Investors hit by FTSE flight
ASTrING of big names are disappearing from the FTSE 100. Sky will go following a £30bn takeover by Comcast of the US, pharmaceuticals firm Shire is being taken over by Takeda of Japan, and in the latest big deal, randgold is merging with rival Barrick.
It’s a bonanza for investment bankers, lawyers and financial Pr firms.
Shareholders, particularly in Sky, are being rewarded too, with handsome takeout prices. The fact that bidders are interested in assets listed here regardless of Brexit is a positive reflection on our stock market and the country as a whole. And yet the Footsie is in danger of looking a little denuded of some of its best stocks for private investors.
The departure of Sky removes from the index one of our best creative businesses, a field in which Britain excels. randgold’s exit to Canada and New York, where its partner Barrick is listed, takes out the only gold miner in the FTSE 100.
Unless its small shareholders exercise their right of veto, consumer goods company Unilever will vanish from the blue-chip index too, in an exercise to streamline its AngloDutch structure with a single listing in the Netherlands. If that happens, it will deprive small shareholders of a FTSE 100 holding that has been consistently popular for decades because of its steady dividends, exposure to fast-growing emerging markets and socially responsible behaviour.
Marks & Spencer, another favourite with private investors, was earlier this year teetering near the FTSE relegation zone.
It’s in the nature of a share index that it is dynamic and it would be in vain to expect the same companies to be in the FTSE 100 today as when it started in the mid-1980s.
Companies that have recently joined the blue-chip club include online food delivery platform Just Eat, online grocer turned logistics firm Ocado and GVC, the Party Poker-to-Ladbrokes betting group.
Gambling, takeaways and online logistics platforms – it’s a reflection of the times.
Labour pains
LABOUr’S proposal to force companies to surrender 10pc of their capital to their workers is a perversion of employee share-ownership, which, when left unmolested by retrograde socialists, is an excellent concept.
Some highly successful companies including Unipart and Admiral Insurance have, for years, reaped the benefit of employee share ownership.
The point is that it has to be genuinely at the heart of a company’s philosophy, not a diktat imposed by hard-Left politicians.
The Labour plan would not give workers the full benefit of share ownership. They would not be permitted to buy or sell and would only be allowed to take dividends to a maximum of £500-per-person, with the rest of it going to the Government.
Labour’s plan looks inferior from a worker point of view to that offered by those supposedly evil capitalists at Admiral, for instance. They give away free shares of £3,600 annually, which can be sold tax-free after five years. There is no limit on dividends and an employee who had saved since the scheme began would now have a nest-egg of around £70,000. Why dump that for an inferior version? The sudden alleged enthusiasm for an employee share-owning democracy sits oddly with Labour’s plans to re-nationalise utilities. Companies such as United Utilities, South West Water and Severn Trent have high levels of employee ownership, but Labour would snatch their shares from them.
And in their ill-informed glee at the thought of expropriating wealth from the capitalists, the Labour top brass has forgotten that pension funds would be among the biggest losers, so their wheeze will impoverish the old age of the workers they purport to cherish.
There is no obvious way the plan could be enforced on foreign-owned businesses with large numbers of employees here, such as Starbucks, which already has its own ‘Bean Stock’ share scheme for baristas.
And why do Corbyn and his cohorts think big businesses would meekly comply? They are, after all, internationally mobile.
If this ludicrous idea ever looked like becoming a reality, firms would quit the London stock market and list elsewhere.
Unilever would be just the beginning.
Hello Marcus
LOOKED at through sober eyes, the excitement at the launch of a savings account paying 1.5pc by Goldman Sach’s new operation Marcus is quite remarkable.
This is well below inflation, so savers will be losing money in real terms, yet it is greeted with untrammelled delight. What an indictment of the pitiful rates paid by rivals.