Think “neoliberalism” isn’t real? The other day, I met it in person

This merger raises serious questions about British law, says Anna Turley.

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In politics, we often bandy terms such as neoliberalism or capitalism around with alacrity, sometimes without pausing to define what we mean. Last week, I had neoliberalism defined for me, because I met it in person at the Business, Energy and Industrial Strategy Select Committee in the House of Commons.

Our committee’s job is to scrutinise the government and to investigate issues relevant to British industry. We are investigating the possible takeover of a huge British company called GKN, which can trace its origins in South Wales back to 1759, by a smaller one called Melrose established in 2003. GKN builds parts for aeroplanes and vehicles, and employs around 60,000 people, with 6,000 of them in the UK. They are subject to a hostile takeover by Melrose. So we called the senior teams in from both companies, as well as Unite the union to talk to us about their proposals. The three founders of Melrose appeared before us, and after some cajoling, explained their plan.

They aim to borrow £1.4 billion to buy the business, and a further £3.5 billion to run the business. They plan to sack the GKN board in its entirety and take over managing GKN’s constituent businesses themselves. As the committee chair Rachel Reeves MP pointed out, Melrose would almost double in size without any extra capacity.

The Melrose team claim that, despite their intention to sell the companies they acquire within three to five years, they run their companies as though they would own it for ever. This was exposed as nonsense by my colleague Peter Kyle MP. In fact what Melrose do is deliver short-term returns to their shareholders by selling off parts of the businesses they acquire. They were very proud that a pound invested in Melrose when it started is worth £18 today. Their rhetoric is all about a ‘speedy, flat and non-hierarchical structure’ for GKN, but the reality is they intend to shed jobs. Each of the three Melrose founders was paid around £40 million this year, with further bonuses in the millions. A successful takeover of GKN would net them many millions more.

When representatives of the Unite trade union gave their evidence, it became even more clear that the real danger is that GKN will be broken up and sold off for short-term advantage.  Steve Turner, assistant general secretary of Unite, also pointed out that Melrose was a financial contributor to the Leave campaign, which cast more than a little doubt on their commitment to European supply chains.

The hostile bid by Melrose raises some vital questions about how we run our industrial economy. A company like GKN is a capitalist company, of course. But it has a long-term strategy, researching and developing products over a ten or twenty-year horizon, investing in the skills of its engineers, designers and apprentices, and a commitment to the defence infrastructure of Britain and the US. It creates jobs as well as wealth. It is a good corporate citizen. And it recognises trade unions. In post-Brexit Britain, it is exactly the kind of company we need to persuade to stay in the UK.

Melrose, on the other hand, seemed to be a machine for short-term money-making and nothing else. In the committee I quoted their letter to shareholders stating that ‘we measure our success by the value we deliver to our shareholders’. This, despite all the warm words about their commitment to the long-term economy, to R&D, to the communities in which they are based, and to the national interest, is the overwhelming impression I was left with. Some very rich people are looking to become even richer, and helping their shareholders to vast fortunes of unearned wealth on the backs of thousands of workers and centuries of endeavour by a great British company. This is the unacceptable face of capitalism: short-term, amoral, and avaricious, like a vulture circling over the terrain looking for weakened prey.

Ministers have the power to block the takeover, on grounds of national security. Shareholders can vote against it, if they experience a sudden rush of conscience. But in the medium term we need new rules on hostile takeovers, making them harder, and a new industrial framework which encourages long-term investment and not a fast shareholder buck. This is something the next Labour government should enact with some urgency, lest we see our proud and long-standing manufacturing base further stripped of its assets and skilled jobs disappear forever.

Anna Turley is MP for Redcar and a member of the BEIS Select Committee.