4 March 2016

Europe’s stealth invasion of British industry


The return of sovereignty, we are told by the Leave campaign, is at the heart of the Great EU debate. Yet it is nation states, acting on their own account, that have made by far the biggest inroads into the UK economy in recent years. If you are old enough to cast your mind back to the heady days of mass-privatisation, you will recall the argument put up, first by Margaret Thatcher, then by John Major, that Government had no business running, er … business. Instead, we were assured, the ownership of public utilities and transport, including the railways, should be shared out among millions of patriotic small investors, who henceforth would hold an important stake in the nation’s future.

Thus it was that in what now seems a mad rush, the UK’s gas, electricity and water sectors were sold off, then sold again, until now, for the most part, they are owned either by international conglomerates or, in many instances, by foreign governments, notably those of our Continental neighbours.

Nor did it end there. After a second stealth invasion, our railways are today run by a combination of state-owned companies headquartered in France, Germany and the Netherlands, plus billionaire buccaneers Richard Branson and Brian Souter – the former a tax exile, the latter a leading backer of the SNP who wishes to break up the United Kingdom. The trains and the services offered may be better or they may be worse than if a revamped British Railways Board had been left in in charge. We can never know for sure. But one thing is certain, they can no longer be classified as purely British assets.

In the energy sector, EDF, France’s state-owned gas and electricity supplier, is based in Paris, Npower has its headquarters in Essen; E.On energy (PowerGen), in Düsseldorf; GDF-Suez, Paris; Scottish Power, Bilbao; Total, Coubevoie (France); Dong, Frederica (Denmark); Gazprom, Moscow; and Corona, Sydney. Of the majors, only Scottish and Southern Energy, with its head office in Perth, and Centrica, a London-based multinational, are British.

The water sector is different. A number of companies, including Anglian Water Welsh Water, Severn Trent and Southern Water, are wholly or mainly UK-owned. Thames Water, however, the largest operator in the UK, is controlled by an Australian investment fund, the Abu Dhabi Investment Authority and the China Investment Corporation. Northumbrian Water comes under the umbrella (as it were) of the Cheung Kong Corporation of Hong Kong; while Wessex Water is the property of the YTL Corporation of Malaysia.

Heathrow airport, around which so much controversy swirls, is currently owned by a holding company that brings together Ferrovial, of Madrid, and various state-owned investors located in China, Singapore and Canada. Gatwick, the country’s other main international hub, is owned by Global Infrastructure Partners which, as its name might suggest, is headquartered in New York City.

So what? you might say. The UK is an advanced capitalist democracy, and if we open our economy to outside investors, we cannot complain if they take up the invitation. It is worth pointing out, though, that no other country has gone nearly so far in this direction. In particular, none of our rivals have sold off strategic assets to foreign governments.  The Germans do not outsource their key energy and transport sectors. Nor do the French or the Dutch. Instead, these three countries moved fast to expand into the UK, using their state-funded corporations to buy up utilities and transform them into investment vehicles for Germany, France and the Netherlands.

Who can doubt that services on HS2, when it finally arrives, will be sold off, post-the hoopla, to our state-owned rivals? Britain, it turns out, has no objection after all to the concept of state-ownership, only to British state ownership.

Think of it this way: did EDF, 85 per cent owned by the French Government, move into the British gas and electricity market in order to share its expertise with its British friends, thus adding to the general prosperity of the United Kingdom? Did Keolis, owned 70 per cent by the French state and 30 per cent by a pension fund vested in the Government of French-speaking Quebec, buy up a number of UK rail franchises out of a sense that hard-pressed British commuters could benefit from an injection of SNCF élan? Did Dutch State Railways buy Scotrail to show the Scots that not everything worth having depended on the link with England? Come to that, did Iberdrola of Bilbao – which is not state-owned – bu up Scottish Power in order to demonstrate Basque solidarity with the SNP?

Hardly. Each of these concerns could see a golden opportunity to make money – an opportunity that, in typical fashion, escaped all but a handful of their British counterparts. Scottish Power recorded earnings last year of £115 million, which, after tax and overheads, will be distributed among the company’s mainly Spanish shareholders. Abellio’s net profits go to plump out the treasury of Nederlandse Spoorwegen; Keolis’s earnings help hold down TGV fares in France.

And so it goes on. Last month it was disclosed that EDF is under pressure from consumers and the Left in France to reduce its dependence on nuclear power. The Socialist Government and the green lobby have combined to require the energy giant to expand its reliance on renewables, such as solar and wind power. In the UK, however, EDF, which in 2009 acquired the nuclear-based British Energy, announced that, following “extensive technical and safety reviews,” it planned to extend the lives of four of its geriatric atomic plants in England and Scotland. According to CEO Vincent de Rivaz , “our continuing investment, our expertise and the professional relationship we have with the [UK] safety regulator means we can safely prolong the operating life of our nuclear power stations”. In other words, it’s “nein danke” in Germany, “non merci” in France, but “yes, please” in Britain.

On the rail front, SNCF, DB and NS (Dutch Railways) have secured hundreds of millions of pounds in earnings from their British subsidiaries over the years. While benefiting from British Government subsidies, they are able to share their good fortune with their parent companies, and thus with rail users in France, Germany and the Netherlands. For SNCF, in particular, this has proved a Godsend. The company has debts in excess of £5 billion, but last September was able to report growth of nearly 12 per cent in revenues from its “thriving” UK division.

Who is to blame for this curious state of affairs? The answer is not the EU. Nor is it our European competitors, who are simply playing a game that was opened to all-comers. Rather, what we are seeing is the continuing flight of British capital from anything that requires long-term investment and a commitment over time to the technologies of the physical world. UK governments past and present, as well as a generation of British entrepreneurs obsessed with money as a commodity, have to admit that they fell into a trap of their own making. It is one thing for Britain to attract inward investment, quite another simply to take the money and run.

Walter Ellis is a writer based in France