The proposed sale of ARM to a Japanese software company makes this
article relevant today, especially after the intention to Brexit.The threatened merger between the US drugs giant Pfizer and the British-Swedish drugs giant AstraZeneca has brought foreign ownership of British industry back into the news. What is the extent of foreign ownership of British industry, does it matter and should it be stopped?
Taking the last point first, the government has considerable powers to limit foreign takeovers, in the case of manufacturing it has virtually absolute power under the Industry Act 1975 and there are other powers such as sections 58 and 59 of the Enterprise Act 2002. If it uses the law the government can stop any foreign media ownership and has wide discretion in controlling takeovers in other sectors, such as specifying the deal so that it is in the interests of the UK or even forbidding them. All EU countries have similar legislation, for instance Italy has the Strategic Sectors Act. According to the European Court of Justice, laws aimed at safeguarding the national interests in strategic fields are consistent with EU law as long as their implementation is based on objective and verifiable conditions.
The foreign ownership of British industry occurs at two levels, the shareholder and the management.
Contrary to the myth that British Pension Funds own British companies, the majority of shareholders of FTSE 100 companies are foreign. About 4.7% of FTSE 100 shares are owned by Pension Funds, 10.7% by British individuals and 53.2% by foreign individuals and companies.
The shareholders are foreign but what of the management? The extent of foreign ownership of British industry is breathtaking:
"But foreign ownership of UK firms is increasing. From 2000 to 2007, in the manufacturing sector and measured in terms of output, foreign ownership rose from 25 to 40 per cent. Among larger companies, it is now between 70 and 80 per cent: 2,000 firms taken into foreign ownership in one decade. I see no sign it has slowed.
In mining and quarrying in 2007, 70 per cent were foreign owned; in utilities, it was 50 per cent and is now much higher. Our next generation of nuclear power stations will also be decided overseas. Only one national newspaper is wholly UK owned, while legislation to free up television station ownership is on the cards." Sir Alan Rudge, Chairman ERA Foundation
Also see "Recent Foreign Ownership" below.
Does it matter? Under EU law corporation tax is levied in the designated country of the Head Office of a multinational so losing UK Companies means an immediate loss to the UK tax payer. The losses in corporation tax must be in the region of £20 billion a year or more to the Exchequer.
The government listens to corporations and the majority of the important industrial corporates in the UK are now foreign. Foreign companies favour cheap labour and the necessary free movement of labour to achieve this end. The ideal for a foreign company is to have an overseas workforce that is highly educated at no cost to the company and paid less than an Indian peasant coupled with importing and exporting goods without restrictions. This now seems to be British government policy.
The foreign ownership of British newspapers means that the news is skewed towards a curious US - Russian Oligarch perspective that also favours cheap labour. This foreign input into government decision making undermines the power of the people whom the government is supposed to represent: you and I.
That Britain now has no sizeable wide range steel production is obviously
strategically dangerous. That we are looking to the Chinese to build the next generation of nuclear power stations shows the strategic idiocy of allowing the entire nuclear power industry to become foreign. I would particularly warn against Chinese, Qatari and other ownership by Sovereign Wealth Funds: ownership by these funds is direct ownership by foreign governments that could be used to the detriment of the UK.
One of the major concerns must also be the location of R&D. Pfizer closed down its huge Sandwich Research Centre in Kent as part of a policy of centralising research and would probably do the same to AstraZeneca's research facilities.
That Mandelson and George Osborne could see nothing wrong with visiting the yacht of the Russian oligarch Oleg Deripaska shows how allowing oligarchs such as the Lebedevs to own British industry removes essential concepts of propriety in carrying out government business. Foreigners who own British companies are not subject to British law and the average level of corruption and malpractice in British political and corporate affairs will equilibrate with those abroad whatever our domestic legislation.
Other countries seldom allow more than 20% of their industry to be foreign owned (although Canada has over 50% - about the same proportion as the UK and France 40% (See Management Today)). They do this because they understand that the route to national prosperity, the per capita prosperity of their own people, is to lay up treasure from overseas. This isn't rocket science, its like football, Chelsea can have a world class football team but people living near Stamford Bridge will never get a chance to play for their own team, their only opportunities will be as cleaners and ticket collectors. Pfizer might acquire AstraZeneca but the scientists will work in the US and the English will be working as cleaners, expected to be grateful for the foreign investment in their jobs. Foreign ownership does the local people no good. But of course, the internationalists, the foreign corporations, will say this is racist and bend the whole of our political establishment to their point of view.
Apart from the social consequences of foreign ownership, the UK is also suffering a huge haemorrhage of funds as a "Primary Income Deficit" in the Balance of Payments that is making us all poorer.
Recent Foreign Ownership
Britain has had a a vast number of foreign takeovers in the past 30 years: London Buses (German), Harrods (Qatar), Boots (US-Italian), British Airports Authority (Spanish), Selfridges, Fortnum & Masons, Savoy (Canadian), Cadburys (US), ICI (Dutch), Jaguar Rover (India), MG Rover (China), Corus (India), Camelot (Canada), P&O Ports (Dubai), EDF Network (China), Rowntrees (Swiss)
The utilities and power sector has a high foreign ownership, especially electricity networks: British Energy (France), EDF (France), EDF Network (China) - yes, the British networks of Electricite De France were taken over by the Chinese and are, paradoxically called UK Power Networks -,Central Networks (US), Northern Gas Networks (US), Northumbrian Water (China), Electricity Northwest Network (US), Northern Powergrid (US), Scottish Power (Spain), Thames Water (Australia), Kemble Water (Australia), South East Water (Australia), Wales and West Utilities (China) etc.
The Telegraph, Mail, Observer and Guardian are British owned. The others: Independent (Lebedevs - Russian oligarch), Sun (Murdoch - US), The Times (Murdoch - US), The Standard (Lebedevs - Russia). SKY is closely linked to the Murdochs, ITV and Channel 4 are still British but Channel 5 is owned by Viacom, a US company.
First published 5/5/14
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