Editorial: Protectionism is not the answer, Lord Heseltine

Britain’s open-door policy on foreign takeovers is a net gain for the economy

Share
Related Topics

Lord Heseltine's inclination towards restrictions on foreign takeovers of British companies should, perhaps, not come as a surprise. After all, the former Deputy Prime Minister came a cropper back in 1986 over his desire to dabble in the future of the Westland helicopter company.

Now, recruited by the Coalition to review economic growth, Lord Heseltine has returned to the theme. After six months of research, tomorrow's report will be a wide-ranging one. Many of its proposals deserve consideration. Efforts to boost companies' research activities, for example, should be supported; and there is much to be said for extra funds for regional expansion. On the subject of takeovers, however, Lord Heseltine is wide of the mark.

The topic is always a tricky one, prompting laments about the "loss" of cherished brands alongside more hard-headed concerns that jobs and factories are easier to cut from overseas. For many, Kraft's takeover of Cadbury in 2010 was a case in point. Although the US food and drink group had promised to keep Somerdale – a chocolate factory near Bristol – open, the ink on the deal was barely dry before it reneged, sparking calls for a "Cadbury law" to protect British companies from hostile foreign bids.

For all the hoo-ha, the reality is rather more nuanced. For a start, globalisation works both ways. Cadbury's status as the world's second-largest confectionary group, for example, was partly due to extensive overseas shopping of its own. Similarly, the assumption that all would otherwise be well is a misleading one. Cadbury was in the doldrums, unable to attract investment and planning to close Somerdale itself, with the loss of all 400 jobs. The choice, then, is rarely between a foreign owner and a rosy status quo, but rather between a foreign owner and decline.

Indeed, all the evidence suggests Britain's open-door policy to be a net gain for the economy as a whole. For all the individual controversies, in most cases productivity and profitability improve under new, non-British owners, as does the performance of local competitors rising to the newly invigorated challenge. Take Jaguar Land Rover. The near-basket case left over from the collapse of Rover is now at the vanguard of British industry, thanks to investment from its Indian parent company, Tata. The foreign money that has poured into everything from bus fleets to electricity networks – and is soon to bankroll much-needed but otherwise-unaffordable nuclear power – is equally welcome.

Lord Heseltine's reflections will strike a particular chord now, as naysayers bemoan the tie-up of Penguin and Random House (owned by Germany's Bertelsmann) as a sad day for the company whose cheap paperbacks brought reading to the masses. But there is little ground to view the merger as an ending – Bertelsmann already owns a slew of once-independent British publishing imprints with no deleterious impact on their characters.

Britain's best interests must not be trumped by the siren call of protectionism, even from a Tory grandee. The current set-up is not perfect, of course. That many US and European companies have structures that militate against foreign takeover is a strong argument for measures placing similar limitations on their activities here. There are also legitimate questions about the role of short-term investors such as hedge funds in takeover bids. These are mere tweaks, though. The general approach, with restrictions based on national security and media ownership alone, is sufficient. A more interventionist style, protecting priority industries, say, is both impractical in itself and set to fall foul of EU law. Lord Heseltine's case is certainly an emotive one. But it is wrong.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Junior Quant Analyst - C++, Boost, Data Mining

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Junior Quant Analyst (Machine Learning, SQL, VBA)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

SQL Developer (TSQL, SSRS, SSAS) Fund Manager - London

£45000 - £50000 per annum + Benefits: Harrington Starr: SQL Developer (TSQL, S...

Software Developer (JavaScript, TDD, Jasmine, Angular.JS)

Negotiable: Harrington Starr: Software Developer (JavaScript, TDD, Jasmine, An...

Day In a Page

Read Next
 

Letters: The West flounders in the Middle East morass

Independent Voices
David Tennant as Hamlet  

To vote no or not to vote no, that is the question... Although do celebrities really have the answer?

David Lister
All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition