Business
You takes the money, you pays the price
Published 09 August 2007
Back-door nationalisation is on the march as enterprises owned by totalitarian governments take over some of our biggest firms
Britain prides itself on its open markets. The CBI estimates that an astonishing 50 per cent of the nation's largest enterprises are in foreign hands. Among the big western economies, the United States and France used to be among the keenest buyers of UK assets. But since the turn of the century, with the rise of the Asian powers and the surge in the global oil price, it is China, India, Singapore and the Gulf statelets that have dominated the takeover headlines.
At present Delta Two, an enigmatic investment fund controlled by Qatar's rulers, is seeking to win control of Britain's oldest grocery chain, J Sainsbury. Barclays, the patrician banker, has turned to state investors from China and Singapore to assist in its effort to win the hand of the ailing Dutch bank ABN Amro. P&O, the shipping giant, has already been snaffled up by Dubai Ports World, and the remnants of Britain's last mass car producer, Rover, are in Chinese hands. Gallaher, maker of Benson & Hedges cigarettes, is now controlled by Japan Tobacco - in which the government in Tokyo owns a 50 per cent stake.
The march of foreign state-owned and foreign state-controlled enterprises represents a form of back-door nationalisation. Many of these investments are being made by companies controlled by totalitarian states accountable to no one. So far the Labour government has declined to draw a line in the sand. The nearest it has come to taking a stand against the state marauders is to suggest that a bid by the powerful Russian state-controlled energy group Gazprom for Centrica, owner of British Gas, might not be entirely welcome.
There is a supreme irony in the way in which these takeovers have been nodded through without a murmur. In the 1980s and 1990s, Britain under Margaret Thatcher became the exemplar of privatisation. National assets including British Airways, BT, the electricity system and nuclear power were turned over to the private sector. Britain became an apostle for privatisation, sending its investment bankers across the globe to advise governments on selling off state enterprises.
One of the tenets of new Labour was to promise not to reverse the Thatcherite reforms. Indeed, the national sell-off continues apace. The secretive defence firm QinetiQ was offloaded by Gordon Brown while still at the Treasury. Sir John Chisholm, the former civil servant running QinetiQ, collected a cool £26m from the sale. Documents accompanying Brown's last Budget record that the government sold off £12bn of surplus property last year as part of a wider plan to dispose of £30bn of public sector assets.
Advocates of privatisation appear to see no paradox in the rush to offload state assets and the creeping overseas nationalisation. Not so long ago, the idea of a representative from the People's Republic sitting on the board of Barclays, a high street bank, would have been inconceivable. Yet China Development Bank could soon be the largest shareholder.
The onslaught is likely to intensify over time. China sits on a trillion US dollars of reserves and is desperately scouring the world for companies and raw materials to buy. In Africa, it has sought to take direct control of natural resources, squeezing out the usual financiers such as the World Bank.
Britain sits tamely by as state outfits grab ever more control over our corporate heritage. The US, by contrast, is refusing to be bought. In the 1990s, egged on by the Hollywood writer Michael Crichton's novel Rising Sun, it stood up to Japanese efforts to grab large chunks of its commerce. It has since resisted attempts by the Gulf states and China to gain control of critical assets. Every overseas investment is scrutinised by the Committee on Foreign Investment in the United States. When the CFIUS failed to stop Dubai buying P&O, which owned six critical ports, including New York, Congress stepped in and forced the US sale to a more acceptable buyer.
The contrast between American vigilance and British pusillanimity is stark. It was bad enough that the UK authorities allowed Ferrovial, a heavily indebted Spanish firm, to take control of the nation's airport operator, BAA, with disastrous consequences. Similarly, German ownership of Thames Water during last year's drought left consumers with nowhere to go for redress. But at least RWE, now the former owner of Thames, and Ferrovial were publicly quoted firms, required to report to stakeholders.
No such checks and balances exist for state-owned companies. Temasek, a Singaporean company, is run by Ho Ching, wife of Singapore's prime minister, Lee Hsien Loong. It is an example of capital's close relationship with power. China Development Bank is under state control. These are owners for whom shareholder democracy and stakeholder capitalism mean nothing.
Overseas state ownership is a threat to jobs, profits, the nation's tax base and, ultimately, our economic and national security.
Alex Brummer is City editor of the Daily Mail
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