Who owns UK plc – and does it matter?
26 January 2011
Britain has consistently been one of the most open economies in the world and a preferred location for foreign investors, second only to the United States globally. The country has an accumulated stock of foreign direct investment of over $1.3 trillion, nearly a tenth of the world total. There has also been a rise in both the proportion of listed companies owned by foreign shareholders (now over 43 per cent) and the number of British firms acquired by foreign companies.
It is the second form of foreign ownership - via mergers and acquisitions - that attracts most attention from the public, the media and politicians. Over the past four years, foreign companies have spent almost £300 billion buying British rivals, with ownership of the assets and the capitalisation value of a firm leaving the country and dividends from profits going to shareholders in the new home country.
In recent years, household names like Abbey National, BAA, Corus (once British Steel), Jaguar, Land Rover, MG Rover, P&O and Pilkington have been acquired - plus beloved football clubs, including Chelsea, Liverpool and Manchester United.
In some cases buy-outs have been funded by other governments, as with Deutsche Bahn’s £1.59 billion takeover of Arriva - with all the irony of a privatised British rail service being 'renationalised' by a German company. As sovereign wealth funds and state-owned enterprises extend their reach from China, the Middle East and elsewhere, there will be renewed debate about the role of governments versus markets.
The takeover of Cadbury by the US giant Kraft for £11.7 billion in 2010 had the potential to create a popular backlash against foreign corporate takeovers. A very British brand developed by one of the very few multinational firms still known for its history, its connection with the founding family and community links in the industrial heartland of England, acquired by an American colossus apparently best-known for its processed cheese sandwich fillers.
But economic openness is a two-way street and Cadbury’s growth over several decades, including the huge merger with Schweppes in 1969, was itself based on international acquisitions. The firm employs over 45,000 people globally, only 9,000 in Britain. It has consistently bought out local rivals abroad to break into growing foreign markets.
In this sense Cadbury illustrates the two sides of corporate ownership at the national level. The $1.3 trillion stock of inward investment is roughly equal to the volume of overseas assets owned by British companies. And in a list of the largest non-financial multinational firms in the world, ranked by their ownership of foreign assets, Vodafone, BP and Shell are all in the top five, with a combined total of over $600 billion.
So what does foreign ownership really mean for British business, the British economy and wider society? Professor Simon Collinson of Warwick Business School and AIM, the Advanced Institute for Management Research has been surveying the evidence. The findings are mixed but suggest that while specific local communities either benefit or suffer, there are positive overall effects for the nation.