Should we be concerned about foreign ownership?

Who owns UK business and industry? In this age of globalisation, perhaps this is an awkward question. But I think it is important that the increasing foreign ownership of UK companies is discussed.

Globalisation is the reality of business today and UK companies have long owed much of their success to their global reach. We led the way on free trade and the abolition of tariff, and, unlike the rest of the world, our belief has been that protectionism is not required.

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.

In some sectors, it’s no longer fanciful to think there will soon be 100 per cent foreign ownership of large companies. And there has been severe imbalance in this area: where UK firms have bought assets overseas, it has been at smaller scale and in ’softer’ sectors. In the last quarter, UK purchases overseas totalled £200m; foreign takeovers of UK businesses amounted to £14bn.

Control is one thing that makes me uneasy. Corporates touch our lives as employers, suppliers and customers; they pay taxes and provide jobs; they host design and production facilities. Does foreign ownership affect commitment to these things? We can only hope not, but assurances to staff in other countries that jobs are not on the line in current cutbacks will not reassure staff here, where no such guarantees are given. It would be naÏve to believe all national interests have disappeared in this ’globalised’ world.

In some sectors, it’s no longer fanciful to think there will be 100 per cent foreign ownership of large companies

UK corporates have influence too. They talk directly to government on issues such as taxation and regulatory policy. In a democracy one would hope that this influence would be moderated by patriotic self-interest. How does foreign ownership affect this?

There is no doubt foreign ownership has been beneficial in some cases, although we can never know what might have resulted had UK investors held their nerve as did European counterparts in automotive and shipbuilding, for example.

The argument of 30 years ago that there was a lack of UK managers tough enough to retain competitiveness is contentious and to think the same now is unrealistic and defeatist.

UK people in well-financed, UK-owned companies match any in the world on measures of quality, innovation and responsiveness to customers.
So what is different about the UK? Unlike any other developed nation, the UK provides no constraints on its industry sales. Where other countries’ banks and investors support corporates through tough times, ours often appear to be after an exit route, while new business is starved of investment. Foreign-based groups see the strategic worth of the UK assets they are buying: why can’t our own banks and investors see the same?

At the micro level, many companies have gained from new ideas, different forms of governance and other benefits. But the macro level is a matter for concern. ’Inward investment’ is often a euphemism for asset-stripping; not about investing for growth in the UK, but about buying up captive markets and transferring profit elsewhere.

If this current ownership trend is acceptable, then we need take no action. But we should face up to hard truths and press for answers to difficult questions.

This article is based on a speech given at a recent Royal Academy of Engineering debate