Time to halt foreign bids

THE Government should not take too long to decide how it intends to police overseas takeovers. The more it prevaricates over one of the most specific pledges made by Theresa May on the Downing Street steps, the more vulnerable Britain becomes to assaults on technology, finance and the tax base of the economy.

The 17pc tumble in the pound, post-Brexit, has made the top FTSE 350 companies and beyond particularly susceptible to a hard currency bid from the US, Japan or China.

Britain’s leader in the ‘Internet of Things’, ARM Holdings, fell into the hands of Japan’s Softbank while the Tories were still sorting themselves out over the summer. As seriously, the UK’s lead in artificial intelligence is heading into foreign hands. Chinese private equity group CSC is in pole position to take control of Founders Factory, which specialises in investing in AI start-ups.

There are two problems with such a deal. China cannot be relied on to keep a vital new technology frontier secure for the UK given its known capacity for stealing industrial secrets. And as we learned at last week’s IMF meeting in Washington, Beijing’s financial system is fragile and weighed down by debt.

Founders Factory would not be the first AI pioneer to be swallowed. In 2014, non-taxpayer Google spent £304m on DeepMind, a company now regarded as the global leader in this area with 250 academics on the payroll.

In the financial sector the biggest beast unprotected from a takeover is the London Stock Exchange Group which is still being pursued by Deutsche Boerse. Paradoxically, all that stands between the LSE and domination by Frankfurt is a European Union competition probe.

Meanwhile, it is open season on the fund management industry. Boston-based Harbour Vest refuses to give up on its effort to buy the assets of SVG Capital. London-based Henderson is proposing to merge with Denver-head quartered Janus Capital and shift its quotation to New York. Serial Aussie asset-stripper Macquarie is in pole position to take the Green Investment Bank off the hands of the Government for £2bn. And in the gaming sector, one of the nation’s favourite bookies – William Hill – is deep into merger talks with Canada-based Amaya in a deal worth £4.6bn. While all this goes on, the Government dithers. The Prime Minister and some min- isters are thought to favour an approach similar to that of the Committee on Foreign Investment in the US. Canada has a similar watchdog in place. Indeed, it was partly responsible for blocking a 2011 bid by the London Stock Exchange for its Canadian counterpart, the Toronto exchange or TMX. Canberra has recently set up something similar. One fully understands why major changes to the Enterprise Act 2002, which currently governs competition, need to be approached with caution. We don’t want dangerous dogs legislation for capitalism.

But with such important sectors of the UK economy under threat in the post-Brexit world, the Business Secretary Greg Clark and the PM have a duty to act without delay.

Dax lifeboat

JOHN Cryan, chief executive of Deutsche Bank, should have chatted to his opposite number Jean-Laurent Bonnafé of BNP Paribas before seeking to negotiate down a proposed fine of £11.3bn penalty by the Department of Justice.

BNP deployed the might of the French government to try and get a £7.3bn fine by the Department of Justice lifted in 2014, and failed miserably. Standard Chartered, HSBC and most alarmingly BP could also testify to the inflexibility of US regulators and courts when punishing overseas offenders.

The Attorney General in the US system is a highly politicised office. In the 1960s, for example, the late Robert Fitzgerald Kennedy used his office to pursue the honourable cause of

civil rights. In the Nixon years, attorney general John Mitchell turned his fire on White House enemies. Most recently people close to Loretta Lynch’s office ruled that Hillary Clinton’s use of a private email system did not require prosecution even though classified material was involved.

One suggestion doing the rounds in Frankfurt is that instead of waiting on the US to give it a deal there should be some German self-help. The authorities cannot step in because to do so would set a precedent for the rest of the eurozone. An alternative would be support from the other banks. The difficulty is that Germany’s banking system is so weakly capitalised and unprofitable that the main players could not safely launch a lifeboat. Instead Deutsche Bank could turn to customers for help. Companies in the key Dax Index of quoted firms are flush with money, holding £65bn of cash and shortterm investments. Shareholders in Siemens, Daimler, Bayer and the like may be less than enamoured with the idea.

The cry of ‘German banks for German companies’ could have considerable appeal.

Last rites

PREMATURE perhaps, but a condolence book for the London Stock Exchange has already arrived on my desk.

Titled Coffee House To Cyber Market, the book by banking historian Elizabeth Hennessy is in the form of one of those glossy coffee-table volumes favoured by self-important organisations and covers 300 years from 1698 to the digital revolution at the start of the 21st Century. Next instalment, The Frankfurt Years?