Retreat on foreign deals
FOREIGN buyers planning to snap-up key British technologies and infrastructure will be breathing a sigh of relief. Theresa May’s pledge in July to curb foreign takeovers has sunk in a sea of verbiage in the Government’s Industrial Strategy.
Indeed, Business Secretary Greg Clark goes as far as to suggest that Softbank’s £24bn acquisition of Cambridge-based ARM is an example of the nation’s industrial success.
There is no doubt that ARM is a technology triumph, built upon the excellence of scientists and technicians at one of our great universities. With its pioneering work in the internet of things, from fridges to cars, ARM had the opportunity to become Britain’s finest contributor to the new digital world.
The Softbank bid ended all that. It symbolised what has become known as the ‘financialization’ of business under which shortterm gains for investment bankers, advisers and shareholders are the overriding interest. The only ‘Soft’ thing about this deal was the soap applied by Masayoshi Son on his visits to Downing Street, with his promises of doubling the workforce.
Since then the Softbank boss looks to have lost focus on post-Brexit Britain and transferred his affections to the US. He has promised Donald Trump he’ll put his muscle behind a $100bn fund to invest in American technologies. The speed with which his attention switched to ingratiating Softbank with the new commander-in-chief is almost comparable with the way Softbank snaffled ARM patents, the results of the hard work of a generation of British scientists, many of them recipients of generous taxpayer funding.
Much of what the Green Paper says on investing in infrastructure is also unwelcome.
The dangers of allowing overseas owners to control vital infrastructure are evident almost every day. The prospect of Japan’s Toshiba becoming a major investor in new nuclear in Cumbria has become less and less likely with the group’s accumulating financial difficulties. It demonstrates the problems of handing command and control on infrastructure projects to overseas companies and governments.
Yet the May Government is allowing the mistakes to be repeated. National Grid is selling gas distribution networks to the ‘vampire kangaroo’ Macquarie. One only has to look at the past of Thames Water to see how shortsighted this has become. Only last month, Camden Passage, in Jeremy Corbyn’s backyard, was flooded as a result of under-investment in the capital’s pipes. Under Macquarie ownership, the pension fund deficit at Thames has soared to £250bn and more than £1bn in dividends shipped off to shareholders.
Thankfully, as a result of questions by MPs, the proposal to sell the Green Investment Bank to Macquarie and a consortium of investors looks as if it may have been canned.
There is much in the Green Paper that makes a great deal of sense. The redirection of the education system to focus more on science, technology, engineering and maths clearly is a good thing. It is also encouraging that the Tories recognise there is a role for government in backing key sectors of the economy, such as the creative industries in which the UK has competitive advantage.
It also wants to strengthen investment and commerce in the regions. The report draws attention to the frightening gap between the gross value added to the economy in London and that in other parts of the country.
But the financial and institutional support proposed is negligible. The British Business Bank is getting extra funding, but it is as nothing compared with the resources of the KfW in Germany or the Small Business Administration in the US. We may live in budget-constrained times, but the postBrexit economy is not going to be transformed by the £170m set aside to create ‘prestigious new Institutes of Technology’. If Britain is serious about the skill shortages domestically, it needs to talk billions rather than millions, and the same for the British Business Bank.
Similarly, if the Government wants to keep the economy competitive, it needs to make sure the Competition and Markets Authority works in the interest of citizens, not corporations. An industrial strategy is the right idea, but so far the execution is feeble.
Copper plated
THE abrupt departure of Garry Jones as chief executive of the London Metal Exchange is just the latest setback for the Hong Kong Exchange & Clearing, which spent £1.8bn on the City bauble in 2012.
A cursory glance at the LME’s history might have offered some clues to the exchange’s mixed pedigree, including the adventures of Britain’s Charles ‘Copperfingers’ Vincent in the 1990s and the disgrace of a Sumitomo trader after the bank took a £1.3bn trading loss.
Among the LME’s alma mater is none other than former Ukip leader Nigel Farage. Need one say more.
Trump trade
HOW do investors trade Trump, given his habit of making market-sensitive tweets? One suggestion is an active Trump Tweet ETF (exchange trade fund) that buys and sells on the President’s words. Could be highly volatile.