EDITOR'S COMMENT: Foreign takeover malaise – a curious British disease

Published: August 25, 2011

WHO will protect British companies from foreign takeovers? Certainly New Labour wouldn’t.

Whenever foreign firms began to eye up possible prey in Britain, New Labour meekly stepped aside. The shrinking of a British company taken over by a foreign firm, which would mean more joblessness and less tax revenue for the Treasury, seemed, almost inexplicably, to cause little concern to New Labour.

It was all accepted as part of the price of globalisation. And globalisation as a world system could not be questioned. Thus, Cadbury, a British institution, was swallowed up by Kraft. New Labour didn’t turn a hair.

True, this stirred some resistance and critics of New Labour’s shortsighted policy began to chant “Cadbury’s Law” to restrict foreign takeovers. Unfortunately, deaf ears were turned by politicians and the senior civil servants in Whitehall.

Recently, though, not quite in the same mix, the Derby engineering company Bombardier lost a massive order to a German company.

Again, little reaction from the present government.

Now, the US technology giant Hewlett-Packard is sniffing around one of our biggest software companies, Autonomy.

It is possible Business Secretary Vince Cable is busy marshalling his arguments before taking a public stance against the threatened takeover. But we fear this is wishful thinking.

Controlled foreign investment is not the issue.

Takeovers are.

Part of the intense commercialisation of football, certainly in the higher leagues, has led to foreign takeovers – the ownership of Manchester United, Chelsea and Manchester City have all fallen to a massive influx of capital from overseas in the past few years.

This has set in motion spiralling wages that have a rippling unstable financial effect on clubs throughout the top leagues. Unless this is steadied, clubs could go out of existence.

Other large economies, such as Germany and France, make sure they pull up the drawbridge against foreign incursions. Major football clubs in Europe do likewise.

What lies behind the British disease?

It can be traced back to the Thatcherite years, the abandonment of our manufacturing base and the deregulation of financial controls in the City.

All British prime ministers since the 1980s have been besotted by the idea.

It is not a question of resurrecting protectionism. It is a matter of safeguarding the British economy. Foreign investment will be withdrawn as quickly as it comes in, if overseas companies fall on bad times and need the capital for higher returns elsewhere in the world.

In the present economic crisis gripping Europe and the US, this is a distinct danger.