Bids that rob the taxpayer
SPECULATION about whether Theresa May was the hidden hand behind the short-lived £115bn Kraft Heinz bid for Unilever is rife.
Yes, Business Secretary Greg Clark and No10 officials were brought in to the weekend discussions. But in the end it was the threat of a political row and an unfavourable media spotlight that caused Kraft Heinz to scupper a transaction already fiercely opposed by Unilever.
What the short-lived bout demonstrated is that, more than six months into the May administration, Downing Street’s pledge to curtail foreign takeovers is unfinished work.
The Government lacks a consistent approach and is hopelessly uncertain of what real powers it has to intervene. The lack of clarity is unfair on all the stakeholders. And every citizen is involved because overseas takeovers of British assets affect our balance of payments with the rest of the world as well as the exchequer.
Foreign owners invariably use the bids as an excuse to cut UK tax bills by shifting domicile to low-tax Switzerland.
The Unilever bid is simply the latest incursion since May took over at No 10 last summer. In the past six months some £70bn of overseas takeovers of British companies have been made. An alarming number of these have been in the technology space, raising concerns of a patent and people brain drain. It is too easily forgotten that many of the best companies, notably ARM, now owned by Japan’s Softbank, are products of Britain’s world-class universities. They exist because of the taxpayer investment in research.
At first blush, Unilever might not appear much of a scientific loss. But from its earliest days at Port Sunlight it has prided itself on producing consumer goods to the highest standards, and using R&D and science to test and develop new products.
The present formal arrangements for the Government to intervene in takeovers are limited. It is able, for instance, to scrutinise 21st Century Fox’s £18.5bn offer for Sky because of the rules governing media plurality. Similarly, it has powers to intervene if companies are involved in defence, such as Rolls-Royce or BAE. It lacks formal powers to step in when the nation’s infrastructure or economic security are threatened.
Other Anglo-Saxon democracies have such authority and have shown no hesitancy in using it in recent months when it has come to rapacious Chinese takeovers.
Lurking in the background there are three other deals with a direct impact on Britain’s economic security about which we are hearing very little. The National Grid is selling the nation’s gas distribution network to a group of Chinese and Qatari investors for £13.8bn. A similar sale of the grid has just been halted in Australia.
Paradoxically, the vampire kangaroo Macquarie (see below) is the Treasury favourite to buy the Green Investment Bank.
And Deutsche Boerse is seeking to swallow the London Stock Exchange, one of the great pillars of London’s leadership as a financial centre. Very disturbing.
Treasury sell-out
THE Green Investment Bank (GIB) is one of the better legacies of the Coalition government. So we should listen carefully when one it its architects, former Business Secretary Sir Vince Cable, writes to a successor, Greg Clark, protesting it is being sold on the cheap to the aforementioned Macquarie.
Cable warns that if the GIB is sold now the taxpayer will be gifting Macquarie ‘hundreds of millions of pounds’ of income that should have gone to the taxpayer.
Instead of looking for shortcuts to top up public finances, the Treasury should be seeking to maximise taxpayer returns and nurture British ownership through a carefully executed floatation.
Saving the LSE
TODAY the Commons will be debating the £25bn ‘merger of equals’ between Deutsche Boerse and the London Stock Exchange.
The attempt by Brexit politicians to halt the deal comes amid indications from Brussels that Europe’s Competition Commissioner Margrethe Vestager is being bullied into nodding through the merger by Brussels politicians wanting to grab back valuable euro clearing and other operations from the City. Bill Cash wants the Prime Minister to use powers under the Bank of England Act of 1946 to kill the deal until the final terms of the UK’s divorce from the EU are settled.
That may seem extreme, but it would be utter madness to allow the LSE to fall under the dead hand of Frankfurt and a chief executive, Carsten Kengeter, who doesn’t appear to understand rules governing insider trading.