owner, like the last two owners of Rover Cars, for asset stripping (brands) or closing down and going elsewhere ?

  4. Roy Grainger
    Posted September 29, 2016 at 5:50 am | Permalink

    I think your are right John, we must enforce reciprocity (terrible word !) – if UK companies are prevented from buying companies in USA (say) then the opposite should apply. In the post-Brexit landscape this is a good principle to work on, not just on trade issues like tarrifs but also issues like deportation.

  5. David Price
    Posted September 29, 2016 at 6:55 am | Permalink

    Have you changed your position on these issues – my clear impression is that the UK governments of all stripes have been particularly lax in defending our strategic technology, industrial and commercial interests to-date.

    What you describe appears to be the policy adopted by the governments of most other countries, though many together with their commercial and industrial partners tend to be far more protective and parochial – Germany, France even the USA for example. Time we were as loyal to and protective of our own as our competitors – in all matters.

    Reply No I have not changed my view

    • David Price
      Posted September 29, 2016 at 6:38 pm | Permalink

      @reply – good to know, now you only have to convince your colleagues in government, the civil service and the heroes in the city, not forgetting the media who delight in talking down private sector efforts. Unfortunately I fear it is too late to close the stable door.

    • Jerry
      Posted September 30, 2016 at 7:48 am | Permalink

      @JR reply; Except you were/are quite happy to advocate a policy of privatisation, and your website still states this fact, few such privatisations had any “Golden Share” clause to protect them, thus Rover Group ended up in the hands of BMW, many a TOC is owned by non UK owned transport companies, as have some energy generators/providers and so on (even some LA waste/recycling collections contractors are now owned by non UK companies).

      • David Price
        Posted September 30, 2016 at 5:13 pm | Permalink

        I don’t believe privatization has a bearing, for example the UK government gave away much valuable research during WW2 to the US without proper compensation so I wouldn’t view state ownership as any form of protection.

        You are closer to the issue with golden shares but even then much comes down to who buys what from whom. I do think there has to be a clamp down on transfer pricing especially where the result is asset stripping and the company isn’t meeting it’s obligations on pensions and redundancy payments.

        • Jerry
          Posted October 1, 2016 at 8:27 am | Permalink

          @David Price; Not sure what fighting a world war has to do with things! Yes, after WW2 some valuable research (notably the jet engine) was handed to the USA, but wasn’t it in exchange for the writing down of some of our war debt?

          The point about privatisation is, had they not been privatised there could have been no (eventual) foreign take over, true no British based speculators could have bought them either. Also the more recent nonsense, used (by some) to justify privatisation, that investment was not being possible whilst such industries remained nationalised, doesn’t always sit very happily with the historical facts. Many of these nationalised companies had state funded investment prior to privatisation once the government chose to remove the political straight-jacket that most, if not all, these industries had been subjected to – from both side of the political divide, which was the real problem as to why many of these nationalised industries had problems.

          • Edward2
            Posted October 2, 2016 at 8:19 am | Permalink

            That post fails to address the central point Jerry being mainly personal rather than anything else.
            The main issue is about the effects of numerous nations owning (fully and partly) UK companies as well as opening branches and investing in UK companies.
            I think the effect is very much beneficial.

            And I worry that the ability for UK companies to do the same in numerous countries around the world would be curtailed if we were to implement your wish of placing restriction on foreign companies in the UK to do the same.

            I agree with our host that the Govt needs to carefully consider the ownership impications of our strategic industries and it does do this as does the Monopolies and Mergers Commission by monitoring the behaviour and market powers of UK companies.

          • Edward2
            Posted October 2, 2016 at 8:21 am | Permalink

            Sorry
            should be six posts lower

  6. Ian Wragg
    Posted September 29, 2016 at 7:18 am | Permalink

    It really annoys me that the likes of EDF can own our power stations and bump up prices to subsidise French consumers.
    We have just lost ARM to the Japanese when there is no way we could buy a similar Japanese company.
    Hopefully the LSE sale will be stopped by the French objections.
    We will soon own nothing with all profits going offshore.

