Taking Great out of Britain
CADBURY’S re-emergence as a serial user of clever tax avoidance strategies should come as little surprise. One of the first actions of new owners Kraft in 2010 was to shift the domicile of Britain’s premier chocolatier to Switzerland.
All the other sins committed by Kraft and its successor company Mondelez have become legion.
They include the closure of the Somerdale plant and export of the Wispa bar to Poland, cutbacks in the workforce at Cadbury’s spiritual home of Bournville, the shrinkage in the size of Dairy Milk bars and some tasteless recipe changes.
As a nation of chocolate lovers, the offences of Cadbury’s uncaring owners are always of consumer interest. The more important overseas takeovers have been of our power industry, large chunks of infrastructure and big industry enterprises such as ICI. In spite of this sordid history, there is an insouciance among our political classes as to who owns who in Britain.
One of the UK’s greatest commercial successes are the creative industries. These range from the role of British architects such as David Chipperfield in remaking the landscape in post-unification Berlin, to the enormous value generated by British vocal artists overseas. Thank goodness that Adele, our most thriving performer at present, has chosen to use an independent firm, XL Recordings, to make her albums. That means that much of the income from the 4.5m of US sales from her album 25, which now tops the iTunes charts in 110 countries, flows back to these shores.
But that is not the case for many of our other popular artists, including One Direction, Ed Sheeran, Sam Smith, Coldplay and the rest with output on the Universal and other labels. The demise of EMI, the home of the Beatles and most of the cutting-edge bands of an earlier vintage, is one of the great tragedies when it comes to overseas earnings and, one suspects, the payment of UK taxes. Much of the blame for EMI’s disappearance falls on the shoulders of Terra Firma’s Guy Hands. He says it was in deep trouble before his private equity firm took control.
Be that as it may, it is ludicrous that the UK has so much creative talent and dominates so much of the world’s rock output but lacks a national champion in music production and distribution.
One of the biggest challenges facing UK economic policymakers at present is with our balance of payments. The trade balance widened in the second quarter and the deficit on the capital account is watched with some dread by policymakers. If more of the income from selling music overseas was generated in the UK rather than foreign producers that would help the trade balance.
As significantly, the fact that so many of Britain’s biggest enterprises are controlled from overseas means that investment income, which might have flowed back to the UK, stays offshore.
The Bank of England might argue that one of the biggest reasons for the capital account shortfall is the fall in the reach of the UK’s banking sector, with Royal Bank of Scotland, Lloyds, Barclays and even HSBC cutting back on overseas operations post the great financial crisis. That may be the explanation for the biggest hit, but losing control of the nation’s intellectual property doesn’t help.
Banana skins
BANKS often complain about the amounts of equity and loss-absorbing capital they are required to keep on their balance sheet since the financial crisis.
Yet a survey from the City thinktank CSFI and accountants PwC suggest they will need every penny.
The annual Banking Banana Skins report finds that the uncertain state of the global economy and in particular the high levels of debt in many parts of the world is seen as the biggest risk over the next year.
Next on the list is cyber-crime, with big questions raised about the durability of the technology. The latest evidence of this came when Barclays’ online and mobile banking systems crashed for two hours on Monday. Other worries include the slow speed of ‘cultural change’ despite popular pressure and exposure to China. Of less concern is regulation, despite the cacophony of noise from bankers saying that the time for retribution is over.
Wishful thinking.
Dame game
IT MAY be too soon to restore British bankers to high society but it looks like there is plenty of mercy for overseas counterparts.
First lady of Spanish banking Ana Botin, executive chairman of Banco Santander, has been appointed an honorary Dame Commander of the British Empire (DBE). She is credited with creating a new force in UK banking by helping to bind together the remnants of Abbey National, Alliance & Leicester and Bradford & Bingley under the Santander UK label. Antonio Horta-Osorio, the Portuguese chief executive of Lloyds Banking Group, who did much of the donkey work before Botin’s arrival, may think this a little rich.