In no major western country is it easier for a foreign firm to take over a domestic company than in the UK. If Britain is to move towards the "responsible capitalism" championed by Ed Miliband, this will need to change.
Aware of this, Miliband used his appearance on The Andrew Marr Show to challenge David Cameron's response to Pfizer's bid for AstraZeneca (the largest proposed foreign takeover in British history). He denounced Cameron for acting as a "cheerleader" for the deal and announced that Labour would bring in a new "public interest test" for such takeovers. Revealing that he had written to the PM on the subject today, he said: "No other country in the world would be waving this bid through, nodding it through on the basis of pretty weak assurance from Pfizer, who have a pretty dubious record when it comes to their record in this country and other takeovers.
"I'm writing to the Prime Minister today setting out how we adapt the public interest test in the future and how he, rather than being that cheerleader for this takeover with paper-thin assurances, should be actually championing British jobs and a British success story that is AstraZeneca."
In his letter to Cameron, Miliband rightly notes Pfizer's worrying track record, including its 2012 decision to close down its R&D facility in Sandwich (leading to the loss of 1,500 jobs) and its weak commitment to investment.
The Tories will probably seek to dismiss Miliband's proposals as crude state interventionism but it is harder for them to do so when figures such as Michael Heseltine, an economic adviser to the government (I recently interviewed him in his Treasury office) and Lord Sainsbury are also questioning whether the deal is in the national interest. Heseltine called earlier this week for the introduction of "reserve powers" to protect British companies when assets such as the country's science base are at risk. He said: "Foreign takeovers can often be hugely helpful and I have no doctrinal preoccupations - I've done enough takeovers of small businesses myself to know how valuable they can be. But the important point is that every other advanced economy has mechanisms of some sort on a failsafe basis to scrutinise foreign takeovers and we're the only country that doesn't."
With Pfizer responsbile for 6,700 high-quality jobs across eight sites in the UK, the stakes are high. By challenging Cameron to abandon his laissez-faire approach, Miliband has smartly intervened in a way that chimes with the public's increasing hostility to no-holds barred capitalism.
Here's the full text of Miliband's letter to Cameron.
Dear Prime Minister
I’m writing regarding the ongoing bid for AstraZeneca by Pfizer. This bid raises serious questions about a key sector of our economy. I know we share a commitment to the UK’s retaining it’s leading global role in pharmaceuticals and wanted to put in writing my concerns with this bid. I also wanted to propose areas on which we could work together to strengthen the oversight of takeovers involving UK firms and to suggest a stronger role by the UK government in this particular bid.
We all recognise that takeovers are an essential part of a functioning economy and can lead to greater efficiencies and better services for consumers. However we also all recognise that too often in recent years major takeovers have failed to deliver the promised benefits.
In this particular bid the stakes could not be much higher. Pfizer’s bid for AstraZeneca affects one of the UK’s most significant investors in R&D, a major contributor to our science base, and 6,700 high quality jobs in the UK. Despite those high stakes, the impression created in recent days has been of a Government cheerleading for this deal on the basis of a short letter with inadequate assurances.
I am strongly of the view that, when it comes to such a strategically important part of UK PLC, we need a more substantive assessment of whether this takeover is in the national economic interest before the UK government allows itself to be seen to be supporting it.
There are reasons to think that such an assessment would be of value. Firstly the company’s track record in the UK raises concerns, including their decision in 2012 to close down the world-renowned R&D facility in Sandwich, leading to the loss of 1,500 jobs. Secondly AstraZeneca currently spends a significantly higher proportion of its turnover on R&D than Pfizer – a crucial concern given the importance of pharmaceutical investment in R&D to the UK science base. Lastly there are concerns about Pfizer’s wider track record regarding the impact on research of previous takeovers.
For the future this case strengthens the view I have expressed in the past that we need to look again at the UK’s takeover regime. In particular there should be a stronger public interest test which encompasses cases such as these where strategic elements of our science base, with impacts well beyond the firm concerned, are involved. Should you wish to make changes to that effect the Labour Party will support you to make them happen.
However, more immediately we need to act swiftly in the case of this specific bid. I have seen the assurances you have received from Pfizer, but this merger would have an impact for decades to come, so it is not enough to have a few specific promises that only last for the next few years.
I note that you have opened up dialogue with the company about this bid and, while noting that this is a decision for the shareholders concerned, responded positively to the outcome of those discussions. I would hope that such a position, allowing the UK Government to be seen as cheerleading for the bid, would only have been taken on the basis of a thorough assessment of whether this bid is in Britain’s national economic interest. If you already have such an assessment I would be grateful for it to be made public to inform those taking this decision. If you do not have detailed advice of that sort I would call on you to put in place an immediate independent assessment to ensure that the implications for our national economic interest are fully discussed. Such an assessment would provide elements of the transparency and information that a wider public interest test would involve. It would also be in Pfizer’s interest if their commitment to the UK’s science base is as strong as they insist. And it is only after such an assessment has been made that a British Prime Minister should decide whether to support such a bid – not by staging quick backroom conversations with one party to a deal.