    • Jerry
      Posted September 29, 2016 at 7:49 pm | Permalink

      @Ian Wragg; “We will soon own nothing with all profits going offshore.”

      That is rich coming from you, boarder line hypocrisy in fact, the above is exactly what has been allowed to happen with the British motor industry, but when ever myself or others try and point this out people like you tell us that we know nothing, and only a week or so ago going on to boast about how you are buying a Japanese car.

      • Edward2
        Posted September 30, 2016 at 8:06 am | Permalink

        You forget that the UK has many hundreds of billions of investments in foreign companies.
        As well as UK businesses that have branches operating all over the world.
        Presumably this is OK with you Jerry
        Just foreigners coming here and investing in the UK you don’t like

        • Jerry
          Posted September 30, 2016 at 2:28 pm | Permalink

          @Edward2; Investments, or outright ownership (and then doing as they please with the business, IP etc. there after), the two are not the same, Ian and myself are talking about the latter, which are you talking about?.

          The problem is not even competition, if someone from another country wants to start-up making widgets here in the UK fine, it is the removal of competition by accusation and/or asset stripping – it is the opposite swing of the pendulum to state ownership/control and as problematic to a Nations economy -if not security.

          It will also be noted that you chose not to reply to Mr Wragg, whose comment is actually where your rational is actually pointed, once again you appear to be trying to pick an argument me rather than debate the issues raised. 🙁

          • Edward2
            Posted September 30, 2016 at 10:18 pm | Permalink

            You tell us you want only UK citizens to control UK businesses.
            Yet you expect other nations to allow UK citizens to control companies in their countries.
            I don’t believe you have thought through your views on this.

          • Jerry
            Posted October 1, 2016 at 6:59 pm | Permalink

            Edward2; “I don’t believe you have thought through your views on this.”

            Well I don’t believe that you read my reply to you (in fact I doubt you have actually read any of the debate started by Mr Wragg above), or if you have you obviously can not think of any kind of informed rebuff as a reply, just your usual style of putting words into my mouth, where have I said that I want, or would be happy for UK companies (or the state) to have a controlling stake in or outright ownership of a foreign company.

            “I don’t believe you have thought through your views on this.”

            Cough, showing us more of your filthy pots Edward2, after all you are arguing even with me about something Mr Wragg actually said!

    • David Price
      Posted October 1, 2016 at 4:44 am | Permalink

      I’m wondering how damaging an LSE ownership change would really be. It is a marketplace and a mainly digital one at that so competitors could startup more cheaply and readily than when it was primarily a physical space and trading floor.

      If it’s location had a bearing, eg the regulatory domain for any registered company, then the companies and regulator themselves would have a large say in the matter, they might even move to a freshly started UK digital stock exchange.

      I have no expertise in this area but I am interested as an amateur indirect customer.

  7. Antisthenes
    Posted September 29, 2016 at 7:21 am | Permalink

    The UK’s security is the only reason I can see that would give need to stop foreign investment or to stop foreigners from buying UK firms. Defence of the realm and security of supply. How the threat of that could be identified would not be easy and difficult to justify. The suspicion would always be that vested interests would use exclusion on spurious security grounds to promote protectionism.

    A tactic trade unions frequently use when they quote health and safety to promote increasing pay and conditions for their members. Are not junior doctors claiming that their demands are not for their own gain but for the betterment of the NHS and patients. A rather fantastical claim but many believe them anyway. No doubt we are all guilty at some time of using the same smoke and mirrors tactic to gain something we want.

    It is of course prudent to be wary of foreigners intentions and guard against them exploiting us for nefarious reasons. However we should not do as we so often do and that is to enact laws, rules and regulations that not just deters the dishonest but the honest as well and opens the door for others to exploit.

