The number of British companies bought by foreign-owned groups far surpassed the number of foreign firms bought by British groups in the first quarter of the year, according to official statistics published yesterday.
Foreign companies spent £14.3bn on British targets in the first three months of the year, only slightly less than the £15.1bn spent in the fourth quarter of 2009, and still at a historically high level, the Office of National Statistics said. The biggest buy was Kraft's £11.7bn hostile takeover of Cadbury, but that deal was only one of 41 acquisitions worth more than £1m.
In comparison, UK companies spent just £200m buying abroad in the first quarter, even less than the £1bn total for the previous three months – and the lowest quarterly value since records began in 1987. Only 10 of the deals were worth more than £1m. There were also £2.3bn-worth of disposals – including the Rio Tinto's sale of Alcan Packaging for £1.2bn.
The quarterly figures on cross-border takeovers tend to be erratic, skewed by big deals such as Kraft's. But the trend is unmistakeable. And it can be explained by Britain's large trade deficit, Martin Weale, the director of the National Institute of Social and Economic Research, said. "The difference is the arithmetical consequence of the fact that we don't save enough," he said. "So investment in the UK has to be financed from abroad, and the mechanism to do that is by selling off bits of the country."
In the short term, the weak pound will make British companies even more attractive takeover targets. But over the longer term, market equilibrium will reassert itself as rising export levels obviate the need to sell off assets to raise money.
The rules on mergers and acquisitions are now being re-assessed in the aftermath of Kraft's takeover of Cadbury; this caused a furore, partly because of the power of Cadbury's hedge fund investors, and partly because of a broken promise over keeping the Somerdale factory open.
The Takeover Panel launched a full-scale review this week, and the Government faces the challenge of reconciling opposing Conservative and Liberal Democrat policy positions on the issue. In the run-up to the general election, the Tories dismissed plans to restrict hostile takeovers as "populist nonsense", while Liberal Democrats called for the return of a public interest veto.
So far, all Vince Cable, the Business Secretary, has said on the subject is that short-term speculators should not be able to play a determining role. "This is not about economic nationalism," he said this week. "We welcome foreign investors but we want all shareholders to be empowered."
The Office of Fair Trading is also taking a growing interest in ownership of Britain's infrastructure. The watchdog launched the first-ever "stock take" last month.Reuse content