Who owns UK plc - and does it matter? - part 2

For firms that are acquired, there are several trends. On average, productivity and profitability tend to increase, but so do plant closures and redundancies. So in general terms the stereotype is true. While the restructuring that follows foreign acquisitions typically improves performance and competitiveness, it does not tend to treat employees, dependent contract firms and local communities particularly well.

Individual company experience is tremendously varied, however, depending on the sector, the intentions of the acquirer and the nature of the takeover. Acquisition 'styles' vary significantly - from highly interventionist, ‘imperialist’ acquisitions where decision-making powers are centralised to a non-interventionist approach where decision-making is devolved to local management. The effects on local employees and communities will reflect the style adopted by the acquirer.

For the wider economy, although foreign takeovers tend to lead to redundancies in the acquired firm, inward investment overall has a positive effect on employment. This is because it includes greenfield investment and the setting up of new businesses alongside acquisitions.

So while employment in British‐owned manufacturing has declined steadily and output has fallen since 1984, employment in foreign‐owned manufacturing businesses has remained stable (and output has doubled), resulting in a much higher level of foreign ownership in British manufacturing now than at any time in the past. This effect is even more pronounced in services with greater increases in employment and output in foreign-owned firms than locally owned firms over the past 25 years.

At the local level, foreign buyers are the catalysts of (usually unwelcome) social change. But British-owned firms themselves have a mixed record in terms of community investment and loyalty to employees, in Britain and abroad. Studies show that their management style generally focuses on shareholders rather than 'stakeholders', such as employees and local communities.

This is a fairly accurate reflection of Britain’s national culture. Compared with the French or the Japanese, for example, the British (and the Americans) tend to view firms as profit-making enterprises where performance and competitiveness dominate goals related to stakeholders.

So while individual regions experience both the positive and negative consequences of foreign ownership, Britain appears to benefit nationally from the openness of the economy, at least in terms of competitiveness. Professor Collinson concludes: 'As a society perhaps we reap what we sow: our culture is characterised by a fairly individualistic, profit-oriented form of capitalism, and this has repercussions at home as well as abroad'.

From the ESRC magazine Britain in 2011

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