    Governments are for our protection only as long as they are impartial and do not abuse the power their position affords them. Unfortunately they do the opposite as the unscrupulous and the well intended but misguided find they are an easy vehicle in which to further their interests. It is not that we do not know that fact as we constantly attempt to address those problem at the ballot box or by revolution. However the governed also want to use government inappropriately. So do not replace them to curb them and make them into a body for which it is intended but to further the interest of their group at the expense of other groups.

  8. Anonymous
    Posted September 29, 2016 at 7:23 am | Permalink

    Intellectual rights need to be protected where state funded universities have provided research and development. The taxpayer rightly expects a kickback from groundbreaking technologies which have come from them.

    One the whole an increasing population demands secure and good wealth yielding companies – that’s if we wish to maintain a good standard of living.

  9. acorn
    Posted September 29, 2016 at 7:38 am | Permalink

    The answer is capital controls, as Bill Mitchell says. “If we adopt a progressive view that the only productive role of the financial markets should be to advance the social welfare of the citizens, then it is likely that a whole range of financial transactions, which drive cross-border capital flows, should be made illegal rather than controlled through capital restrictions.

    In this context, capital controls may be an interim strategy while the nation sorts through the legislative tangle that would be involved. Capital inflows that manifest as FDI [foreign direct investment] in productive infrastructure are relatively unproblematic. They create employment and physical augmentation of productive capacity which becomes geographically immobile.”

    On FPI, foreign portfolio investment, Bill says:-

    “However, financial flows that are speculative (especially short-term flows) and which are not connected with the real economy are unproductive and should be declared illegal. This approach would best be introduced on a multi-lateral basis spanning all nations rather than being imposed on a country-by-country basis.

    The large first-world nations should take the lead. However, given that such leadership is unlikely to be forthcoming a single nation could still act unilaterally in this regard.

    Local banks should play no role in facilitating the entry of speculative short-term flows. In this context, the only useful thing a bank should do is to facilitate a payments system and provide loans to credit-worthy customers.”

  10. Martyn G
    Posted September 29, 2016 at 7:52 am | Permalink

    A sensible appraisal of the topic, John. Please forgive my sarcasm but do I not hear the clip-clop of a departing horse, followed by the sound of the stable door being slammed shut regarding foreign takeovers?
    Far too much of the UK’s strategic infrastructure is now in foreign hands, one effect of which is that we have to pay more for their use or provision than do the people in other countries. Of course, it is not always that foreign owners impose higher costs on us e.g. we pay more to use the channel tunnel to/from Europe than do Europeans traveling to/from the UK. I assume that this is a home-grown higher cost imposition?

  11. Liz
    Posted September 29, 2016 at 8:02 am | Permalink

    I agree with these proposals. However there is a suspicion that the Markets Authority is not even using the powers that it does have now and sometimes seems rather naive. It seems to be easier for foreign companies and States to buy up British assets than in almost any other country in the world. A lot of take overs are because the company/state doing the buying either wishes to close the company down to reduce competition or wants to get hold of knowledge,brands and patents. States buying infrastructure assets in foreign lands merely want power – pure and simple.

  12. Lifelogic
    Posted September 29, 2016 at 8:08 am | Permalink

    I agree broadly with all of this.

    Also much of the patent and intellectual property protection systems that have been legislated for (and extended by the courts) are actually a large net negative on efficiency and innovation. Lots more, largely unproductive, jobs for lawyers and the likes. There can be an upside to them sometimes, but it is overwhelmingly a net negative as currently structured. It should be rolled back. The length of protections shortened and limited to areas where there really are substantial positive advantages to such legal protections.

    • hefner
      Posted September 29, 2016 at 5:46 pm | Permalink

      Are you sure of such a statement: if so, prove by giving properly referenced example.

    • hefner
      Posted September 29, 2016 at 6:49 pm | Permalink

      I am not sure that GSK, or, e.g., the patent-producing start-ups around Oxford and Cambridge, or even ARM would agree with your anti-IPR statement.

