UK investment minister: British companies ‘perform better’ with overseas owners

Foreign invested firms are more productive, says Lord Grimstone, amid private equity buying spree

Gerry Grimstone, chairman of Standard Life Aberdeen Plc and deputy chairman of Barclays Plc, speaks during a Bloomberg Television interview on the sidelines of the Boao Forum for Asia Annual Conference in Boao, China, on Monday, April 9, 2018. Grimstone praised the authoritarian leadership of President Xi Jinping and endorsed China as a beacon of stability amid rising tensions between the Asian trading giant and the U.S. Photographer: Qilai Shen/Bloomberg via Getty Images
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British companies perform better with overseas ownership, according to business minister Lord Gerry Grimstone, who said the country had nothing to fear from the recent private equity buying spree of UK-listed businesses.

Mr Grimstone’s comments came as pension trustees for UK supermarket chain Morrisons warned the private equity firms looking to take it over that their buyout would “materially weaken” its ability to support the retirement of its 85,000 existing and former workers.

Despite the flood of interest in UK-listed businesses, Mr Grimstone said it would be detrimental to Britain’s prospects if the country rejected overseas bids.

“It would be a sad day for Britain if we pulled down the shutters so that we weren’t a mercantile entrepreneurial country,” he said.

“All our research shows that overseas invested companies are more productive and produce more jobs. It’s an extraordinary finding but what it shows is the importance of attracting overseas investment into the UK.”

Since Britain’s exit from the EU, the UK government has been actively seeking more overseas investment to help bolster the country as it moves into a new era.

But this year’s private equity bids for major supermarkets and defence companies is causing unease among politicians, trade unions and investors who fear the takeovers might lead to job losses and rising debt.

Buyout groups spent $45 billion ($61.77bn) snapping up companies in the UK in the first half of 2021, according to Refinitiv data, more than double the next best first six months on record.

This figure was also almost 10 per cent of the total $547bn private equity firms spent across the globe.

Recent buyout activity raising concerns include the Morrisons takeover, where the trustees of the pension assets worth £5.5bn said the deal would affect its ability to support the retirements of its 85,000 existing and former workers.

The supermarket is the target of a $9.5 billion bidding war between US-based Clayton Dubilier & Rice and a consortium led by SoftBank-owned Fortress Investment Group.

The grocer, currently a member of the midcap index, the FTSE 250, is now set to enter the FTSE 100 index, Britain’s blue-chip benchmark, after its shares rose more than 60 per cent since receiving its first offer from CD&R in June.

Index manager FTSE Russell placed Morrisons on its “indicative FTSE 100 Additions” list on August 24 and said it would make a final announcement next month.

Its membership in the index could prove short-lived, with the bidders set to take the supermarket chain private.

Meanwhile, the government is also closely examining a flurry of takeover bids for UK defence and aerospace companies from US companies to determine how they will affect national security, expertise and jobs.

British security company Ultra Electronic Holdings accepted a £2.57 billion ($3.53bn) buyout from US private-equity backed Cobham last week, while British defence contractor Meggitt is also being pursued by two American groups, Parker-Hannifin and TransDigm Group.

Business secretary Kwasi Kwarteng said he accepted takeovers in the defence sector are sensitive amid the situation in Afghanistan, giving the UK government reason to monitor the takeover process and its effect on UK jobs, expertise and security.

“That’s exactly what we are looking at,” Mr Kwarteng said.

The UK government is set to host a major international investment summit in October to attract more overseas investment to post-Brexit Britain.

The Global Investment Summit, on October 19, will showcase British innovation and demonstrate the country’s commitment to green industries of the future ahead of the Cop26 environmental summit in Glasgow in November.

Mr Grimstone, former deputy chairman of Barclays, a major sponsor of the summit, said the UK was at the forefront of industries of the future, including renewable energy and FinTech.

He also pointed to the £1bn investment in new car and battery production announced by Nissan in July, which will see the Japanese car manufacturer build a new all-electric car model next to its factory in Sunderland.

The project will create 900 jobs at Nissan and 750 at Envision, the Chinese battery supplier with which it is building the vehicles.

“We intend to keep the UK as one of the most attractive destinations for foreign investment in the world,” Mr Grimstone said.

“We are in that category but I like to think of investment as one of the most globally competitive sports and we intend to win in it.”

Foreign investment in the UK created more than 55,000 jobs in the last financial year, according to the government, with Scotland and the South West and East of England among the regions experiencing the biggest increases.

“The UK is the best investment destination in the world,” international trade secretary Liz Truss said on Wednesday.

“Greater investment in our industries of the future will create high-value jobs, boost the economy and level up the country as we build back better.”

Updated: August 25, 2021, 9:56 AM