Cynics will point rather to the level of public funds going into the plant via the Welsh Development Agency. More generally, the question raised by this and other projects is whether it is really such a compliment to receive so much inward investment.
The scale of the flow into the UK is certainly substantial. In the first three quarters of 1995, no less than pounds 11bn of direct investment took place - more than 2 per cent of GDP. More important, the inflow was equivalent to almost 15 per cent of total investment in the economy - this at a time when growth in capital spending has been extremely disappointing.
Much of the inflow has in practice gone on the purchase of financial assets through mergers and takeovers, rather than new investment on the ground. But clearly foreign firms are now playing a highly significant role in renewing the country's capital stock.
Nowhere is this more so than in manufacturing, for so long the achilles' heel of the British economy. Foreign firms now account for almost a third of total industrial investment. They equip each of their workers with double the amount of plant and equipment provided by UK-owned firms. It comes as no surprise, then, that foreign-owned firms produce 40 per cent more per worker than their UK counterparts.
However, despite the undoubted benefits from direct investment, it still leaves many people feeling uneasy. Early worries about Britain becoming the home of screwdriver plants have not been wholly dispelled. It is true that foreign investors conduct a fair amount of research in Britain. Their share of manufacturing research and development was 19 per cent in 1989, hardly less than their 21 per cent share of turnover. However, this is less encouraging than it seems, because the big multinationals who predominate in foreign investment spend disproportionately on R&D. Certainly the evidence of "Silicon Glen" - the concentration of electronics manufacturing in Scotland - is that the local economy remains strongest in assembly work rather than higher value areas.
Furthermore, while manufacturing has been assisted by foreign investment, the long slide in its share of GDP has not been reversed. Ten years ago, it accounted for just over a quarter of national output; now it accounts for little over a fifth. No doubt the position would have been considerably worse without the big investments made by foreign companies. Yet the inward flow testifies as much to the underlying weakness of manufacturing, with foreign investors resettling huge swathes of industry - like colour television production - abandoned by second-rate home producers.
So we get industrial regeneration of a kind. But it comes on the terms of the multinationals who have selected Britain as a base. There is a price to be paid and this is not just overt or covert forms of industrial support. More importantly, the freedom of policymakers to tax business is restricted. The interest of foreign investors in strategic questions such as Britain's place in Europe also has to be considered. Multinationals have invested in the UK as a springboard for a European market and they don't want to see that threatened. For all the Tory Euro-sceptic rhetoric, the effect is to constrain ministerial freedom of manoeuvre. This may be no bad thing. In the end, however, the price we pay for inward investment is loss of control.
European minefield for Lloyds Chemists bids
For those interested in the arcane world of EU competition policy, the Lloyds Chemists takeover saga is proving quite a treasure. As this column warned it might be, the UniChem bid for Lloyds, one of Britain's biggest pharmacy chains, was yesterday referred to the Monopolies and Mergers Commission. At the same time the OFT asked that the rival bid by Gehe should be brought back to Britain from Brussels for consideration by the MMC alongside UniChem.
Gehe is a German company. The cross-border nature of its bid gives Brussels jurisdiction. Clearly it would be ridiculous for UniChem to be referred to the MMC and not Gehe, for as far as the UK is concerned, the two companies are mirror images of each other. Their bids raise exactly the same competition issues.
However, claiming Gehe back from Brussels is more than just a formality. What has to happen is that a particular domestic competition problem - say undue concentration of market power in Yorkshire - has to be demonstrated. The MMC then has to confine its deliberations to that specific concern. What the Office of Fair Trading is doing with UniChem and wants to do with Gehe is have a wide-ranging inquiry dealing with issues of "vertical integration" and anything else that takes the MMC's fancy. It hasn't actually raised a "specific" concern. The application form is as a consequence incorrectly filled in.
A field day for Gehe's lawyers, then. The European Commission would like to say to say yes to the British competition authorities, but technically it may be barred from doing so. Don't forget the politics of this, however. Brussels is at present trying to extend its remit for examining cross- border mergers by reducing the qualifying size. In this it is facing fierce resistance from both Britain and Germany. But if the EC agreed to hand back more cases to domestic competition authorities, Britain might just be persuaded to drop its opposition. Here's another good reason, therefore, why Brussels might in this case be persuaded to bend the rules.
Competition law may be an arcane world, but most people are capable of understanding the concept of one law for UniChem, a British company, and an altogether different and less onerous one for Gehe, a German company. It is plainly not right.
Labour attack on rail link is nonsense
It is not often, these days, that it is possible to write in support of a government initiative, but the ground on which Labour has chosen to attack the high speed rail link is so much nonsense. Certainly the delays and shifting of position which have characterised this project have been farcical. But to portray the whole thing as a gigantic giveaway to the private sector, as Clare Short, Labour's transport spokeswoman, does, is tosh. Nobody would have even considered building this link without a very considerable direct Government grant. While some important assets - quite a lot of land, the Waterloo international terminal, St Pancras Station and a one-third interest in Eurostar - have been thrown in for good measure, they only have a value if it is possible to make money out of them. So far the state has failed, so why not give the private sector a go?Reuse content