      • Lifelogic
        Posted September 30, 2016 at 4:22 am | Permalink

        Perhaps they would not. But the reality is that IP protection does more harm than good and needs to be reformed. It creates lots and lots of essentially parasitic & non productive jobs. The arguments in favour are that it encourages more investment in R&D (which it can do sometime) and forces publication but on balance I have no doubt it does more harm than good as currently structured.

        It restricts R&D and makes it more expensive in general, this due to these additional parasitic costs, patent costs and other risks the system brings.

        • hefner
          Posted September 30, 2016 at 7:24 am | Permalink

          … and the example is?

        • David Price
          Posted October 1, 2016 at 4:55 am | Permalink

          The problem is that the protection doesn’t work well enough except in mutually law abiding countries, else there wouldn’t be so many knock-offs on the market.

          But to be clear, no amount of legal rule following will help you if a company with deeper pockets or in a different legal domain decides to “adopt” your idea. Sometimes they pay, sometimes they don’t but it is expensive and difficult to protect what you have done.

          The ultimate protector is government but they are typically a waste of time on this issue.

          The simplest approach, but not always feasible, is to simply not publish your idea and/or change your product faster than the competition or tie it to a service only you can provide. But even then you have to be able to protect you trademark and reputation, so you really cannot avoid legal entanglements.

          What we really need is a government and legal services which is on our side, not their own.

          • hefner
            Posted October 1, 2016 at 8:14 pm | Permalink

            So more state protection? And how does the state know what to protect if there is no IPR -type file describing the product or technique or …
            And will this not go against the idea of a minimal state?

          • David Price
            Posted October 2, 2016 at 5:38 am | Permalink

            @hefner
            I don’t want more protection, I want the government to deliver on it’s obligations otherwise why should I pay taxes or do product development here.

            A patent is state permission to exclusively exploit your own idea, publishing it allows others to improve on it if they can. If the state doesn’t enforce your right what is the point of the right, the law or the government?

  13. Bert Young
    Posted September 29, 2016 at 8:17 am | Permalink

    There are many loop-holes in the present system of trading and the comments John makes this morning are a timely warning to button things up . It should not be possible for any national asset ( however it is defined ) to be taken over by outside interests . The London Stock Exchange is the most recent example that is threatened by German financial interests . If the takeover was successful it would inevitably mean a shift to Frankfurt of one of the most influential activities in the City .

    The Steel industry in this country has also been seriously damaged by outside influences . No matter how the pricing and competitive capability of our Steel manufacturing is , it remains a vital ingredient to many other products made here ; were it to be obliterated in some way or other , the economy would subsequently suffer . The same is true of any ingredient that is needed in the supply of products to the Armed Forces – we must safeguard these routes .

    It is impossible to pinpoint at this stage all the products and services that need protection , everything has to be competitive as well as protected . What is necessary is a continuous watchdog authority approved and sanctioned that can intervene immediately ; this type of control and supervision would have the respect of international investors and earmark this country as one – if not the best , investment centres of the world .

  14. alan jutson
    Posted September 29, 2016 at 8:27 am | Permalink

    Take on board your comments John, but would much prefer, power generation, water supply and mass transport to be owned by Uk organisations where the profit is taxed here.

    Would also like companies who complete government contracts and any business which carries Government subsidies to be located and pay tax here.

    I see no reason why taxpayers in this country should add to the profits of foreign businesses, unless such services or expertice are not available here.

    As for the finance industry, yes of course have rules, but this industry has proven for decades that they can get around any legislation you care to impose, as money movement is just a simple keyboard action, completed in seconds.

