UK Companies: European Bids (Hansard, 4 April 1990)

§ The Minister of State, Department of Trade and Industry (Lord Trefgarne)
My Lords, no. The proper way to tackle the problem of discriminatory treatment is not to erect one's own barriers, but to seek to reduce or eliminate those erected by other countries.

§ Lord Orr-Ewing
My Lords, is my noble friend aware that last year about 2, 000 public and private companies in the United Kingdom were taken over by foreign companies? That would not be too disturbing if the reverse process were possible. However, in many Western European countries there are technical obstructions to prevent us reversing the process. Does my noble friend agree that, in view of the very serious position that is developing, it is time the Government brought all the parties together, including the EC, to agree a level playing field where we are all on equal terms in this takeover battle?

§ Lord Trefgarne
My Lords, my noble friend will be aware that takeover regulations are being discussed in the European Community. They are likely to come into effect in September this year. They will substantially level the playing field to which my noble friend referred. However, your Lordships may be interested to know that, relatively speaking the United Kingdom is much more active in overseas markets than are overseas companies in the United Kingdom market. For example, in 1989 1403 United Kingdom companies were responsible for acquisitions in the USA and Canada totalling £ 19, 812 million, involving 296 companies. On the reverse side of the coin, only 44 companies were concerned involving £ 4, 859 million.

§ Lord Jay
My Lords, as the Minister also observed, a growing number of privatised British firms are being renationalised as subsidiaries of French state-owned companies. Can the Minister say whether that was one of the objects of the Government's privatisation policy?

§ Lord Trefgarne
My Lords, I agree with the noble Lord that that is a matter which needs to be kept under fairly careful scrutiny. It is certainly no part of United Kingdom policy to move companies from the public to the private sector and then back into somebody else's public sector, particularly when that overseas public sector does not operate in a properly commercial and competitive way.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that his optimism about the levelling of the playing field is not shared everywhere? It is quite clear that people will give up something which they believe is to their advantage if there is affinity between the 12 who constitute the EC, but that ingredient is lacking. Will the Government keep that fact very soundly in mind so that they do not follow an illusion only to present it as a fact?

§ Lord Trefgarne
My Lords, I quite agree with my noble friend that until recently, anyway, the European playing field has not been very well tilled. There have been some sticky spots on part of the wicket, if I may describe the situation in that way. That is why we have been playing such an active part in the preparation of the current regulations and why we attach such importance to some of the directives which are currently being considered in the same area.

§ Lord Stoddart of Swindon
My Lords, in the light of the Question asked by the noble Lord, Lord Orr-Ewing, is it not the fact that 1992 means not so much the completion of a single market but rather more a double-cross as far as this country is concerned?

§ Lord Trefgarne
My Lords, I do not agree with that at all. The EC is moving steadily towards the completion of the single European market. We greatly support all the steps that are being taken in that area. We are in the forefront in ensuring that our own regulatory and statutory system meets all the requirements which have been set out and which have been agreed across such a wide base. All the members of the EC have declared and agreed their objectives to complete and perfect the single European market by the end of 1992. We now hope and believe that that will happen.

§ Lord Campbell of Alloway
My Lords, can my noble friend the Minister say a little more about the 1404 state of this process of assimilation of the laws of the member states? Is he aware that I raised this question some time ago when my noble friend, Lord Young, answered from the Dispatch Box? Unless we are prepared to put up some temporary barriers for the purpose of achieving a reasonable agreement, does my noble friend not agree that as regards the EC this matter will go on and on?

§ Lord Trefgarne
My Lords, in general terms I believe that my noble friend is mistaken. In moving to a free trade situation, whether it be in matters of this kind or as regards more conventional trade arrangements, these objectives are not achieved by the United Kingdom or other important players in those areas raising barriers in the way which my noble friend would have us do. We have to lead from the front in these matters. I am very proud of the United Kingdom's record in this respect.

§ Lord Williams of Elvel
My Lords, does the noble Lord recognise that giving statistics about United Kingdom companies' activities in the United States of America and about United States companies in the United Kingdom is no answer to his noble friend Lord Orr-Ewing and is well wide of the Question on the Order Paper? Does he further recognise that this is not a question of regulation? It is a question of the relationship between shareholders and their companies which in continental Europe are quite different from those prevailing in the United Kingdom. Whatever the regulations may be, and however level may be the playing field in terms of regulations and in terms of takeover practice, the fact is, as the noble Lord, Lord Campbell of Alloway, pointed out, we shall never have a level playing field that matters in those relationships?

§ Lord Trefgarne
My Lords, I do not agree with the noble Lord. I am entitled to quote those figures to my noble friend because of the implication in his Question that United Kingdom companies were being taken over on a large scale while United Kingdom companies had no opportunity in overseas markets. That is not the case. United Kingdom companies have achieved wide success in world markets, particularly in acquiring overseas companies. We are a major player on the world investment scene.

§ Lord Williams of Elvel
My Lords, if the noble Lord cares to read the Question which his noble friend asked, he will see that the United States is quite irrelevant.

§ Lord Trefgarne
My Lords, if the noble Lord wants other examples about other parts of the world, I shall be happy to recite those too.

§ Lord Mottistone
My Lords, my noble friend kindly told us what is happening in the Community but the Question relates to Western Europe. What action are the Government taking to make sure that the playing field is level between the United Kingdom and Switzerland. I give the example of Nestleé taking over Rowntree. Nestle could work it one way but Rowntree could not work it the other way. What is happening about Australia?

§ Lord Trefgarne
My Lords, I do not claim that the position is perfect in every market in which we have to operate. My noble friend is quite right to point out that Switzerland is not a member of the European Community and is therefore not bound by the European Community regulations and directives unless it chooses to be so. Certainly we shall be arguing in specific cases for countries to bring their arrangements more into line with those which we regard as acceptable. By and large, references to the Monopolies and Mergers Commission— I imagine that this is what my noble friend had in mind— are made on grounds of competition, not on grounds of who the new owner might be.

§ Baroness Seear
My Lords, is the noble Lord aware that we on these Benches strongly support the Government's determination to advance freedom of trade?

§ Lord Trefgarne
My Lords, I am grateful to the noble Baroness. I wish she had intervened a few moments earlier.

§ Lord Orr-Ewing
My Lords, is my noble friend aware that of the 100 largest United Kingdom companies, all of which play a very prominent part in our export trade, 12 are now taken over each year? Time is not on our side. Whatever we are doing in other fields is admirable, but will the Government adopt a sense of urgency in gathering people together so that we can achieve a better balance in and out of this country and Western Europe?

§ Lord Trefgarne
My Lords, the implication of my noble friend's Question was that it was a bad thing that these firms were being taken over in the way he described. I do not accept that proposition. Each case has to be examined on its merits, principally from the point of view of competition. But it is also open to the shareholders of the companies concerned to decide what is in their best interests. In almost every case these takeovers take place because shareholders like the offer that is made to them. Who am I to qualify their judgment?