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More than half of all shares in UK companies are in foreign hands. After Tata Steel, it's time to ask questions

While the US Congress halted a proposed sale of six ports to the UAE, many UK ports are foreign - non-EU - owned. And the capital's biggest airports are now all in foreign hands

Mary Dejevsky
Thursday 31 March 2016 15:49 BST
Protesters outside Tata's plant in Scunthorpe
Protesters outside Tata's plant in Scunthorpe (Getty)

Tata Steel’s decision to sell up in the UK gave the Prime Minister a brutal welcome on his return from holiday, brought the business secretary home early from Australia, and allowed Jeremy Corbyn to strut his stuff against one of the grittier industrial backdrops this country still has to offer.

It places at least 15,000 jobs at risk - close to 40,000 if you include the likely knock-on effects - and many of those jobs are in areas that remain dependent on a single employer. No wonder there is much fluttering in the political dovecote.

In some ways, what is unfolding in South Wales and elsewhere has the feel of a drama from the 1980s. We are back discussing the merits or otherwise of nationalisation - if it’s good enough for a bank, why not for steel? Out-and-out free-marketeers are back arguing the toss with the statists - except that steel production now accounts for only 1 per cent of Britain’s manufacturing output and a fraction of the jobs that it did then, so that the costs and benefits of any rescue now look a little different.

And then there is - how could there not be, less than three months before the in-out referendum? - the EU angle. If we were out, say the “Leavers”, the UK would be free to slap much higher tariffs on imported steel, saving a key sector of manufacturing and the jobs that go with it.

Not so fast, say the “Remainers”, prices of practically everything metallic - from cars to pre-fab warehouses - would then rise to match, leaving the UK substantially poorer, and the EU could impose its own tariffs on UK steel exports.

All these questions of principle and practice are relevant, but not nearly as relevant as the one question that successive governments have preferred not to ask over the same time - at least not with the degree of openness that was warranted. And this question is: how far has the much-vaunted openness of the UK’s economy been in the national interest? How far has the quest for foreign investment been allowed to override other considerations? Is there a point at which a country can be too “open for business”?

This has nothing to do with the UK’s membership or not of the European Union. EU members take different views of their own home-grown industries and use different stratagems to protect what they see as their interests.

But they operate a tariff-free zone: free movement of goods, as of people. The quarrel of the UK steel industry in general, and of Tata Steel UK in particular, is not with any other European steel producer, but primarily with China because of the scale of its manufacturing and the cheapness of its steel.

Any remedy here needs to be sought through the EU. Its economic clout as a grouping was demonstrated when it acted - successfully - 13 years ago against discriminatory US tariffs (on steel, as it happened).

But care has to be taken not to damage other sectorial interests, in the UK, as across the EU. This is why the EU has tariffs on Chinese steel which are lower than those imposed by the US.

Yet the bigger quarrel has to be had with this, and previous, UK governments. In the past 24 hours a former head of the Navy, Admiral Lord West, has argued that a home-grown steel industry is vital for national defence. If he has a point, beyond special pleading, then where were the top brass when the preponderance of the UK steel industry was sold to Indian-owned Tata?

Did the UK government of the day - it was the Blair government that signed off on the sale of then Corus to Tata - not regard steel as a strategic industry, without which the UK’s prized defence sovereignty could be impaired? And if it did, was there not an argument for keeping it in UK, or EU, ownership?

Let me clarify here that my instincts are all in favour of free trade. Abolishing barriers, to my mind, is infinitely preferable to building them. Europe-wide free trade has been of enormous benefit. But if even the United States, that arch-advocate - if not perfect practitioner - of the free market draws lines around its national interests, then it surely has sound reasons.

Such has been the UK’s accelerating zeal to attract foreign money that more than half of all shares in UK-based companies are now in foreign hands. And the London Stock Exchange itself is about to go the same way.

Where clearly commercial goods are concerned, and there is genuine competition, it is hard to object, even where supposed “national treasures” are lost. The problem with Kraft’s takeover of Cadbury was less the purchase as such, than the almost immediate betrayal of trust.

But what of utilities and major infrastructure? Privatisation is one thing; a sale to non-UK, or even non-EU, interests, it seems to me, quite another. While the US Congress halted a proposed sale of six ports to the UAE, many UK ports are foreign - non-EU - owned. They include London’s Prince Albert Docks, where a Chinese developer has apparently run into some sort of undefined trouble.

The capital’s biggest airports are now all in foreign hands. EDF (France) not only owns a major UK utility, it is about to build at least one, maybe more, nuclear power stations here, funded in part with Chinese money - a deal that has aroused qualms even among some of EDF’s own executives.

A Chinese telecoms conglomerate (Huawei) provides much of BT’s hardware. There are reportedly “safeguards” in place. Says who? The same people who signed off on it, though the US is said to have expressed reservations.

The extent of foreign ownership in the UK economy is not something that has been openly debated as such, with the downsides - loss of security and control - as well as the upsides - money, obviously - given equal airtime.

Tata’s exit offers an opportunity to ask the big questions that should have been raised - but weren’t - when Tata bought into the UK steel industry in 2006.

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