Ownership is set to become a powerful issue

Does it matter who owns the UK’s assets? What was until recently an issue for debate in the City of London and the corridors of Westminster has moved into the saloon bar.

Forget Spaniards owning our airports, a high street bank and a mobile phone company, the Icelanders have got their hands on West Ham football club. Oh yes, and Manchester United is in American hands. And a Dubai company is set to own Liverpool FC. What might once have brought people out onto the street now passes with a shrug of the shoulders. These teams already field Argentines, Norwegians and Frenchman so who on the terraces cares who the moneymen are.

This is wholly in keeping with the UK’s ultra-liberal views of ownership. The last couple of years have seen BAA, O2, Abbey National, Allied Domecq, BOC and Pilkington be taken by overseas firms. At the same time the US has blocked a takeover of American ports by a company based in Dubai – that totem of free market thinking that wants to own Liverpool FC– because of fears of al-Qaeda infiltration.

Political hostility from Congress also scuppered two Chinese takeovers – Californian oil company Unocal and the appliance maker Maytag. In the US defending jobs has become a mantra in the run-up to next month’s mid-term elections. In Europe, EU member states have started erecting walls around their strategic companies such as energy and water suppliers and – in the case of France – protecting its yoghurt maker Danone from a takeover.
Brussels has imposed tariffs on Chinese imports: first clothes – the famous “bra wars” – and now shoes, ignoring the fact that these European industries are dying. Against this backdrop, talks on a global trade deal that could have opened up western food markets in particular to poor countries have collapsed. Western governments – the UK excepted - feel unable to sell a contraction in their farming industries to their voters.

But before we in Britain start feeling too pleased with ourselves, there are signs that the Government has realised there is a limit.

Talk of a takeover by the London Stock Exchange by NASDAQ has prompted the Government to rush through legislation aimed at maintaining UK-style regulation even if ownership changed. And while European governments were angst-ing about the ownership issue, London was given a dose of its own medicine. Speculation that Gazprom, the Russian state gas giant, might launch a bid for Centrica, the owner of British Gas, sent alarm bells ringing down Whitehall. Just imagine what consternation a bid by Gazprom for National Grid Wireless, the owner of the electricity supply infrastructure, would create.

There are very valid reasons for blocking such a bid. The Russian government has not shown itself to be a friend of democracy and liberalism – and that was before it was before it was accused of poisoning one its enemies on British soil.

Russia has made it clear since the start of the 2006 how it views its ownership of vast amounts of gas and oil reserves – as a geopolitical weapon. Ukraine, Georgia and several EU nation states have all found what it is like to live near the Russian bear.
There are therefore clear reasons for the Government to step in and block a takeover on national security grounds. There are plenty of banks, mobile phone operators and even airports in this country but only one national grid.

The problem for the UK Government is how to manage such as obvious U-turn – let alone doing it without creating a diplomatic incident. There is a recent precedent. We should remember that the UK, the only major member of the EU to welcome workers from the 10 new members in 2005, has partially closed the door to migrant workers from Bulgaria and Romania when they join the EU in 2007.

The increase of some 220,000 in the workforce over the last year combined with a rise in unemployment of 280,000 has raised the question as to whether poorly educated Brits are being chucked on the dole by sprightly eastern Europeans. But the Government must make sure it does not get dragged into the isolationist, protectionist maelstrom sweeping the continent.

October 2006 saw a clear but callous example. The mayor of the Italian city of Padua has built a three-metre, 85-metre long wall to separate a white working class estate from housing for new migrants. The centre-left central government realises it needs to do something to offset a falling birth rate and soporific productivity performance. But the council doesn’t like it.

As Raguram Rajan, economic counsellor to the International Monetary Fund, seen by many as the guardian of globalisation, told me at the IMF’s annual meetings - people get “scared” by globalisation. “Trade is perhaps the single most important contributor to world growth in recent years but equally, extremely hard to sell,” he says.

To date the UK has kept a clean sheet on the issue of ownership. At some point it will have to show the red card to an insalubrious bidder.