Michael Harrison's Outlook: If inward investment is such a good idea, why does selling our heritage make us so uneasy?

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An Indian company takes over Britain's biggest steel maker. The Spanish buy our airports - and, for good measure, our banks, power companies and mobile networks. The Mexicans run our concrete industry and the Japanese our biggest glass manufacturer, while you have to travel to Singapore, Canada and Dubai to talk to the owners of this island nation's main ports. Most of our electricity industry long since passed into foreign ownership - first it was the Americans, then the Europeans. Now the Russians are coming. Maybe. Much of the water industry has gone the same way. Last year Thames, the country's biggest water supplier, swapped a German owner for a bunch of Australians.

In short, industries that were once thought to represent the commanding heights of the economy are falling under overseas ownership. And it seems to be happening at an increasingly rapid rate. UK plc is up for sale and it is irrelevant where the buyers come from as long as they have the money. What's more, while our open borders policy encourages foreign bidders, we often can't reciprocate. Try to remember the last time a British company bought a French or German utility. Does any of this matter?

Tata's debt-funded £6.7bn takeover this week of Corus raises the issue afresh. If the buyer hadn't been Indian, it would have been Brazilian. Corus started off with the intention of finding a steel maker to buy in a developing economy and ended up being bought itself.

So what, you may say. Mergers and acquisitions are a fact of life and if the money raised from the sale of Corus can be recycled and put to more efficient use by its shareholders, so much the better. Capital markets are blind, if not to the colour of money, then at least to the complexion of those who borrow it. It is a testament to the strength of the UK economy and its manufacturing base that we attract so much inward investment, not a threat.

Surprisingly enough, the UK continues to be a net gainer from this global M&A merry-go-round. At least in macroeconomic terms. As my colleague Hamish McRae pointed out in these pages yesterday, we still earn more on our foreign investments than we pay out in dividends and interest to foreigners who invest over here.

But that's not an argument which is likely to cut much ice in the blast furnaces of south Wales, where the workforce must be looking at the astronomic sum Tata paid for Corus and wondering how it is going to make its purchase pay off.

The short answer is that Tata would be crazy to buy a business just to run it into the ground. Moreover, thanks to the deal, finished steel made here by Corus has just as much chance of finding its way into the Indian automotive industry as Tata slab is likely to start arriving at the Welsh docks.

What happens, however, if Tata and Corus begin to sink under the weight of debt used to finance the transaction? Or the steel industry goes into another of its cyclical downturns and hard investment choices have to be made? In that event, India would almost certainly be a better place to have a job than Port Talbot. Investment control is one thing - quoted UK companies long since got used to the idea that much of their ownership may lie overseas. Management control, which is now increasingly being exercised outside the UK, is another thing.

To take one example, Peugeot was able to close its Coventry car plant because control of the company resides in France and not here. Had the plant been French, then a way would have been found to make it economic and keep it open. This is not to say that all foreign owners of British companies will make investment decisions based on their own national interest. Nor is it to advocate the approach adopted by the French of attempting to ring-fence strategic industries that must not fall under foreign control - a list that, ludicrously, seems to include yogurt. Far from it. It is merely to observe that who pays the piper, generally calls the tune.

In some cases, foreign ownership comes with obligations. Utilities and airport owners, for instance, are regulated to ensure that they cannot salt profits away overseas at the expense of investment here. The Commons Transport Committee would go much further when it comes to the UK's ports industry. It distrusts what it calls the "unregulated whims of international capital" and would have the Government intervene in the market when investment decisions taken in far-away places threatened the UK national interest.

Political incorrectness on a grand scale, of course. But you don't have to be Gwyneth Dunwoody to be a touch concerned about the annexation of so much of British industry by foreign owners.

Of course, inward investment ought to be encouraged. Of course, nationality ought not to be an issue where ownership is concerned. Of course, it is best left to markets and not governments to pick winners and dictate capital flows. And yet why is it that the surrender of British control over so many British companies makes us so uneasy?

Shell and the pursuit of happiness

The profits are gushing like never before, so why isn't Shell's Jeroen van der Veer a happy man? To be fair, happiness is a relative concept. He is a lot less worried than he was three years ago when the reserves reporting scandal threatened to hole the Shell supertanker below the water line. But the captain is not what you would call brimming with confidence. Costs are rising, refining margins are falling and Van the Man has been forced to junk the production targets he set himself less than a year ago because of Shell's little local difficulties in Nigeria.

He's still elephant hunting for projects that merit investment of more than $1bn. But the competition is getting tougher and for the moment the oil price is heading in the wrong direction if Shell wants to maximise the potential of its oil sands fields, where a big chunk of reserves lie.

Ideally, he'd like to plant Shell's flag more firmly in Iran, where the world's second largest reserves of oil and gas lie, but he is worried about making a political enemy of Uncle Sam who has promised punitive sanctions against anyone who cosies up to the ayatollahs. The threat has been enough to scare off BP altogether.

As for Russia, Shell has been forced to bite the bullet and cede control of Sakhalin to Gazprom, wiping 400 million barrels from its proven reserves in the process.

Investors are being kept happy with a dividend policy which keeps the cash pumping out but what can Van do to really get them up on their feet and dancing? Not a mega-merger, if he is as good as his word. Shell still favours organic growth over acquisition.

Perhaps that is just as well because the siren voices are beginning to sing to him again about the attractions of a tie-up with BP. It was just such a vainglorious empire-building dream that finally helped push Lord Browne out of BP prematurely. His successor-designate Tony Hayward has begun the process of building BP in his own image with his first important appointment yesterday - that of a new head of exploration and production. A merger with Shell would be, er, a distraction to say the least. If he can resist the urge, so surely can Shell.

m.harrison@independent.co.uk

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