  15. Ed Mahony
    Posted September 29, 2016 at 8:30 am | Permalink

    If people want hard Brexit then they’re going to have to go for hard liberal open market otherwise countries outside the EU aren’t going to be that willing to do trade deals with the UK. If people want hard Brexit, they’re also going to have to bend over backwards to be nice to the Japanese, Chinese and Americans. One way or the other we’re still going to lose ‘control’ but in a different way, although not to the long-term geopolitical interests (the overall, prosperity, peace and security of the continent in which you live) of the UK whose geogpolitics should be focused on Europe not Japan, China, America or anywhere else. (And who knows how many immigrants we’re still going to carrying on getting from outside the EU).

  16. Lifelogic
    Posted September 29, 2016 at 8:35 am | Permalink

    Interesting to hear today about all the subsidies for farmers, stud farms and the likes from the EU. Philip Hammond has it seems promised to retain these for many years. In fact most of these subsidies (like most things EU) are absurd and need altering very substantially.

  17. Mick Anderson
    Posted September 29, 2016 at 8:40 am | Permalink

    There is a fourth possibility, where the new owner is in a position to make the use or product of the asset absurdly expensive.

    I would have been less cynical about this pronouncement from Mrs May if she had not accepted the lousy deal over Hinkley Point.

  18. Graham
    Posted September 29, 2016 at 8:45 am | Permalink

    Never understood why state organisations (usually French the EU champions) can freely invest in our essential industries without safeguards

  19. margaret
    Posted September 29, 2016 at 9:08 am | Permalink

    Of Course the film ‘ Pretty Woman’ made us punters aware of these tactics of buying to sell and close. In the film all was well as Richard Gere demonstrated an ethical side , but this is real life.

  20. The PrangWizartd
    Posted September 29, 2016 at 9:36 am | Permalink

    There is a particular case in point. In Yorkshire a mine is in the final stages of financing prior to a start being made on sinking the shafts to get at vast deposits of high-grade fertiliser. To my mind this is a strategic asset which must be protected against a foreign takeover or control.

    If such a takeover should happen all the cash-flow, and all the profits, all the dividends will go abroad for decades, further impoverishing us, and the foreign owner will have the power to decide where the product is sold. They would of course have the power to close it altogether even if it were profitable if it conflicted with other interests of theirs or if another nation for example proved more robust than us in influencing them. And how much notice would be taken of local concerns?

    Steps should be taken now to ensure that none of this can happen. Will our wealth be sacrificed by allowing free market ideology to exceed a national interest? I would suggest there are examples where this has happened already.

    If all our assets are open for sale to foreign interests and they acquire them, in the end whose nation is it and to what extent do we leave ourselves open to blackmail?

    I hope action can be taken in the case of this mine. Whilst I think Corbyn and his Socialism is a danger in the round if he said he would protect our interests by nationalising it I’d go along with him. We have sold off far too much already.

    If Brexit was motivated by ‘taking back control’, then let’s apply it here too.

  21. bigneil
    Posted September 29, 2016 at 9:38 am | Permalink

    Foreign take over bids? – isn’t that the EU in another name?

  22. Kevin Quinton
    Posted September 29, 2016 at 9:54 am | Permalink

    I’ve always felt that it is foolish to allow UK infrastructure to be owned by foreign entities.
    This gives them the ability to cause disruption in times of disagreement or tension between the UK and their country.

  23. CHRISTOPHER HOUSTON
    Posted September 29, 2016 at 10:05 am | Permalink

    4th Paragraph:

    …”The first is what if the foreign owner buys up UK factories in order to close them, to reduce world capacity and make his factories and products elsewhere more valuable? ”

    There have been accusations of US drug companies doing this in the UK, closing R&D departments thus debilitating our ability to innovate. Canada has had quite a time with US companies and hedgefunds buying into companies, gaining strategic positions on their boards, redirecting their “visions” to fulfill short-term profitability and then ditching the company.This had been alleged in biotechs, telecoms, and agricultural chemicals amongst others. Canada-US relations are not as cosy as some people may imagine.

