Folly of flogging off Britain
These are desperate days for the Tories as the choice of ethically challenged David Cameron as Foreign secretary shows. some of the ideas coming from those around the Prime Minister Rishi sunak are plain daft.
Deputy-PM Oliver Dowden’s proposal to pare back the National security and Investment Act to make the UK more ‘business friendly’ is profoundly wrong.
It threatens British start-ups and risks doubling down on errors of the past. had there not been a concerted political campaign against the sale in 2014 of the country’s now largest- quoted company, the health sciences innovator AstraZeneca, it would be a depleted offshoot of Pfizer rather that the champion of immunology treatments for cancer.
Much of its success, based around scientists trained or nurtured at Britain’s universities, would have been shipped overseas. AZ is now worth £28bn more than Pfizer!
One only has to look at the miserable history of Arm holdings since it was sold to softbank in 2016 to understand what a disaster it has been for the UK, which has no world-class tech company around where an advanced semiconductor universe could have been built. Under softbank’s ownership, Arm’s Chinese operation fell under Beijing control. As softbank struggled to improve returns, it put Arm up for sale.
A sale to Nvidia was blocked by competition authorities, it suffered an over-hyped initial public offering in the Us and has seen its top management ship out to North America. For years it has been open season on the very UK tech that sunak wants to embrace. Among the vanishing British tech leaders are Aveva, sonar maker Ultra electronics, satellite group Inmarsat and aerospace group Cobham, which fell into private equity hands. At the time of writing, the future of bioscience trailblazer Abcam hangs in the balance.
Want to know why so many of our utilities, including Thames Water and heathrow, fail to work in the national interest? It is because they are in the hands of disinterested overseas owners who are more interested in what they can extract in dividends and interest payments than investment in new infrastructure.
Most of our G7 competitors would not allow this to happen, which is why the National security and Investment Act was passed to create a more secure playing field. Watering it down would be a catastrophe.
Unlocking pensions
The unveiling of the edinburgh Accords last year, with the aim of reinvigorating pension fund investment in Britain, seems a lifetime away. The idea was to revitalise pension fund investment in shares on the London stock exchange and to encourage more risk taking by backing start-ups and venture capital. It is crazy that the City hosts one of the most vibrant wholesale capital markets in the world but our pension funds choose to place the overwhelming amount of the £2.5 trillion of assets overseas.
Chancellor Jeremy hunt recognised this and has been seeking to galvanise local authority pension funds by encouraging mergers and to capture some of the money in defined contribution pension schemes for domestic investment. Progress has been slow. Labour’s shadow chancellor Rachel Reeves sees this as a clear opportunity to boost UK business investment. Reeves believes this is a role for the Pensions Regulator in mandating change. she has several ideas, including aping the French Tibi Initiative by seeking to direct funding from defined contribution schemes into growth industries. A full bore approach to reform, rather than the micro-step taken by the Tories so far, could prove a tonic for output.
Flying high
Thank goodness for fund manager Neil Woodford and former German Chancellor Angela Merkel. Were it not for their intervention, the UK’s flagship defence firm BAe systems would have been swallowed by Airbus a decade ago.
The changes in the geo-political outlook in middle-europe, the south China seas and now the Middle east have transformed prospects for a firm shunned by ethical investment enthusiasts.
This year alone it has booked £30bn in new orders. It is no longer dependent on the needs of Riyadh – as significant a customer as it still is – to prosper.
There are future opportunities ahead with the Tempest (eurofighter). Production would benefit BAe and Rolls-Royce investors and is no longer just an ambition. Chocks away.