Overseas companies should pay windfall tax when buying UK firms

Report suggests taxing sales of British business to keep them out of foreign hands

Updated: 
Britain Cadbury

Overseas companies should have to pay a windfall tax when they snap up British firms, to help stop assets being lost to overseas control, according to a new report.

The suggestion came in a report from Civitas. It studied takeovers in the aerospace industry to assess the risks posed to the country from the sale of so many businesses to overseas players. They warned that the industry is being sold off at an alarming rate, and the proportion of firms controlled from overseas has risen from 14% in 1990 to 41% in 2014.

They argued that other countries do far more to protect their homegrown firms, and the failure of the UK government to intervene is damaging the country. Part of the problem is that when a company is bought up, often the UK arm is left dealing with low-level assembly while the skilled jobs and expertise go overseas. Another issue is that it's largely the big and successful companies being cherry-picked by overseas companies, leaving the UK with the smaller players with less potential.

Big sales

The rate of acquisitions has actually slowed in recent years. The government's figures show that in 2014 just 20 UK companies were bought by overseas firms - compared to 105 acquisitions of foreign firms by UK businesses. However, we have seen the loss of some great British names in recent years.

At the moment half of the largest energy companies have been sold to overseas companies, along with a number of water companies, train operators, airports and ports. Much of the country's infrastructure is therefore reliant on overseas firms.

There are some voices of disquiet as to how accountable these companies can be to British consumers, but it's often the much-loved brands that hurt the most when they go. One of the most controversial was Cadbury, bought by Kraft in the US in 2010.

It caused outrage at the time, because Kraft closed a British factory within weeks of the takeover - despite promising it would remain open. In the years since, the company has made a number of decisions that angered British consumers, not least to change the chocolate around Creme Eggs, axe chocolate coins and change the shape of Dairy Milk. More quietly it dropped a long-standing perk of working for the firm. Previously the company gave long-term former employees chocolates at Christmas. Under Kraft these 14,000 annual gifts were ditched.

The tax

The report's authors, Norman Smith and Joseph Wright said the solution would be to tax foreign firms that want to buy UK businesses. They said the UK could follow "the Israeli example of levying a large tax charge on the buyer when domestic technology/know-how falls under foreign control, at least for businesses which have had public funding for R&D or product development". They added: "For larger companies a turnover related requirement to obtain government consent would be more appropriate."

However, at least under the current government, it is distinctly unlikely that such a tax would be considered. A spokesman for the Department for Business, Innovation and Skills, told The Telegraph: "The UK's traditional openness to investment has served us well as the second largest host country for foreign direct Investment stock. Mergers and acquisitions can be an important mechanism for enhancing the governance, productivity and innovative capacity of UK companies. In all cases, the Government's focus is on ensuring the best outcome for the long-term success of the UK economy."

But what do you think, would you like to see more done to keep British businesses in UK hands?

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