    Similarly, not naming names there are EU cosmetic companies who suddenly buy up smaller companies and have been doing it systematically for decades,and then virtually close them down, actually eliminating their products from the EU and international market. There is little evidence the EU has even lifted a six-tined rubber stamp to stop it happening. We should not hope for quality cheaply-priced cosmetics from EU companies. Chinese companies who can clone and mass-produce virtually any low-tech product that are cosmetics are banned by the EU for “dumping” or potential “dumping”. The EU has not protected fair competition even within the EU. As we know, it is a monster and one could name certain personages in Europe, elite families, who have gained greatly by EU politics and policies at the expense of the consumer and our own national wealth across the board.

  24. Posted September 29, 2016 at 10:25 am | Permalink

    The majority of shares in UK companies are held by insurance companies, pension funds and various other trusts. The problem here is that the majority of those managing such funds are paid huge bonuses depending on the growth of the investments that they manage and have little interest in the companies themselves. Thus, if an offer is made for the shares the manager holds by some other company, his sole criteria is how much he can make on the deal and how much will it boost his fund. He has no interest in who wants to buy the company or whether it is in the national interest, he is solely interested in making a profit.

    In the case of pension funds, I was told by a trustee of the fund that pays my pension that their sole duty was to act in the financial interests of the pensioners and prospective pensioners. They could not, as one member wanted, withdraw funds from investments in the defence industries, as they were considered to be a good investment and would potentially lay themselves open to being sued. Presumably, if he didn’t sell when in an advantageous position, he would also be in trouble.

    Thus, to keep the ownership of companies in this country, we would seem to need to both change the attitude of fund managers and possibly change the law.

  25. Christine Constable
    Posted September 29, 2016 at 10:38 am | Permalink

    John

    I do hope that with the forthcoming Conservative Conference Theresa is going to flesh out a viable future for the UK on all fronts. I was very dismayed by the latest disloyal grumblings of dinosaurs like Kenneth Clarke, whose Bilderbergs ambitions for the UK are well known. He and his ilk are rejected by many who see the importance of retaining our Sovereignty as vital if we are to prevent Authoritarianism in Europe. Why the guy persists on imaging the EU rather than the UK is best placed to forge our industrial strategy God only knows.

    As far as I can see after 40 years the EU has done very little to strengthen our situation and continues to force us to leech money to a failing system. I hope many positive steps for the UK will be revealed this coming weekend, Theresa’s silence is allowing twits like Clarke to peddle their rhetoric of failure.

  26. oldtimer
    Posted September 29, 2016 at 10:39 am | Permalink

    You make sensible suggestions on this issue. There are other circumstances that need consideration in the development of policy. These are instances where unusual tax benefits attach to a foreign business taking over a UK business. I cannot immediately recall the precise example but such Spanish tax rules have, in the past, assisted a Spanish business take over a significant UK asset – effectively creating a tilted playing field against any UK business wishing to counterbid.

  27. CHRISTOPHER HOUSTON
    Posted September 29, 2016 at 10:43 am | Permalink

    Liam Fox is on TV right now. He is speaking from Manchester about Free Trade. Whilst the thrust of his argument against protectionism is sound, his examples , I believe, are not accurate.
    He gives the example of how Free Trade enabled the benefits of mass production …economy of production. He says that is why Scotland does not produce wine and one never sees French whisky. As far as I know, British bilateral agreements pre-dating the EU ensure we don’t as a nation produce wine above a certain strength, we do not by and large produce cognac, brandy; and in return the French never even try to produce whisky which, is a pity because Scottish whiskies can be rather sharp, over-malted, often taste like the contents of bottles one might find in a hospital operating theatre and, I myself was embarrassingly informed as I gave a bottle of Scottish whisky as a gift to a family of foreigners abroad that it tasted “soapy”…It did indeed. Red faces all round, especially mine. A production fault/ and/or storage fault. Scotland may not gain by competition in whisky unless it stops banking on a virtual monopoly guaranteed by its membership of the United Kingdom. Anyone know a NEW Scottish whisky on the market? About time the Scots distilleries started innovating. They are giving Scotch and protectionism such a bad name that Mr Fox, it seems, dare not mention it.

