Big businesses warn UK will be the loser from government intervention on foreign takeovers

Corporate giants including Rolls-Royce and Samsung have expressed their fears that new powers to block foreign bids will be at the heart of Theresa May’s pledge to create “a proper industrial strategy to get the whole economy firing”, reports The Telegraph.

The warnings came in dozens of submissions on the UK’s industrial strategy to the newly created business, enterprise and industrial strategy committee (BEIS). The department issued a request for written evidence from more than 170 businesses and trade bodies as the Government looks to draw up a new blueprint for British industry.

Chief among the concerns of both foreign and home-grown companies is that the UK will return to the closed, protectionist policies last adopted by Labour during the 1970s to ruinous effect.

Calls for the Government to get tougher on foreign bids first emerged following Kraft’s controversial bid for Cadbury in 2010. They grew louder in the wake of Pfizer’s hostile bid for AstraZeneca two years ago, and have reached new heights in response to Frankfurt’s bid for the London Stock Exchange and Softbank’s swoop on tech champion Arm Holdings in recent months.

Mrs May, a well-known sceptic of the previous government’s appetite for foreign investment, has suggested that her Cabinet could prevent deals if they are not considered to be “in the national interest”.

However, the overwhelming majority of those that BEIS approached have urged against such measures, warning that it would be detrimental to foreign investment, the UK’s own overseas interests, and the wider British economy.

FTSE 100 engineer Rolls-Royce said: “A closed approach to foreign takeovers will generally deter investment.”

Korean electronics giant Samsung said: “As a major foreign direct investor in the UK, Samsung would be concerned if the Government pursued a protectionist strategy which favoured UK companies or blocked non-UK investment… any attempt to close the marketplace to foreign investment would damage the whole economy.”

Business lobby groups the Institute of Directors and the Royal Academy of Engineering also cautioned against any temptation to expand the Government’s powers to block foreign takeovers.

Britain’s competition watchdog the Competition and Markets Authority said that interventionism might trigger tit-for-tat reprisals from other countries “to the possible detriment of UK businesses seeking to do business there”.

“It is important that changes to the merger control process do not dilute the message that competitive businesses are critical to the UK’s economic well-being… Consideration would need to be given to the impact on the UK’s reputation internationally… and on the UK’s ability to attract investment from overseas,” it added.

However, Scottish electricity and gas supplier SSE argued that such powers could be beneficial if done the right way. “The Government should be consistent in how it judges the merits of any takeover. This will send clear signals to investors and put pressure on participants in takeover situations to demonstrate how their plans would have a positive economic, social and environmental impact in the UK,” it said.

Rolls-Royce said that any intervention would need to be “clear and consistent”.