On the face of it, SoftBank’s purchase of the UK technology
firm ARM Holdings is good for Britain.
Despite the media gloom surrounding Brexit and the dire predictions of an economy on the verge of collapse, in reality many large foreign investors are keen to get in first when it comes to purchasing UK businesses.
But sadly that is not the whole story.
The acquisition is only the latest example of a British-built and British-owned company being sold abroad, against the interests of working people in this country.
It should be stopped, and the whole trend of selling off British industrial assets should be stopped too.
As of this week, ARM is not a British business. It is a Japanese business based in the UK.
But why does it matter who owns the company? All the jobs are to be retained, apparently.
SoftBank has reassured the ARM board of directors that it will “remain a very significant UK business and will continue to play a key role in the development of new technology”.
I am not convinced. We have heard this story time and time again.
And despite the best intentions of everyone involved, almost every time, the UK has come out worse off.
Over the past few decades Britain has sold companies to overseas interests at an unprecedented level, and the rate of sales shows no sign of slowing.
Foreign investors now own a massive £1tn worth of British companies, according to the latest figures released by the ONS.
Over the past five years overseas buyers have increased their stakes in UK firms by 10 percentage points.
The key problem is that when a British company is sold to a foreign owner, it is controlled in the interests of those people who are living abroad rather than of the workers based in Britain.
The focus of the management of a foreign-owned company is inevitably – and, I must add, understandably – in their home territory.
That is where, for instance, they will be keen to base their high-level add-on services, such as research and development, which will produce the best-paying jobs and create the largest boost for the economy – if only because they are easier for them to manage there.
It is this offshoring of management jobs in the manufacturing and industrial sectors that has led to the weakening of experience and skillsets in the UK.
It makes it more difficult for British managers to build the experience and skills they need to run effective industrial companies.
If British school-leavers want to enter industry and manufacturing, there are now fewer and fewer opportunities.
This has surely been a big contributor to the large skills gap between industrial managers in Germany and Britain.
It is also true that profits made on foreign-owned companies are most likely to be paid in taxes to foreign governments.
This means that public services such as schools, hospitals and transport systems abroad are benefiting from British-based companies and British workforces, at a time when we so desperately need to inject revenue into our own public services.
Of course, when a foreign company buys a British asset, they must give legal assurances that they will maintain a level of investment and activity in the UK.
These guarantees are usually to provide company workers with certainty that the firm will not be relocated. But the guarantees are time-limited, usually to five or 10 years.
And despite the best intentions of the management – even if they want to maintain activity in Britain – if their margins come under pressure, they will generally, all things considered, prefer to cut their expenditure in Britain rather than in their home market.
Foreign ownership is not always a bad thing. But we have to recognise that we have gone too far.
By having a policy of selling our assets to foreign owners as the first option, we are storing up incalculable problems, which will inevitably lead to severe economic difficulties.
If we want to ensure that the British economy has a sound future, that there are good jobs across all sectors including manufacturing, and that our national interest will be at the heart of the majority of UK companies in 10 years’ time, we need to accept that our love affair with quick profits and foreign owners is a destructive one.
Despite the media gloom surrounding Brexit and the dire predictions of an economy on the verge of collapse, in reality many large foreign investors are keen to get in first when it comes to purchasing UK businesses.
But sadly that is not the whole story.
The acquisition is only the latest example of a British-built and British-owned company being sold abroad, against the interests of working people in this country.
It should be stopped, and the whole trend of selling off British industrial assets should be stopped too.
As of this week, ARM is not a British business. It is a Japanese business based in the UK.
But why does it matter who owns the company? All the jobs are to be retained, apparently.
SoftBank has reassured the ARM board of directors that it will “remain a very significant UK business and will continue to play a key role in the development of new technology”.
I am not convinced. We have heard this story time and time again.
And despite the best intentions of everyone involved, almost every time, the UK has come out worse off.
Over the past few decades Britain has sold companies to overseas interests at an unprecedented level, and the rate of sales shows no sign of slowing.
Foreign investors now own a massive £1tn worth of British companies, according to the latest figures released by the ONS.
Over the past five years overseas buyers have increased their stakes in UK firms by 10 percentage points.
The key problem is that when a British company is sold to a foreign owner, it is controlled in the interests of those people who are living abroad rather than of the workers based in Britain.
The focus of the management of a foreign-owned company is inevitably – and, I must add, understandably – in their home territory.
That is where, for instance, they will be keen to base their high-level add-on services, such as research and development, which will produce the best-paying jobs and create the largest boost for the economy – if only because they are easier for them to manage there.
It is this offshoring of management jobs in the manufacturing and industrial sectors that has led to the weakening of experience and skillsets in the UK.
It makes it more difficult for British managers to build the experience and skills they need to run effective industrial companies.
If British school-leavers want to enter industry and manufacturing, there are now fewer and fewer opportunities.
This has surely been a big contributor to the large skills gap between industrial managers in Germany and Britain.
It is also true that profits made on foreign-owned companies are most likely to be paid in taxes to foreign governments.
This means that public services such as schools, hospitals and transport systems abroad are benefiting from British-based companies and British workforces, at a time when we so desperately need to inject revenue into our own public services.
Of course, when a foreign company buys a British asset, they must give legal assurances that they will maintain a level of investment and activity in the UK.
These guarantees are usually to provide company workers with certainty that the firm will not be relocated. But the guarantees are time-limited, usually to five or 10 years.
And despite the best intentions of the management – even if they want to maintain activity in Britain – if their margins come under pressure, they will generally, all things considered, prefer to cut their expenditure in Britain rather than in their home market.
Foreign ownership is not always a bad thing. But we have to recognise that we have gone too far.
By having a policy of selling our assets to foreign owners as the first option, we are storing up incalculable problems, which will inevitably lead to severe economic difficulties.
If we want to ensure that the British economy has a sound future, that there are good jobs across all sectors including manufacturing, and that our national interest will be at the heart of the majority of UK companies in 10 years’ time, we need to accept that our love affair with quick profits and foreign owners is a destructive one.
No comments:
Post a Comment