  28. forthurst
    Posted September 29, 2016 at 11:10 am | Permalink

    If a foreign purchase of a UK asset could not be considered either potentially beneficial or broadly neutral, without attempting to place restrictions on the future scope of operations, then it should not be permitted. Trying to constrain foreign owners on an ad hoc basis is unsatisfactory from every point of view; in fact, foreign purchasers should be contrained from voluntarily offering contraints themselves on their own future conduct in order to molify naive politicians, because, in any case, they could sell those assets on either for profit or because their greed had finally caught up with them.

    Foreign owners of infrastructure assets would not normally want to uproot them and move them elsewhere; however, foreign owners can and do set out to maximise their current earnings from assets at the expense of utility customers and at the expense of future necessary investment, and, having done so, transfer all the profits to a foreign domain, depriving the Exchequer of income.

    Trying to draw up rules over intellectual property purely on the basis of whether it is associated with defence is unsatisfactory. There are more and more businesses of which intellectual property is their key asset and the basis of their future growth and success. Unless politicians ensure that new intellectual property does not inevitably fall to foreign acquisition, it will be impossible for this country to ever create a business the size of so many that reside on the Nasdaq and which make a huge contribution to the success of the US economy.

    At one time this country was big in confectionary; not any more, as all our global brands have been acquired by foreign businesses, with the loss of thousands of jobs and profits for the Exchequer: brands are also important for creating and retaining economic activity in this country.

    JR believes that UK owners of shares should be able to dispose of them as they wish, irrespective of the broader national interest; however, large businesses in this country attract investment from foreign investors through Collective Investment Funds which, in a majority, decided to sell ARM to the Japs much to the disgust of the workforce and the wider technology community in Cambridge. It is even less clear that when foreign purchasers move in on the UK stock market on the basis that it is cheaper than their own inflated markets, as with US, then they should be permitted to make strategic decisions affecting our industrial base, simply for their short term gain.

    Politicians need to start to act responsibility when allowing the disposal of UK assets; it is all very well talking about improving education with regard to STEM subjects, but the fact is that engineers are generally poorly paid in this country and many find they have to go abroad to either get a job at all, or to achieve adequate remuneration, and many move into more remunitive activities such as banksterism which is probably better at wealth destruction than wealth creation; this unsatisfactory situation is a consequence of the attrition of our engineering industry over decades.

  29. Posted September 29, 2016 at 12:09 pm | Permalink

    There is also the issue of exchange rates and those who have first access to any newly minted money. An unhealthy synergy through a too close relationships can mean a badly run entity can acquire well run assets. Within a national market it is far easier to protect against this sort of behaviour and of course such behaviour isn’t so easily leveraged if everyone shares the same currency.

  30. Iain Gill
    Posted September 29, 2016 at 1:38 pm | Permalink

    Loss of our best intellectual property is a bigger problem than foreign owned companies. It’s also facilitated more rapidly by use of foreign outsourced workforces, both on and offshore. Its facilitated by the way work visas especially intra company transfer visas are abused on a mass scale these days. It’s facilitated by use of data centres off shore. And so very much more.
    Our political elite fail to understand how our premium prices in world markets are only justified by higher quality and newer innovations encapsulated in that intellectual property. Intellectual property has always leaked abroad, it is the sheer speed with which it can and does happen now that is the issue. Loss of that intellectual property means we are just selling ever closer to commodity products and services on the world stage and we will never compete with cheaper cost base economies in the commodity market sector.

  31. Prigger
    Posted September 29, 2016 at 2:00 pm | Permalink

    Officers wearing body-cameras lead to less complaints against the Police, it is reported.The general idea is that we all behave better if we are continually and continuously monitored in all situations.No, someone who spies on people is a voyeur. Not nice!

