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How America bought up Britain

From assets to businesses, the high street to the internet, US investors have a stranglehold on Britain’s economy.

By Will Dunn

In the summer of 1913, the newly appointed US ambassador to Great Britain, Walter Hines Page, wrote to a friend back in Washington: “These English are spending their capital… what are we going to do with the leadership of the world presently when it clearly falls into our hands?” Page was an Anglophile, but he saw that the realignment was already happening, as America’s huge natural resources and new-found economic might allowed it to replace Britain’s dwindling empire. In 1930, the American journalist Ludwell Denny summed up his country’s approach to imperialism: “Too wise to govern the world, we shall merely own it.” Denny believed capitalism would enable the US to take over other countries without ever needing to invade: “What chance has Britain got against America?” he asked. 

Nowhere has America asserted its economic dominance more strongly than in Britain, where around two million people now work for US companies. Tens of billions of dollars per year are transferred across the Atlantic in the form of dividends paid on the proceeds of British work, conducted on behalf of American owners. A jaunty little map on the Office for National Statistics website gives the good news that our goods exports to America actually outweigh our imports by a few billion. Go, Global Britain! But a less accessible chart, found in the deeper reaches of the website of the American tax authority, the IRS, tells a different story: in 2020 (the latest year on record) the revenue recorded by American companies in the UK was over $707bn, more than ten times the amount made in the entire continent of Africa. In 2019, large US corporations made an (aggregated) profit of £2,500 from every household in the UK.  

Under the direction of Angus Hanton, economist and co-founder of the Intergenerational Foundation, Vassal State takes the reader on a dizzying tour of an economy that has come to resemble Orwell’s Airstrip One (the title refers to Angela Merkel’s description of Belarus, the smaller and financially subservient partner to Russia).

Every British high street has obvious American outposts (KFC, McDonald’s) but the average shopper probably does not realise how many products that we might think of as belonging to British culture – Mars bars, Weetabix, Innocent smoothies, Andrex loo roll – are ultimately owned in dollars. We do not question the little Union Jack sticker that reassures us we are buying “British chicken” – was the unfortunate bird issued a blue passport before it was mechanically separated? – and so we fail to understand that we buy much of our meat from conglomerates that are controlled from across the Atlantic.

The British characters we assign to shops – Morrisons, the working-class supermarket from Bradford, or Gail’s, the blousy bakery from Hampstead – are fictions; both are owned by US private equity firms, as are the middle-class temples of Majestic Wine and Waterstones.

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The “digital economy” beloved of our politicians is a means of extending the American economy into our own: British consumers use American technology (Apple, Google, Microsoft) to shop on American websites (Amazon, eBay) hosted by American internet companies (Amazon, Google). We find these sites using American search engines. When we’re not working (usually on Microsoft software) we watch American TV and films on US-owned streaming services; all three of the main streaming services in the UK are American, and seven of the ten most-watched titles on Netflix one recent week were made by US companies. British kids are more likely to watch Google-owned YouTube (where all five of the top English-language channels are based in the US), or to play games bought from companies in Seattle, or to scroll Californian social media platforms. British teachers and parents increasingly observe children in the UK speaking with American accents, because most of the media they consume comes from across the Atlantic.

It’s true that British culture also heads the other way. America has been buying up the UK’s artworks at a rate of £5bn a year for the last decade, furnishing museums in Los Angeles and New York with those paintings that cannot be “saved for the nation”. There is a great deal of debate about the extent to which our universities educate students from overseas; far less is said of the thousands of gifted British students and researchers who are chosen to transfer their intelligence and energy to American universities and businesses.

Britain has been singled out for special treatment. The investment made by the US into the UK outweighs its spending in the rest of Europe combined. This is not just because we have a shared language and we were on the same team in the Second World War. Our political leaders have actively courted this takeover. Voters have been told that foreign direct investment, or FDI, is an unequivocal good; it means foreign investors building new factories for grateful British workers. The reality is that a lot of this “investment” is US private equity firms helping themselves to British companies that are cheaper to buy (thanks to our less buoyant financial markets) than American businesses. This is good for the financial sector, which profits from the boom in buyouts – in 2022-23 alone, US private equity firms bought 181 British businesses – but it means swathes of companies come to be owned by people for whom local employment is not a concern. The UK has lost two million manufacturing jobs since 1991.

Our political class is well aware of this. Our Prime Minister worked for an American investment bank and a hedge fund based in California; his personal wealth today is largely predicated on how the New York Stock Exchange values his father-in-law’s company, Infosys. The Chancellor is a multimillionaire because the company he founded, Hotcourses, was sold to a foreign (Australian) buyer. Unlike France and Germany, which have laws to prevent foreign takeovers of strategically important companies, Britain – ever the butler – has made a virtue of being the “junior partner”, as David Cameron described our role in the special relationship in 2010.

Sometimes it is the government itself that sells our assets overseas. Hanton highlights the 5,000 railway arches, home to thousands of small businesses, that Philip Hammond (as transport secretary) compelled Network Rail to sell at a very affordable price to the US private equity giant Blackstone. Rents promptly doubled, putting many small companies out of business and destroying jobs, but Hammond was satisfied to have created decisive change: the civil servants who had previously managed the commercial property were, he told Hanton, “hopeless people” who were “bureaucratically unable to ever get anything done”. Lord Hammond is now a partner at the private equity firm Buckthorn and a person with significant control of seven property development companies.

Blackstone’s treatment of the railway arches is one example of why private equity has been so successful. Private owners have fewer requirements for transparency and accountability than publicly traded companies. Negative publicity doesn’t really affect them. They can aggressively reshape companies and increase their margins as their fiduciary duty dictates. This might mean simply running the company better, or it might mean loading it with debt, or sacking large numbers of workers, or avoiding as much tax as possible.

This last point is also true of publicly traded companies. Last December, HMRC estimates indicated that US multinationals had underpaid tax in the UK by £5.6bn. Amazon’s main UK division paid no UK corporation tax at all in 2021 or 2022; the company’s net sales in the UK for those two years exceeded £48bn. In the last five years 6,000 British shops have closed permanently, according to the British Retail Consortium, and more than one in ten shops are vacant. In 2020, the UK attempted to defend its ailing shops by placing a new digital services tax (DST) on the US online giants. The previous year Donald Trump responded to a similar plan by France: “We tax our companies; they don’t tax our companies.” In October 2021 the UK agreed to “transition away” from the DST in favour of a “global system” (guess who benefits).   

It was Trump, with his weird grasp on the hand of a painfully embarrassed Theresa May, who made a mockery of the special relationship, although on one side of the Atlantic it was already a joke. When Gordon Brown visited Washington in 2009 he was presented with a DVD box set of old films that would only work on a US machine, the kind of gift that comes from a hasty trip to the nearest petrol station.

It is time, Hanton writes, to see this relationship for what it is, and to write new rules that favour British work over the financial interests of American investors. This involves rethinking the tax system, regulating takeovers and aggressively supporting the growth of businesses and skills that are incentivised to sell shares in London rather than New York. Hanton writes with admiration and fondness for America; he is “not arguing for nationalism”, he writes, “but against abject dependency”.

Vassal State: How America Runs Britain
Angus Hanton
Swift Press, 304pp, £25

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[See also: How to mend a broken economy]

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This article appears in the 17 Apr 2024 issue of the New Statesman, Israel vs Iran