Why Britain welcomes foreign takeovers
Even London's 300-year-old stock exchange is up for sale, but few seem concerned.
It's an observation often made over a bowl of strawberries among Wimbledon's sumptuous tennis courts: The tournament may be British, the venue undeniably so, but virtually all the major players are foreign.Skip to next paragraph
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Now it seems, the same arguments have migrated to a far broader field: British business. Once off-limits to foreign owners, British companies are now being swallowed up at a prodigious rate. What's more, no one seems to mind.
"The attitude is if a bunch of Spaniards want to own the airports, why does that matter?" says Professor Karel Williams of Manchester University, referring to a Spanish group's hostile bid for BAA, the company that runs most of Britain's big airports.
And that's only one of several major foreign deals in play right now, which economics commentator Will Hutton estimated at $100 billion in a recent article, "UK for sale, one careless owner."
Russians are stalking the largest energy utility; Americans are interested in nuclear operations. Even the 300-year-old London Stock Exchange itself is fending off bidders from Europe and America. Virtually no one in Britain has quibbled. And few have protested at the bid for BAA by Spain's Ferrovial.
That attitude stands in stark contrast with Americans' views on the matter. While no one in Britain seemed to flinch when a Dubai firm bought British shipping group P&O earlier this year, the deal generated an uproar in the US because it meant the Arab company would inherit P&O's operations in sensitive US ports.
But the "Wimbledonization" of British business raises two key questions: Is literally everything for sale, or are there certain assets that will remain off limits for reasons of security or political accountability? And why are the British so blasé when most of their big trade partners, America included, prickle at the thought of foreigners making off with the crown jewels of their economies?
Financial commentators and academics say that when it comes to foreign takeovers, Britain has perhaps the most open capitalist model of any big economic power. Margaret Thatcher's privatization drive made shareholder capitalism extremely popular, and firms are thus very widely held - by pension funds, institutions, and countless private individuals. They can easily be bought by simply appealing to one instinct: the desire to book a profit.
"To sell a company at a big profit is regarded a success," says Peter Buckley, director of the Centre for International Business at Leeds University. "British companies are on the whole publicly quoted, more widely held, and more easily available. But in the French and German systems, companies are often more closely held - by family members or regional bodies. It can be harder to win them over."
Professor Williams adds that the financial imperative has smothered sentiments of patriotism and introspection, causing the government to defer to "the City" - London's equivalent of Wall Street. "The government doesn't draw the line any- more," he says. "Now you have a system known as 'City-knows-best': If someone offers you a good price for anything, you sell it."