    If we had a proper Leader of the Anglican Church who amongst other things believed in “Thou shalt not kill” as an Absolute and that a “Just” war is something out of a 1950s boys’ war story comic when people readily accepted mass killings with joy, then he just might recall something vaguely mentioned in just one half of the Bible he still recognises in some form or another that God gave us Free Will. If we know for sure we will get caught doing just about anything from dropping a toffee paper on a street to dumping charity polythene bags through letter boxes and get fined disproportionately heavily then we most certainly do NOT have Free Will. We have to do what people consider the right thing. We are disabled from making a conscious choice of whether to do good or evil. Like a leashed bulldog.

  32. Atlas
    Posted September 29, 2016 at 2:48 pm | Permalink

    The promises of foreign take-over firms should be enforcable.

  33. geoff not Hoon
    Posted September 29, 2016 at 3:10 pm | Permalink

    haven’t we seen a fourth area of serious concern where foreign based money takes over something like a former utility to strip out as much cash as it can and then dump it in a poor state? It may be legitimate but other than the get rich folk behind the purchase every one else is a loser.

    • alan jutson
      Posted September 29, 2016 at 5:33 pm | Permalink

      geoff

      You left out a very important bit when they dump it !

      They also leave the Pension underfunded so the taxpayer has to pick up that liability as well.
      Its happening more and more of late, and will continue to grow whilst there are few rules or sanctions to prevent it.

      • A different Simon
        Posted September 29, 2016 at 9:28 pm | Permalink

        Alan Jutson ,

        Perhaps defined benefit pension obligations are stopping a whole lot of M&A transactions ?

        It’s time that those remaining companies in the private sector which offer DB pensions stop doing so and HM Govt stops offering them to it’s favoured few .

        Better to bump up the state pension to a livable level , related to average earnings and try and reduce the cost of living .

        For pensions to work , the older generation must provide the infrastructure needed by the next generation . As the lack of affordable and social housing shows , and use of off balance sheet finance , the older generation has not .

        • David Price
          Posted October 1, 2016 at 5:05 am | Permalink

          But the “next” generation should not include imported demand. That increase is solely the governments responsibility and I don’t see why I or my children are responsible for providing the infrastructure for all those additional, and non-contributory heads.

          I agree about DB pensions being stopped in the public sector.

    • miami.mode
      Posted September 29, 2016 at 5:54 pm | Permalink

      Agreed on that, geoff. All too often a company is taken over, especially by private equity, loaded with debt against the assets and the cash is then extracted. Difficult to know how to overcome this except, of course, that it does require the assistance of a compliant bank or lender.

      • anon
        Posted October 1, 2016 at 1:33 pm | Permalink

        – ensure debt (interest) is not tax favored more than equity.
        – impose debt/equity ratio limits for limited companies.
        – apply witholding tax on interest payments.
        – reform our asymetric risk/reward banking system so losses & gains are stay with the rightful insider participants
        – ensure we have competition measures which ensure we have many independent bank service providers.

  34. Kevin Simmons
    Posted September 29, 2016 at 5:39 pm | Permalink

    There is a fourth concern, which is Foreign companies buying already profitable UK companies but not taking over the Pension Fund Liabilities. A precedent has been set this year after a US company bought a successful UK engineering company and was permitted to place the pension fund into the Pension Protection Fund. Until now any accrued pension benefits had to be honoured. The Pensions Bill is due to be discussed in the autumn and it appears that MPs are going to further reduce protection for employees in the private sector

  35. A different Simon
    Posted September 29, 2016 at 9:32 pm | Permalink

    What about foreign investors buying U.K. land and housing ?

    They are taking over our country acre by acre and pricing Britons out .

    HM Govt miss a trick by failing to shift the burden of taxation from labour and enterprise onto land .

    Are you ever going to do anything about that like Winston Churchill and Lloyd George tried ?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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