Britain’s wholesale auctioning off of everything from once nationalised industries to our most iconic brands has to stop! Our current eagerness to sell everything we have of value has to be unsustainable and bad for the economy in both the long and short-terms. This post is prompted by news yesterday of Hovis being sold to american investment firm The Gores Group after 125 years of continued British ownership. The straw that has broken the camels back, if you will. It feels like not a week goes by without another much loved British institution being sold to the highest bidder. But is my view just sentimentalism? Is foreign investment simply a sign of a more globalised economy?
A great example is that of Boots the Chemist, not least because growing up in Nottingham it is a brand that means so much to me and my family. Boots was sold in 2007 to an Italian investment firm. Soon after the takeover, Boots — which had been based in Nottingham for 161 years — moved its headquarters to Zug in Switzerland. Before the takeover, Boots had paid £89 million in British tax in its final year as a quoted company on the London stock market. Now that it pays its tax in Zug, that figure has shrunk to just £9 million. This leaves an 80 million defect each year in the British coffers.
Worryingly, foreign companies acquired £30billion worth of British enterprises in 2009. In 2010, that rose to a value of £54.5 billion and has been steadily raising ever since.
Other countries adopt what’s known as ‘economic patriotism,’ which involves putting tremendous obstacles in the path of foreign bids. France argues that it’s in the national interest to prevent key technologies falling into foreign hands. Key technologies that extend all the way from nuclear power to yoghurt-making. We must start to adopt similar measures!
Recalling the famous Hovis advert – once all our brands are sold off surely we face an increasingly steep hill up which we must push our bike to replace all that we have sold.
I would be interested to hear from anyone with any ideas of what must be done to put pressure on government to stop this madness!
– James
Although I am not up on EU law I think that there is something against protectionism. I recall hearing that a few years ago to comply Germany removed the legal protection for VW which would allow foreign investors and ownership.
HM government (in the absence of any treachery laws) would argue that there is nothing they can do. Surely if a company is floated then there is nothing that can be done!
Isn’t it in part to do with the greedy shareholders, they just want a fat cut of the worth of the company in many cases. It would be nice is this government actually did something for the country and put obstacles in the past instead of leading foreign investment in. Nuclear power to China comes to mind. Your campaign “Made in Britain” is only half its worth if the profit ends up in the far east!
I’m tempted to agree that this is madness. It’s quite complicated madness though.
The Hovis deal still has to be agreed by shareholders (and I imagine that these will mostly be corporates/investment funds etc) and by regulators.
Premier foods owns the Hovis brand as it does many others and has simply borrowed too much over the years and doesn’t have enough in its pension pot. And of course not enough people are buying Hovis.
It’s also interesting to read that Premier foods has also got rid of Branston pickle, Sarson’s vinegar and Hartley’s jam to foreign buyers (according to The Telegraph) – so they may well be heavily responsible for those figures you’ve got for sales to non-UK companies!
Thanks for doing the research on tax – I hadn’t realised the difference in tax income that taking Boots into private Swiss ownership had made. I thought it also notable that Boots has 4000 staff on zero-hour contracts.
Would buying more Hovis have helped? In this case I don’t think it would – it would have just increased the amount that Premier would have sold it for. As soon as you get big enough to be on the stock exchange then people buy into your company and they want to see a return on that investment. If the company doesn’t get any investment then it probably won’t be able to get any larger/employ more people. The investors may be investing with your pension money – and if they don’t get a return your pension is worthless.
We, the public need to buy more UK-made goods, but the investors need to start thinking about something other than the bottom line.
It all seems a bit sad and a bit “grab it now when you can before the ship sinks”, however the TV is full of praise today for our “marvelous exchequer” who always seems to release a good feelgood spin on a wet rainy miserable “no-real-news day” and hide the bad news on the day of Nelson Mandela death – funny that 🙂
If we all stopped buying when they were taken over foreign owners would soon get the message and not buy British companies! I do not buy Cadburys or Weetabix now.
The other side of the coin is the magnificent job Tata of India have done with Jaguar LandRover which has gone from struggling under BL followed by Ford, followed by BMW and is now selling record numbers of brilliant vehicles world wide and employing ever increasing numbers of UK based workers
The core of the problem is ownership. Once a company goes public shareholders can come from anywhere and the boards primary job (or at least as they see it!) is to deliver ‘shareholder value’. I would like to see a British government attack this in two ways. Firstly promote by all means possible Employee Ownership. (They have a Great website http://employeeownership.co.uk/) As a country we need to embed this as a core strategy for long term stability in our industries. It is a proven method and ways should be found of making this the preferred option whenever and for what ever reason a company or part thereof comes up for sale. Secondly the whole culture of boards of directors needs to change. Surely they should see their job, and be incentivised accordingly, as the long term health of their company, its employees and its customers. Instead the culture and incentives, are to hold out for the maximum bid price at such a time as they or the markets decide is a good time to sell. Surely the long term approach would benefit the shareholders as well though, by way of increased dividends and share prices. Put simply if a board are not willing or able to manage a company for the long term then they should not be in that position!
Nicely put Mike –
http://www.reasonandreality.org/?p=3020 Its going to get worse. It’s corporatism at its worst and British Influence are the main lobby group pushing this forward. Give it another 20 years and our lives will be owned by corporations and bankers, yes, even the NHS.