The US gobbles up another British world-beater

Worldpay, which was transforming financial commerce, is a victim of Brexit uncertainty

‘The only useful thing banks have invented in the past 20 years,” Paul Volcker, a former chairman of the US Federal Reserve, memorably remarked at the height of the financial crisis, “is the ATM.” It was a pertinent, as well as amusing, observation that seemed perfectly to capture the ruin that “collateralised debt obligations” and much of the rest of the “financial innovation” of the pre-crisis era had visited on the world economy.

Scarcely noticed, however, banking has since upped its game and is now a veritable hive of socially useful inventiveness. One example is the convenience and efficiency of payment systems that have been advancing in leaps and bounds, rendering even the redoubtable ATM progressively obsolete. Increasingly, we don’t need cash to go about our everyday lives; card, contactless and online forms of payment are taking its place. Physical cash may soon be as redundant as the chequebook.

One of the prime movers behind this revolution is a British “fintech” company you’ve very possibly never heard of called Worldpay. As an enabler of card and online payments, Worldpay is part of the financial plumbing that is quietly transforming the way modern commerce operates. With the explosive rise of ecommerce and contactless payment, it has become one of Britain’s fastestgrowing enterprises. Moreover, it is one of the very few UK technology companies to have made it to the FTSE100 index of leading British stocks.

What a shame, then, that it this week became the latest in a growing number of UK enterprises to have fallen victim to a foreign takeover – a £9 billion bid from a similar US company called Vantiv. For all its growth, payment processing remains a highly fragmented market, ripe for international consolidation. Worldpay had planned to play a leading role in the consolidation game, eventually emerging as a global behemoth in payment systems.

Unfortunately, Brexit devaluation, together with the pall of uncertainty leaving the European Union has cast over the UK finance sector as a whole, has got in the way and reversed the tables. Once the hunter, Worldpay has become the hunted. When the takeover is complete, control will pass to Cincinnati in deepest Ohio.

The incoming £9 billion at least helps patch up the UK’S balance of payments a while longer, but in other respects it scarcely seems a matter for celebration. Britain is creating too few world beaters, and it seems to be losing those it does have at a rate of knots.

The back story here bares some repeating, for Worldpay is in some respects a case study in squandered and frustrated British opportunity. Originally part of Royal Bank of Scotland, it was sold to private equity seven years ago for what by today’s standards looks a snip – £1.7 billion. RBS was by no means a willing seller. Rather, it was forced into it by the European Commission as part of the “remedy” for the £45.5 billion of “state aid” the bank received during the financial crisis. What’s more, RBS was given a limited time frame to make the sale, locking it into the depressed prices that ruled at the time.

Suggestions from RBS’S then chairman, Sir Philip Hampton, that Worldpay and other assets earmarked by Brussels for disposal be demerged instead, so shareholders could benefit from any future upside, were rejected by the Bank of England, which insisted the company be sold outright to bolster RBS’S capital reserves. In any case, the upshot is that taxpayers, who still own 72 per cent of RBS as a result of the bail-out, have lost out to the tune of £5 billion or more.

I don’t want to over-egg the point. There is obviously some justification for the EU’S state aid rules, strictly adhered to by the UK but manipulated to destruction by others. It’s right that state handouts are discouraged. Where they take place, there must be penalties to ensure that any advantage gained is countered. Yet without the bail-out, RBS would have gone bust, and in so doing would have brought down half the European banking system with it. UK state aid did the whole of Europe a service. Europe should have been thanking UK taxpayers, not punishing them.

Nor do the rules seem to stop others. In a recent case, the newly elected French President, Emmanuel Macron, simply ordered French banks to write off 90 per cent of their debts in order to save a company judged vital to the national interest.

One of the advantages of Brexit, I suppose, is that it promises to release Britain from Europe’s often perverse state aid rules, allowing the Government to set a more interventionist industrial policy. This might include, for example, protecting Worldpay from foreign takeover – not that I would advocate such an approach.

But don’t bet on it; agreeing to continued governance by European rules on state aid and much else besides is all too likely to be the price paid for the relatively soft Brexit Britain increasingly seems to be pursuing. Hey ho. FOLLOW Jeremy Warner on Twitter @jeremywarneruk; READ MORE at telegraph.co.uk/opinion