Hong Kong’s swoop will be the biggest test yet for post-Brexit Britain
Welcome to Brexit Britain, where everything is for sale. Or is it? The timing of a blockbuster bid for the London Stock Exchange from its Hong Kong counterpart could not be worse for a government desperate to reposition itself as the pre-eminent global free trading hub.
The City will be pivotal to any such attempt to build a thriving economy outside of the European Union and the LSE is the beating heart of the Square Mile. Yet the EU referendum – and the political imbroglio since – has turned UK companies into sitting ducks.
The pound is at record lows, stock
prices have tanked and debt has never been cheaper. Blue-chip firms have been falling like dominoes.
It is at this moment that Hong Kong’s stock exchange has tabled a £32bn bid for the LSE. Its offer of £83.61 a share looks a little stingy at a 23pc premium to LSE’s closing price on Tuesday. LSE shares soared more than 15pc to £79 on the news, although they later pared back those gains to trade 5pc higher.
Brexiteers will claim that Hong Kong’s move is proof that Britain remains hugely attractive to foreign investors – but don’t be fooled.
Assets don’t come much more prized than the LSE, a true pillar of the financial industry. No wonder Andrea Leadsom sounded confused about how to react.
The new Business Secretary made the usual platitudes about welcoming foreign investment and “collaboration with international interests” but she also cautioned that close scrutiny would be given to anything with “security implications”.
In which case, the Government should be crawling all over this proposal. The suggestion of security fears will seem curious at first.
The pro-democracy riots in Hong Kong may stem from concerns about Beijing’s creeping influence but the city remains independent, and there seems little prospect of it suddenly falling to China.
But you don’t have to look hard to see who is pulling the strings at the Hong Kong stock exchange.
Chairman Laura Cha is appointed by Carrie Lam, the chief executive of Hong Kong, who has repeatedly faced claims that she is a puppet of Beijing, accusations that have grown louder amid the increasingly violent crackdown on student protesters. The exchange’s boss Charles Li claimed on a conference call with journalists that its seven-year ownership of the London Metal Exchange, during which it had invested in the UK, created jobs and paid taxes, was proof that it would be a suitable custodian of the City’s crown jewels. No offence to Mr Li, but the LME isn’t in the same league as the LSE. Surely the bigger question is whether ministers are prepared to allow the LSE to lose its independence at all.
David Schwimmer, the LSE boss, had been planning to take on Bloomberg in the fast-growing financial data market through a £23bn takeover of Refinitiv, its closest rival.
Though not without risks, the deal would double its size and position the company for the data-driven trading of the 21st century, as well as open up major new opportunities in bonds and foreign exchange trading.
At a period when the economy is facing its most uncertain moment since the financial crisis of 2008, isn’t this the sort of bold and timely deal that the UK should be throwing its weight behind?
Britain should be looking at ways to significantly strengthen the City of London, not weaken it by offloading its most important institution to the Chinese.
Still, it is not hard to see why Hong Kong has chosen now to have a stab at such a bold deal. One thing that the Government has demonstrated since
‘Britain should be looking at ways to significantly strengthen the City of London, not weaken it’
the referendum on EU membership is that it doesn’t really give a fig about our financial services industry. The City’s failure to extract any concessions over Brexit in the past three years proves that point pretty emphatically.
Perhaps it will be left to Donald Trump to have the final say. The US president has already expressed his displeasure at our perceived kowtowing to Huawei and allowing the Chinese to build our nuclear power stations.
He has also repeatedly labelled China a currency manipulator, a charge that would heavily implicate the region’s primary financial trading hub. Surely any precondition of Trump agreeing to a trade deal with the UK after Brexit will be that a takeover of the LSE is blocked?
“Free Trade Britain” has a dilemma on its hands.